Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (162248)	9/5/2020 10:46:21 AM
From: TobagoJack	Read Replies (2) \| Respond to of 218083

Just read something stating the obvious, but nevertheless worth stating ... from Mauldin Amongst the 4 alternate scenarios, whilst #2 is most interesting, as Nasdaq would re-price to zero overnight, because I prefer to over-estimate the Team USA ruling class intelligence #1 is impossible, because I do not underestimate Team China ruling class intelligence #3 is not necessary, because gold is not for using I therefore guessing #4 shall be Timing is tricky to get just right, but in any case ... GetMoreGoldNow, be guidance to self. Hello Reader, In a recent Over My Shoulder issue, my longtime friend Louis Gave, co-founder of Gavekal Research, laid out four scenarios under the title, “What US-China Decoupling Means for the US Dollar.” The US-China relationship is more tense than at any time over the last decade. At the same time, China is now the largest oil importer in the world... and paying for its crude in US dollars. Louis states, “The fact that the world’s largest commodity importer pays for these imports using another nation’s currency was an anomaly, even when the US and China got along. It developed because China’s demand for commodities grew so fast after 2000 that no parallel financial system could be set up in time. “Yet as US hostility towards Beijing increases, Chinese policymakers will inevitably fret about US banks’ ability to fund their country’s vital trade.” His analysis shows that this will end in one of four possible scenarios: China could simply stick with its reliance on US dollars. This is the scenario the market is pricing in today.The US could move to cut China off from the US dollar system. This would likely lead to an implosion of Chinese economic growth, cause commodity prices to crater, and the world economy to enter a deflationary bust “that could make the 1930s look like a walk in the park.”China could set up a sort of gold-renminbi standard to conduct much of its trade. This would be bullish for gold and bearish for the dollar.China convinces commodity exporters to accept renminbi, which would be bullish for renminbi bonds.Let’s hope we won’t see scenario 2 in our lifetimes, but obviously, scenarios 3 and 4 are both negative for the US dollar. How likely is it that they come to pass? Louis thinks it’s quite likely: “Markets are priced for Chinese commodity purchases to continue in US dollars, but every geopolitical wind—and domestic policy wind in both China and the US—is blowing the other way.”

To: Cogito Ergo Sum who wrote (162248)	9/6/2020 4:17:07 AM
From: TobagoJack	Read Replies (2) \| Respond to of 218083

In the meantime, follow the money ... economist.com Why is Wall Street expanding in China? It may be a step on the way to China becoming a financial superpower Sep 5th 2020 IN THE TECH industry the rupture between China and America continues to grow. Will Uncle Sam force a sale of TikTok, a Chinese-run app popular in the West (see article)? Can Huawei survive the embargo? Is Apple shifting its supply chains from China? Yet in one part of the global economy the pattern is of superpower engagement, not estrangement: high finance. BlackRock, a giant asset manager, has got the nod to set up a Chinese fund business. Vanguard, a rival, is shifting its Asian headquarters to Shanghai. JPMorgan Chase may spend $1bn to buy control of its Chinese money-management venture (see article). Foreign fund managers bought nearly $200bn of mainland Chinese shares and bonds in the past year. Far from short-term greed, Wall Street’s taste for China reflects a long-term bet that finance’s centre of gravity will shift east. And unlike in tech, both sides think they can capture the benefits of interaction without taking too much risk. Western, and in particular American, capital markets still reign supreme on most measures. Derivatives are often traded in Chicago; currencies in London. American firms dominate the league tables in asset management and investment banking. The White House has sought to weaponise America’s pre-eminence, by pushing Chinese firms to delist their shares from New York, for example. But if anything the trade war has shown the growing muscle of China in finance. A big wave of IPOs is taking place in Hong Kong, often done by firms keen for an alternative to New York. China’s prowess in fintech will soon be centre-stage with the listing of Ant Group, which may be the world’s largest IPO ever. And then there is the surprising rush of Wall Street firms and other foreign investors into mainland China. They have been knocking on the door for 30 years with little success. Now they are betting that China is serious about welcoming foreign finance. With its current-account surplus set to fall over time, or even fall into deficit, it needs to attract more foreign capital. The terms of access have improved. China is at last allowing Western firms to take control of their mainland operations and has made it easier for fund managers to buy and sell mainland securities. The potential prize is vast: a new source of fees for Wall Street banks, and for fund managers a huge universe of potential customers and companies to invest in. There are risks. China could bend the rules to protect local banks and brokers. Corruption is a hazard: in 2016 JPMorgan Chase was fined by American regulators for giving jobs to well-connected Chinese “princelings”. Worries over human-rights abuses may intensify. And navigating America’s sanctions regime will be tricky—global banks active in Hong Kong, such as HSBC, are already under pressure to cut off some Chinese officials there. Yet American financial firms’ exposure to China is low enough that they have little to lose. The tech industry is dangerously dependent on China: Apple assembles many of its devices there. By contrast, the top five Wall Street banks have only 1.6% of their assets exposed to China and Hong Kong. China’s ability to attract Wall Street firms during a bitter trade war shows the clout its capital markets have. But to become a financial superpower it would need to create its own global finance and payments infrastructure and make the yuan more freely convertible. The leading Chinese firms have a tiny presence abroad (just 5% of revenues for Ant) and most of China’s trade is invoiced in dollars, making it vulnerable to American sanctions. Building an alternative to America’s global monetary network is a huge task that will take years and require China’s control-obsessed officials to loosen their grip further. Still, the trade war has given China a big incentive to take the next step.¦ This article appeared in the Leaders section of the print edition under the headline "The exception"