This is a mobile optimized page that loads fast, if you want to load the real page, click this text.

Trading the Trend

interestingly, I was introduced and read "Three-Body Problem."within my stay in Shenzhen..typical start up nerds literature, and I can share the views exposed.
There was only one surprising item: a surprisingly honest and frank description of cultural revolution within the depicting of one of the character youth.
Did you know that there were actual tank battles in Beijing during that time between different factions, army and youth ?
Anyway, watch movies in China now and we have the Hollywood style, but saved by the red army instead of the marines, with muscle, strong invincible warriors and most often near future scenario.
SCi Fi but in 2030 or so...
China population is primed to go past the cold war if need be.
 
Anton Kreil's just released a video related to trend trading, one of the very few guys worth listening to/watching IMO:

 
The current CCP checklist.

Hong Kong. Tick.
Taiwan. In progress.
South seas. Tick.
New Zealand. In progress.
Australia. Stalled.

Sorry, wrong thread. Meh.
 
On y semblait au contraire plutôt hostile.
I see the chart is mirror imaging from the 1914 period....is basic TA indicating war Duc?
As we know, history repeats, and logic states that this v rally is illogical. More situation based.
Please explain to a Nimrod...aka me.
 
There will probably need to be several posts simply to keep the subject to a manageable length in each post.



The 1914-1945 era is the one that I shall start with. Today we have a pandemic, protectionism and nationalism. None of them are as serious as the historical ones. As to war, we have (potentially) a Cold War II.



Falling industrial production was a function of the Smoot-Hawley Tariff legislation. The US today is less exposed to purely industrial production than it was then.



That falling production impacted the market to a greater degree, due to a far higher component of industrial based stocks.



The Fed. raised interest rates, which was calamitous. This was driven by the exodus of gold. Gold at that time was the Reserve Currency of the world.



Unemployment, obviously largely driven by industrial production, was decimated.



As a result of world wide tariffs, exports/imports around the world collapsed. We are seeing currently, due to tariffs falling trade. We may see due to COVID a further reduction in international trade due to supply chain issues, just-in-time and production in total brought back onshore to home nations. In other words a severe contraction in globalisation.



We do currently have low (disinflationary) commodity prices. This is due more to increased supply (and during COVID falling demand) rather than deflationary due to tariffs.



The British pound was the Reserve Currency (being directly exchangeable with gold) and Britain had to default (much as Nixon did in 1971) as we could not redeem. That ended the pound as the primary reserve currency of the world and pretty much Britain as a world power. It saw the rise of the US to pre-eminence. Is China seeking similar?



The gold drain in the US is the driver of the Fed. raising the discount rate. The US is no longer tied to gold and can therefore via the Fed. manipulate monetary policy as it wishes (clearly the Fed. has already stepped outside of the law and its 1913 Charter with some of the current programmes). This is a good thing in the short term. Longer term is it?



Because bank failures on an epic scale would (as they did then) cripple the economy.

The takeaway is this (and this is why I queried Mr 9K): while we have some of the issues of the Great Depression present, some we have only in a mild form. Will those symptoms develop into a fully fledged disease? If they did, how would the following questions be answered? Consequences?

(i) Is the loss of industrial pre-eminence an issue for the US in retaining the primary reserve status?;
(ii) In a Cold War with China, would the same tactic as employed against the USSR work again?
(iii) How and why did the US take reserve currency status from the UK?
(iv) Trump or Biden? Which has the intellectual capability to take on China?;
(v) Would negative answers drive a serious bear market?

jog on
duc

 
Looking at the WWII years.

The unemployment and loss of industrial production (the two went hand-in-hand) remains an issue right through the 1930's.



Not until America enters the war are the employment and production issues solved. The US being the factory of the West.



Stockmarket rips higher.



Germany's collapses. If there were charts of Japan, they would show similar. Western Europe (France, UK, Holland, Belgium etc) were all depressed from wartime damage. The Russians exported vast swathes of German industry East along with as many scientists etc that they could lay their hands on (the US also went on a brain grab).

