Is China Slowdown Good For The World?

[Parsad]

While I wouldn't want to see a full-stop, but a slowing China...could it actually be good for the rest of the world?  Lower commodity prices, lower-priced finished goods for consumers as inventories stack up, continued repatriation of manufacturing to the United States...could it actually prove to be beneficial?  Cheers!

 

http://www.cnbc.com/id/48773431

[Cardboard]

Have you ever seen a soft landing in any economy especially after a boom of this magnitude? All signs point to a hard landing and I see it in the price of copper, oil and zinc everyday. They are not participating in the rally, but remain elevated due to this global currency devaluation process.

 

So China is one big issue, then you have Europe essentially in recession already with a big decision on Sept 14 regarding Greece. Then you have the U.S. which is not showing much growth at all and will have to deal with certainly some type of cuts in December or the fiscal cliff. What about Israel and Iran? Then you have this:

 

http://www.cnbc.com/id/48774736

 

So every major economy is showing next to no growth, saddled with debt, oversupply, etc. Major decisions are to be made for every one of them this Fall. The picture appears very bleak, at least it is easy to picture something, somewhere going wrong. Then you have the S&P sitting a the high for the year and less than 10% away from its all time high. The VIX is at multi-year lows, the number of names on the 52 week list is very low. It does not sound like a time to be brave or to be fully invested. It smells like the S&P doing its last hurrah before a major turn in sentiment. There are pockets of opportunities as discussed daily on this board, but not enough to build a diversified portfolio and I want to keep dry powder this time around, unlike 2008...

 

Cardboard

[gokou3]

Latest article by Andy Xie, a famed economist in China:

 

http://www.ritholtz.com/blog/2012/08/the-only-way-out/

 

China’s economic problems originate from government intervention in the market. Real reforms must involve changing the role of the government. Any reform that doesn’t focus on this is bound to fail.

[bmichaud]

Well said Cardboard. Global recession, secular bear combined with a massive debt overhang and the market at over 20X normal earnings?? Fantasy land IMO. EVERYONE is expecting QE3 and EVERYONE is expecting it to buoy the market - classic set up to sell the news?

 

I seriously question the benefit of the ECB's conditional bond buying program as Europe continues to grind itself into depression. LTRO effect lasted for what? 90 days? Real sustainable. I honestly cannot believe what Europe is actually doing. It's fascinating to watch quite frankly. The US did such a good job arresting itself from a deflationary trap via TARP and massive deficits (QE was merely coincidental) - how can Europe not follow our model? Fascinating!!

[Guest FFHfan]

how can Europe not follow our model? Fascinating!!

 

The elites (politicians, journalists, commentators and so-called intellectuals) in Europe (predominantly leftist) will never admit that America did something right.  ::)

 

Here in Germany as in the rest of continental Europe, there is a strong underlying Anti-American racism. It's not the fault of the average joe, but that of our media, so-called intellectuals and our political elites. Our media is overwhelmingly controlled by the left (Spiegel, Süddeutsche Zeitung, Frankfurter Rundschau, Taz, Tagesspiegel, Focus, Stern), the opinion pages are predominately filled with the ideologies of the left. Our state Tv stations (Tagesschau (ARD), heute (ZDF) are dominated by the left. There isn't a week where America is not constantly critized, either on print or TV. If there is a crime happening in the US, our media will put it on the front pages. If a similar crime happens in Germany, it will only get low coverage. Young children learn this resentment from their parents, then from their teachers and then from their professors in college. Everyone allied with the USA will get the same treatment. Different opinions are barely allowed.

[bmichaud]

how can Europe not follow our model? Fascinating!!

 

The elites (politicians, journalists, commentators and so-called intellectuals) in Europe (predominantly leftist) will never admit that America did something right.  ::)

 

Here in Germany as in the rest of continental Europe, there is a strong underlying Anti-American racism. It's not the fault of the average joe, but that of our media, so-called intellectuals and our political elites. Our media is overwhelmingly controlled by the left (Spiegel, Süddeutsche Zeitung, Frankfurter Rundschau, Taz, Tagesspiegel, Focus, Stern), the opinion pages are predominately filled with the ideologies of the left. Our state Tv stations (Tagesschau (ARD), heute (ZDF) are dominated by the left. There isn't a week where America is not constantly critized, either on print or TV. If there is a crime happening in the US, our media will put it on the front pages. If a similar crime happens in Germany, it will only get low coverage. Young children learn this resentment from their parents, then from their teachers and then from their professors in college. Everyone allied with the USA will get the same treatment. Different opinions are barely allowed.

 

Very interesting. I had no idea the extent of the anti-American resentment. I actually scan the business section of Spegiel for debt crisis news maybe once a day and haven't really picked up on that. Will have to pay more attention!

[rmitz]

Well said Cardboard. Global recession, secular bear combined with a massive debt overhang and the market at over 20X normal earnings?? Fantasy land IMO. EVERYONE is expecting QE3 and EVERYONE is expecting it to buoy the market - classic set up to sell the news?

 

I seriously question the benefit of the ECB's conditional bond buying program as Europe continues to grind itself into depression. LTRO effect lasted for what? 90 days? Real sustainable. I honestly cannot believe what Europe is actually doing. It's fascinating to watch quite frankly. The US did such a good job arresting itself from a deflationary trap via TARP and massive deficits (QE was merely coincidental) - how can Europe not follow our model? Fascinating!!

 

I try to reconcile this with my own portfolio, and I find it somewhat difficult.  The only company I own with a PE above 11 is Berkshire, at 18, and we all know that's not the right way to look at BRK.  It's probably worth noting that companies probably have a lot more cash and assets now.  It's also true for me that most of my stocks have not really appreciated in this market, so that makes it difficult to take profits and sit out...

[anders]

Here in Germany as in the rest of continental Europe, there is a strong underlying Anti-American racism.

 

Im very surprised to hear this ???.. Im european with many friends all over europe and, I do not recognize what you are implying. And I dont think it is that easy. Europe is the worlds biggest economical power - the worlds biggest spender with more than 2000 year of history, with currently 17 different decision makers, and banks gasping for air... I am surprised that so many underestimate the economical effect on the world if Europe would "fall". Greek default is not the issue, the risk is that the effect will spill over to the whole European union - nothing is stronger than the market.

 

The Germans dont like ECB printing money since they still remember the hyperinflation after ww1, and FED will print money in milton fashion since they still remember great depression. Dont get me wrong, I strongly - with many fellow europeans I might add - believe in the american capitalist model - it works, but would anyone argue that what US is doing right now is solid and reasonable..? The Fed is printing money into oblivion and 100% of gdp revenue goes directly to fund mandatory spending - social security, medic aid/care and, all spending above is borrowed money. And not to forget, spending more than you receive, you stimulate.. You can run this system with to -10% deficit for a while, but when we talk about -20%, its a problem.. no its an enigma! Meanwhile the politicians are driving chicken race with the debt ceiling and the solution is to throw out the steering wheel out the window..

 

Keynes would turn over in his grave.