But to be honest, I don’t think we go straight down from here. Without fundamental data such as CPI and FOMC, the auction pricing of markets will not finalize and establish its true intention.
The “Big One” will be when everyone throws caution to the wind and starts flexing their profits screenshots to family and friends. This is the moment when fools will be parted from their money, as the timeless wisdom has repeatedly rang true.
Although I don’t know exactly when that will be, I have a general ballpark and I have a plan to take advantage of this (Premium Note sent to Members today). When these folks start embracing the “new-born” bull market in light of the seriously challenged macro environment we’re in, I will be ready to minimize positioning and avoid chaos as best as possible.
For now, we plan, we wait, and we patiently observe. The demise of many amateur investors who haven’t learned their lesson yet from 2022 is coming in the weeks/months ahead.
“The crux of the bear argument is this downturn will be deeper and more prolonged to help clean the excesses of the COVID-19 era that took chip demand and valuations well above trend. There is merit to this argument - CY22 chip sales are tracking north of $550bn, 34% above pre-COVID levels.
The crux of our more optimistic argument is that chip stocks could be volatile, but will look past potential 1H23 macro headlines, towards a potential 2H23 and CY24 recovery. Unlike prior upturns that were globally synched, the CY22 global economy was driven primarily just by the US. So even if the US slows down in CY23, global chip demand could be boosted by a potential upturn in China.” - BofA
Macro Chart In Focus
Analyst Team Note:
On Chinese stocks, Morgan Stanley is now bullish… “Multiple positive developments alongside a clear path set toward reopening warrant an upgrade. We are at the beginning of a multi-quarter recovery in earnings revisions and valuations.”
The government has accelerated its shift toward reopening as it became evident its strategy of eliminating infections was failing to bring the current record Covid outbreak under control. The virus restrictions have caused widespread damage to the economy and fueled protests in several major cities, prompting authorities to roll back some restrictions in recent days.
Beijing is now allowing some low-risk patients to isolate at home instead of quarantine camps. Shanghai scrapped PCR testing requirements to enter parks or use public transportation. And top officials and the state media have also softened their rhetoric about COVID.
Chart That Caught Our Eye
Analyst Team Note:
“Sixty-five trillion dollars is a not big number: It’s a huge, barely comprehensible number. It’s more than two-and-a-half times the size of the entire US Treasury market, the world’s biggest. It’s 14% of the value of all financial assets globally, according to a tally from the Bank for International Settlements.
It’s also the value of hidden dollar debt unrecorded on the balance sheets of non-US banks and shadow banks as of June this year, also according to the BIS, the central bankers’ central bank. It has been growing rapidly, having nearly doubled since 2008.
Years of ultra-low interest rates and investors’ aggressive hunt for returns have driven leverage higher — and the growth FX swap and forward liabilities is one mammoth example of that. Rising rates and volatile asset prices make high leverage a dangerous source of instability, ever more so because it is hidden.” - Bloomberg
We want to take a moment to thank Interactive Brokers for being one of our Channel’s trusted Partners and to inform my audience of the special features they have given that our online friends here closely follow Chinese Internet stocks (BABA/Tencent).
Much of Larry’s audience is concerned about the US ADR issue of Chinese Stocks being delisted.