The US moving into the 1950's was the productive centre of the world. It became the creditor nation of the world, hence, the US dollar was tied to gold and was the de facto 'Reserve Currency'.

With the ending of the war, there was again 'globalisation' as trading took place on an expanded basis. This was restricted somewhat by the Iron Curtain and the Cold War I as Stalin shut off the East.

jog on
duc
 
Into the 1950's



We have another 'hot' war in Korea. What should be clear by now is that conventional 'war' is not a driver of Bear markets. What we are starting to see is the emergence of consumer based technology. This has largely (in part) been driven by wartime based technology. In this case Cold War technology via the Space Race with the USSR. Cold Wars are not drivers of Bear markets.

Currently China and the US are engaged in a Tech. war. This has echoes of the US/Soviet tech. war that ran for 40 years.

Also important to the trends are: (i) who is President and (ii) policy decisions made. At this point, the US is still a creditor nation.

jog on
duc
 
A bit macro time wise for the thread but applying these lessons of history, do you see China now as the Germany of late 1930..talking economy not ideology.irrelevant to the subject
The current industrial and i include high tech power of China is mind-blowing, as were the advances of Germany industry just before WWII.
One does not need to be a genius to believe that in absence of markets to sell phones and junk goods, China might redirect this production toward both domestic production:.happy people...
AND defence..hum..industry: proud Han people.
I sée some DFEN good outcome there but doubt the US can win that one.It has a demographic advantage but is loosing currently its social integrity and its attractions.this can be reverted but the timing is wrong.
Rotten from the inside
Before Reagan,the US was in a bad state socially and economically yet it managed its rebirth.
Trump tried the same imho but he faced an internal enemy which wasn't there for Reagan.
Reagan ultimately put USSR to its knees, Trump has low chance to do the same with China and the democrats will not even try..
In the spirit of the historical graph but a bit long .feel free to move to other thread
 


I'll come to conclusions eventually, just outlining the history currently.

jog on
duc
 
There is not going to be a cold war 2.0. China imports the overwhelming majority of its energy and exports the overwhelming majority of its goods. It also has the worst demographics of any country in the world other than japan, and is the most overcredited nation in human history. It's also completely surrounded geographically, with terrible relations with basically all of its neighbours.

All the U.S needs to do is pull the rug out & it's all over.
 
I highly recommend for the experts to have a nice little travel in both countries: China/US, once obviously the planes fly again and if we are ever allowed to put a foot back in Chinese soil.
It might change your views, or do you ever change your view?
 
You'll have to elaborate for me frog
 
So the 1960's





Interest rates low and relatively stable. The hot war in Vietnam was however inflationary. Added to that was the 'oil' issue for the US: Add to that the social unrest (similar to current times) of black activisim, which resulted in President Johnson signing into law Kennedy's civil rights bills.



The US had reached 'Peak Oil' (at that time it was limited by technology) and this was followed by the first oil shock.



Which was further compounded by Nixon defaulting in August 1971, causing the US dollar to crumble



During the late 1960s, persistent US balance-of-payments deficits steadily reduced US gold reserves as some Central Banks exchanged dollars for gold (French). By 1971, the world held x3 dollars:gold. Nixon defaulted.

Add to that strong Trade Unions with legal protections via COLAs in their employment contract, the US suffered stagflation.



jog on
duc
 
SHANGHAI, July 20 (Reuters) - The yuan traded lower at
midday after swinging in a tight range around the critical 7 per
dollar level on Monday morning, as ongoing Sino-U.S. tensions
pressured sentiment but investors were yet to gauge any
substantive actions.

China's embassy in Myanmar on Sunday accused the United
States of "outrageously smearing" the country and driving a
wedge with its Southeast Asian neighbors over the contested
South China Sea and Hong Kong, reflecting the increasingly
fraught relations between the superpowers.

