Posted on 09/27/2011 10:36:17 AM PDT by SeekAndFind
Todd Martin, an Asia equity strategist at Societe General SA, talks about the outlook for China's economy and credit market. Martin also discusses global stocks and commodities. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia."
The interview starts off with a very weak idea "fundamentals have been thrown out the window". However the analysis gets much better as the video progresses. Here are a few key ideas from Todd Martin.
Six Key IdeasChina did not decouple in 2008 (except perhaps in reverse), and it will not be immune from this global slowdown either.
- China Will Slow Much More than China Bulls and Commodity Bulls Think
- Non-food Commodities Take Big Hit
- Eurozone Experiment Ends in Breakup
- US Protectionism Takes Hold
- Deficit Countries Control Demand, Thus Have the Best Cards
- Disaster Hits BRICs
Contrarian Thinking
Except perhaps for points three and four (and perhaps for all six points) investors and analysts have taken the opposite view. Most are looking to buy the dip, invest in commodities, invest in commodity producing currencies, and invest in the BRICs.
We did not have commodity producer decoupling in 2008 and there is no reason to expect it as debt-deflation plays out and China abandons its reckless investments in infrastructure.
I suspect China slows sooner than Pettis thinks, but no sooner than the next regime change in China. Markets, however, may react well in advance.
Global Deflationary Outlook
Pettis does not use the word "deflation" in his writeup, but he describes a very deflationary global outlook complete with protectionism, beggar-thy-neighbor policies, currency wars, and falling non-food commodity prices.
Pettis did not discuss energy, but the forces are clear: peak oil. vs. global slowdown. Given peak oil and the possibility of war over it, energy is a wildcard.
There have been signs of this happening for a while. China is a house of cards. If any one of a long list of issues goes poorly for China, they will have a bigger mess on their hands than we could dream of happening here in the US.
How would you like to have a population of second generation spoiled brats from the only child policies to deal with as your responsibility to manage? Forget it!
We are in a faux economy. We don’t know the value of anything because of regulation, and government spending that kicks the can down the road for future taxpayers. Those in power will stay in power because the game is rigged. Those not in power will game the system in every way possible to make sure that other people pay for whatever it is they need.
Out next President must take on both parties. Sarah may be the only one who has enough courage to do so.
I do have to wonder what it will do to the world economy as a whole, and how it will impact the U.S. specifically. I wonder if they have a clause in the loans that allows them to call the loan at any time. If so, yikes!
If they show signs of going down the toilet, they will sell their US T-bill holdings in order to buy resources. They would rather crash the rest of the world than deal with unrest at home.
I’m just a nursing student and a sahm. I try to understand what is going on the world but this is confusing to me. I keep buying extra food and cutting expenses, but I really don’t fully understand the ramifications of this.
Could someone please phrase what this means in everyday terms?
Thank you.
I think it means that the dollar will become worth less than it is right now.
If they stop spending, they face all sorts of very angry people: welfare recipients, government retirees, employees of companies which are dependent upon government spending. So they want to keep spending.
They can't continue for much longer, and every year that they delay the crash will make the crash that much worse.
Yes, that’s why I kept my answer so short; it’s hard to predict how bad the chaos will be and what forms it will take.
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