Global Stocks are falling from the negative impact of global growth, profitability and the collapse of global trading systems – Bretton- Woods and others. Brace yourself.
The western financial media are reporting the US – China trade war 24/7 with little evidence that all the pressure, the tariffs and the talk are having any impact – except for one key stock. That is Apple stock. Apple is having poor sales in Greater China, which is mainland China, Singapore, Taiwan, Hong Kong and the surrounding areas. This could mean that consumers are turning their back on Apple, just as a show of allegiance to China.
The Command Economy of the Communist Becomes State Capitalism and Dictatorship – Xi and his team are smart.
In this context the plot and the possible outcomes of the US – China trade deal become ever more complex as it is, in the end, a race against time. The US is imposing tariffs on China, and these tariffs are having some impact in the Chinese economy. However, keep in mind that China is start-run-capitalism at its best which is in fact, a massive government that can marshal vast amounts of capital efficiently in the direction that it chooses. So while markets brace for a global slowdown, the Chinese regime can direct 30 to 50 billion dollars to address weakness in specific areas of the economy. In short, they can bolster weak areas with targeted funds – and they are good at it too. Of course, the other strength Beijing is that they can adjust the numbers. For example, if GDP is reported at 6.7 percent or 6.5 percent when in fact it is more realistically at 6.0 percent, this is perfectly normal in their system.
Now the press could be over reacting to the Apple revelation on Wednesday, it could be that the press is searching for news to “build a story” around a false incentive that could introduce waves of trade deal discourse. Think about it, the incentive is there as a trade deal between the US and China would trigger a global really in US, European and Japanese stocks – Chinese stocks as well. In our last piece we reported that China saw its stock market take first place in the worst market of 2018 award. It was crushed, down over 25 percent, more than any other major market.
Bear in mind that we at Classiarius like to give different sides and different points of view – so keep in mind that in 2003, 2008 and 2012, there were so-called experts calling for the collapse of the Chinese economy, and well, it did not collapse. It has fallen into massive amounts of debt that the government is now addressing.
US Weak, China Weak – A Race to Recession
Still, we know that the US is falling into a period of weakness and this is a waiting game for the two presidents of the two largest economies on the planet. the US ISM manufacturing was reported at 54.1, which is expansion. However, the orders dropped from 62.2 in November fo 51.1 in December – this is a shockingly large drop. Only twice in 35 years it has fallen this much, in 2001 and 2008, both recessions.
The Caxin/Markit Manufacturing Purchasing Managers Index fell to 49.7 from 50.2 in November. China is slowing as well. But the bottom line is this – the US is provoking a trade war that will damage China, the US, and 50 other countries around the world. There are several theories, but the most plausible ones are the US containment strategy 2.0, the support of Japan, the US forcing a Belt and Road acceleration and the US support of Japan – which needs joint support in Asia.
The War has Begun – 2019 will see global shocks to markets, and there is no where to hide.