Yuan traders said recent news headlines suggested that
tensions between the world's two largest economies were
escalating, but impact on the currency remained limited as
neither side mentioned they would break the Phase 1 trade deal.

"The trend of a weaker dollar has not yet changed
significantly, as long as the Sino-U.S. trade agreement is not
substantially disrupted, market's optimistic expectations for
the yuan will sustain," analysts at China Construction Bank
(Asia) said in a note.

jog on
duc
 
In the 1980's things started to change into the structure that we (more or less) see today.



Inflation is no more and interest rates start their great bull market. The stock market also starts its epic run into 2000. Here we see the Tech embryo launch. MSFT and CSCO were penny stocks in the 1980's.

The US trade balances shifted.



This also marked the rise of China.

The US stock market continued into the entire 1990's:



The break-up of the Soviet block increased the forces of globalisation and drove the offshoring of US manufacturing and supply chains to China. China would grow to the major exporter to the US.

Did the dollar suffer? No not really. The same buying that propelled the stock market was present in the bond markets,



Essentially what happened is: the US imported cheaper low end goods from China et al. The rest of the world bought US stocks/debt. Net net, the Balance of Payments balanced.



Which brings us pretty much up to date. The US dollar is the Reserve Currency primarily for 2 reasons:

(i) The US buys (debtor) more goods and services than pretty much the rest of the world combined; and
(ii) The US can continue to do this because they are the Tech leaders of the world and the rest of the world buys US Tech in such a quantity, that the Balance of Payments balances when;
(iii) As the most stable destination (flight to safety) US debt is held in preference to any other.



Above you see the US dollar as against just Tech. Combine that with the flight to safety and because exporting economies to the US do not not want their currency to appreciate against the US dollar thereby making their goods expensive by comparison, the US can create dollars without any fear of inflation.

The Cold War with China is over Tech. China wants control of it, the US is resisting. If China wins, the US overconsumption and debt loads become an issue as the continued creation of US dollars will have the inflationary effect of the 1970's and stagflation of the economy. No foreign funds will flow to US dollars as the safe haven if China wins this war.

Oil prices are a weak point for China.



The POO follows China. The US pretty much broke their dependency on the Arabs, until of course just recently. It will be important for the US strategically to regain oil independence and work at pushing the POO as high as possible, putting strain on China's economy, which is still oil dependent, although in the other thread there was a hint that China will build nuclear power stations.

I'm sure China would just love Aus for the mineral wealth and NZ as a giant farm to grow food on having devastated their own arable land through pollution. Of course China is as nearly Imperialistic as the US, with footholds worldwide, particularly Africa and food could well be an issue down the road.

Trump also limited visas for US Tech. companies (primarily from India) which enraged the US Tech. industry. That policy needs to be reversed quickly. It is in effect a form of tariff and history demonstrates just how damaging tariffs can be.

Anyway the combatants are squaring up.



jog on
duc
 

Attachments

  • Screen Shot 2020-07-20 at 7.44.41 AM.png
    178.2 KB · Views: 4
All of which is completely irrelevant when china is completely dependent on U.S security of its energy and materials imports and trade exports, is the most overcredited nation in human history, is the fastest ageing nation in history, is completely surrounded by hostile neighbours that control its seafaring supply lines, and even imports its food.

The U.S is one of the least trading economies in the world. Trade to/from the U.S is vanishingly unimportant. The only thing it imported was oil, and it's now oil independent. The world can burn and it can just sit back & watch.

China's tech is years and years and years behind the rest of the world. It can't even secure a deep water trade route from the persian gulf. Japan could defeat its current navy and do so easily.

Food:



Trade:



And that's 2015 numbers, before the yanks went completely oil independent.

Finance:







(That's scared chinese money realising they had to get their money out before it's too late)

Supply lines:







It takes an aircraft carrier battle group to keep the persian gulf open. The saudi's & iranians have wanted to wipe each other out for decades. The rest of the world has been piggybacking off the U.S security of it every day since the bretton-woods agreement made to fight the cold war, and doubly so once the soviet union collapsed and a massive international alliance to fight the soviets hasn't even been needed.

