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🧠 The Big Brain
The Forgotten Recession
Everyone calling for a recession last year ended up with egg on their faces.
Bloomberg’s 100% certain recession forecast expired yesterday:
But when you look around the global economy, the many pockets of weakness should concern us.
Not in the sense that the economy’s about to hit a brick wall tomorrow.
More that all of the stuff people said would matter a year ago is actually starting to matter now.
And instead of freaking out about it like we did before, we’re collectively numb to the signs.
Ah yeah, that old thing? Pfffft been going on AGES
To be fair, it has.
It’s also been 19 months since the first Fed rate hike.
Time to roll out this table again:
Averages can hide all kinds of juicy details. They can’t hide the fact that we’re now entering the economic danger zone.
The period when those “long and variable lags” really tend to kick in…
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⚡ The Spark
China’s Growth Surprise Is Not Tempting Investors
The Reuters headline after Chinese data beat expectations last night.
🔥 Numbers: GDP Growth +4.9%, Industrial Output +4.5%, Retail Sales +5.5%
There’s plenty to like. A broad-based recovery looks to be gaining traction.
China's economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside, suggesting the recent flurry of policy measures is helping to bolster a tentative recovery.
So what’s the takeaway here?
China Beige Book do excellent work on China’s economy, and CEO Leland Miller laid out the situation in his characteristically direct manner on CNBC:
Cyclically too bearish, structurally too bullish is exactly how we see it too:
Cyclically, the economy is on the up. Structurally, it’s on the way down.
Improving international relations would go a long way towards restoring investor confidence.
Likewise, more evidence of economic growth, fiscal stimulus, and an uptick in company earnings could tip the scales too.
However, the ongoing property downturn is likely to keep a lid on any bounce. On that note…
💡 The Lightbulb
We are the most right ever
Country Garden failing, just like we predicted
Every so often, we take a big theme and focus on that.
Our most viewed piece was on Evergrande, and the Chinese property sector in general…
Chickens to roost: today, Country garden, China’s ACTUAL largest property developer, has gone kaput…
Just like we said people should focus on them in 2021.
Country Garden (white) vs Evergrande.
CG is China's 2nd largest developer.
If Evergrande had issues, then so will CG. #3333 #2007
— David Belle (@davidbelle_)
8:44 AM • Aug 23, 2021
Lehman Moment: at the time, YouTube and Twitter were battered with the words, making parallels with 2008…
But instead, we said there was no specific Lehman Moment and more a slow trudge into quicksand…
Which is exactly what is happening now, 2 years later!
Soggy biscuit: we aren’t reaching ourselves around here but more referencing back to a theme that keeps occurring…
Which relates to today’s Big Brain and that is simply that…
Things take longer to play out than people first understand or predict.
On your Marks: our favourite hedgefund manager, Howard Marks, said something similar…
“Things can take longer to happen than you thought they would, but then they happen faster than you thought they could.”
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