Posted on 11/07/2023 5:43:24 AM PST by FarCenter
In the home stretch of a rocky 2023, China and Warren Buffett are warning the global economy that the year ahead could be even more precarious.
Not directly or in tandem, of course. But the financial decisions being made in Omaha, Nebraska and Beijing don’t seem very promising for the 12-14 months ahead.
Buffett’s Berkshire Hathaway conglomerate, for example, is raising its cash position in headline-generating ways. Its cash pile is now a record-breaking US$157.2 billion amid rising global interest rates and a lack of solid investment options.
Xi Jinping’s China is also going as liquid as it can — and rapidly — without panicking investors everywhere. As of the end of August, China’s stockpile of US Treasury securities dropped to the lowest level in at least 14 years.
What’s more, Beijing’s exposure to US government debt has fallen about 40% in just the last decade. Xi’s Communist Party has long since passed the dubious honor of Washington’s top banker to Japan. But at No 2, with $805.4 billion of US Treasuries, China’s selling activity is raising eyebrows in government offices and trading pits around the globe.
(Excerpt) Read more at asiatimes.com ...
They are doing what most banks should have been doing—selling assets that are falling in value. While I agree that is something you want to do…I am not sure going into cash is the best idea.
Remember, the Fed was the largest holder of Mortgage backed securities over the past decade or so. Those assets have declined substantially since the increase in interest rates. If the Fed had to “mark to market” their balance sheet would look like a steaming pile of crap.
But the Fed doesn’t have to play by our rules.
The Chinese economy is destitute and needs the cash
Government worker are unpaid for weeks and months
Pretty much everyone is saying the Fed has more rate increases in store for us. That means Treasury assets still have a bit more to fall before they are done.
I don’t disagree with your logic, just your timing.
The US government and the governments of the Western World are all headed for default.
This is not a good time to invest in government debt IMO.
Of course China is slowly dumping treasuries, they don’t want them seized like Russian assets were as we approach war with them.
You and the "everyone" may very well be right and I be wrong. One thing I'm looking at, however, is that long-term treasury funds are down a lot from their ATH (all time high). For example, PRULX is down 56% from it's ATH on Aug 4, 2020. So if I'm wrong and it goes down, it's hard to imagine it going down much further (low cost). But if I'm right and it goes up like it traditionally does with stock downturns, then I can make a lot (high return).
>>The US government and the governments of the Western World are all headed for default.
The alternative to default is to keep interest rates low and tolerate a decade of 10% inflation to reduce the effective size of the debt pile.
Better yet, if you believe rates are coming down buy call options on TLT.
I’m not quite convinced of that, though. With strikes for higher wages and minimum wages going up and $20 big Mac meals, I don’t think inflation is coming down.
I think it’s more likely we’re headed for stagflation... high interest and little growth.
The US has a debt of 33+ Trillion dollars.
We are headed for triple digit inflation as the congress continues to kick the can down the road rather than suffer the pain of serious budget cuts.
Mean while the voters continue to return men and women to office that believe that they are Santa Claus.
I have given up hope that we can avoid the fate of Venezuela and Zimbabwe.
Get ready for billion dollar US Federal Reserve Notes.
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