Demographics:






China, even if the Americans continue to secure their supply of basically everything, is f***ed. Once the yanks just pack their bags & go home, they'll find themselves unable to secure the supply of basically everything they need to produce anything, or indeed even exist (including food and oil), bankrupt, with an extremely expensive population of geriatrics, no internal consumer market to sell their stuff to, and no way to get it to a foreign market either.

America doesn't even need to pull the rug out for china to be f***ed, but it'll be 10x as bad if they do, and they're already in the process of doing so. It would have already started properly if not for coronavirus - remember this one little attack that took 5% of the world's oil supply offline quite literally overnight:

https://en.wikipedia.org/wiki/2019_Abqaiq–Khurais_attack

That was just the beginning. Coronavirus has just put everything on hold.
 
Here's the 5 minute youtube version:


The past four years has seen over 7 trillion dollars in capital flight to the united states for precisely the reason(s) I explained above:

If you can't secure your trade, you need to build where you sell, and you also need to be sure you can actually build there, i.e secure your inputs. You need both sales and supply security. China has neither. Simple example: Toyota's two largest manufacturing plants are now in kentucky & texas.

This is the real reason for the economic rebound the U.S has seen lately - not trump. This was all going to happen anyway, trump just kicked it into high gear. Hence the huge capital flight in 2016/2017 in the graph I posted previously: Everyone thought the end was going to be nigh far sooner than if clinton won.

They were right.
 

This is way off-topic.

However, China will be securing their maritime trade routes in the coming years/decades with naval ports along its maritime trade routes. This is known as the string-of-pearls theory. China will also push into the Central Asian plateau nations where there is an enormous amount of natural resources that can be exploited within close proximity to their nation.

China are forecast to be the largest economy by 2024, according to World Bank and IMF projections:



Guess your bet with me isn't looking too good
 

Rofl china doesn't even have a decade left. Why do you think they're cracking down on hong kong in the way they are?

Let's say the yanks stop securing their (and everyone else's) oil supply from the persian gulf, what happens then? They can't secure it themselves, their navy can barely fight its way out of a bathtub and it has to make it past 12,000km of hostile coastline through major choke points.

Why do you think japan's built out the navy that it has? And india? And europe for that matter?

Where is the financing going to come from? Who are they going to sell their goods to? Where is their food going to come from? Where are their raw inputs like energy going to come from?

America provides the entire global structure/system which makes china possible, and it's stopping doing so. China has never in history managed to economically integrate with anything beyond the island chain(s) that surround them, except right now, because the yanks have enabled it. The past 30 years has been, historically speaking, a total aberration.

Their finance(s) & demographics alone have bankrupted them even ignoring all of this. It's the most overcredited country in history and the fastest ageing nation in history too iirc (certainly the fastest ageing now).

Why do you think all that money bailed when trump was elected? It realised it didn't have nearly as much time to GTFO as it thought it did. It was right.

None of this is actually unique to china - plenty of other countries import/export all kinds of stuff (read: needs) like oil, food etc. We're just focused on china here because it's the biggest. Plenty of other countries like south korea are just as f***ed for almost identical reasons.

Want to double the bet?
 
Last edited:

Have a read of the Chinese treasure ships under Admiral Zheng during the 15th century Ming dynasty; China were a superpower then.

I see China's major pivot will be in expanding their regional influence westward into the Central Asian Plateau states to get their energy and food. This will be coordinated with their string-of-pearls, essentially building military naval ports along the old maritime trade routes to Europe for trade.

Also, China are the largest producers of most of the world's industrial commodities, while still being a massive importer of them. I suspect China are hoarding commodities.

Not interested in doubling the bet, the bet is based on tokenism.
 
Cookies are required to use this site. You must accept them to continue using the site. Learn more...