Currently Checkable Deposits as a percentage of Nominal GDP are around 16%. In Q3 of 2007 Checkable Deposits as a percentage of Nominal GDP were around 1%. Which partially explains why the Great Recession was so bad - no one had cash in the bank. If affluent consumers are what is keeping the economy expanding, then they are still sitting on lots of spendable deposits. This implies that even late in the cycle the expansion will continue to chug along.
Have 20% exposure to precious metals, commodities fund such as XME, emerging markets, US value stocks for next couple of years. Don't chase the peak, whatever rallies Mag7 will have it will give away those gains in next few months, rinse and repeat. Its prolonged yoyo market unless follow the rotations in US market.
Look at MRK, REGN, GILD etc. Outperforming since the correction begun. It's late cycle rally, watch rotations closely on weekly and monthly to identify the patterns.
1. Energy prices haven't touched a peak yet, when we see oil prices above $120, that will set the market on fire, into recession in subsequent quarters.
2. Bubble burst when there's no place to hide. Only market that could soak in trillions is Chinese stock market. Other markets such as Japanese and Europe is miniscule compared to the US and China market. When China market does parabolic rallies, thats the sign of concern. I don't see that yet, it's a structural bull market in China and Hong Kong, valuations are lot cheaper than Japan. China is sitting on enormous liquidity. Trump needs Xi for funding and growth, we will be surprised that the US will work closely with Russia and China this time for resources to build infrastructure, industrial to grow out of this stagnant growth.
All tech bubble burst either energy prices are high, or all options for safety in risk assets are exhausted i.e. both China and US peaks.
We are nowhere near these trends. The US is behaving like India and Brazil, it's classic stagflation and showing sign of appetite for growth. Yes the US tech stocks is overvalued by 3x, next year we will enter high volatility in US markets due to stagflation, midterm elections.
The US is old China; China is the new US. Upside down. I avoid too much exposure to US, except value stocks like Healthcare and Staples. IWM will perform due to biotech stocks.
Overall, investing in emerging market is better when dollar is trending weaker for next few years, easy returns without lifting a finger. China will keep their currency stable, their focus is mostly on consumption growth to derisk from export economy, which means they keep their currency stable and strong for longer.
Agree with most of this. Only thing I can’t really comment on is the oil part since I don’t have a strong view there. But the China angle you laid out is spot on.
Energy stocks will do so much better next year. The world growth is positive due to fight for resources better 3 giants: US, China, India. There's so much hunger for commodities. Don't touch Europe, it's lost decade due to fracture of Europe, geopolitics, internal politics to search for their identity in each country there.
US, China, India, South East Asia are growth drivers for next few years. Latin America will do better due to commodities.
Currently Checkable Deposits as a percentage of Nominal GDP are around 16%. In Q3 of 2007 Checkable Deposits as a percentage of Nominal GDP were around 1%. Which partially explains why the Great Recession was so bad - no one had cash in the bank. If affluent consumers are what is keeping the economy expanding, then they are still sitting on lots of spendable deposits. This implies that even late in the cycle the expansion will continue to chug along.
Brilliantly written. Agree with all points.
Thank you!
Great post. I agree on the timing issue. For comparison, the subprime obliteration was set to happen already in 2006, but it burst only in 2008...
Have 20% exposure to precious metals, commodities fund such as XME, emerging markets, US value stocks for next couple of years. Don't chase the peak, whatever rallies Mag7 will have it will give away those gains in next few months, rinse and repeat. Its prolonged yoyo market unless follow the rotations in US market.
Look at MRK, REGN, GILD etc. Outperforming since the correction begun. It's late cycle rally, watch rotations closely on weekly and monthly to identify the patterns.
1. Energy prices haven't touched a peak yet, when we see oil prices above $120, that will set the market on fire, into recession in subsequent quarters.
2. Bubble burst when there's no place to hide. Only market that could soak in trillions is Chinese stock market. Other markets such as Japanese and Europe is miniscule compared to the US and China market. When China market does parabolic rallies, thats the sign of concern. I don't see that yet, it's a structural bull market in China and Hong Kong, valuations are lot cheaper than Japan. China is sitting on enormous liquidity. Trump needs Xi for funding and growth, we will be surprised that the US will work closely with Russia and China this time for resources to build infrastructure, industrial to grow out of this stagnant growth.
All tech bubble burst either energy prices are high, or all options for safety in risk assets are exhausted i.e. both China and US peaks.
We are nowhere near these trends. The US is behaving like India and Brazil, it's classic stagflation and showing sign of appetite for growth. Yes the US tech stocks is overvalued by 3x, next year we will enter high volatility in US markets due to stagflation, midterm elections.
The US is old China; China is the new US. Upside down. I avoid too much exposure to US, except value stocks like Healthcare and Staples. IWM will perform due to biotech stocks.
Overall, investing in emerging market is better when dollar is trending weaker for next few years, easy returns without lifting a finger. China will keep their currency stable, their focus is mostly on consumption growth to derisk from export economy, which means they keep their currency stable and strong for longer.
Agree with most of this. Only thing I can’t really comment on is the oil part since I don’t have a strong view there. But the China angle you laid out is spot on.
Energy stocks will do so much better next year. The world growth is positive due to fight for resources better 3 giants: US, China, India. There's so much hunger for commodities. Don't touch Europe, it's lost decade due to fracture of Europe, geopolitics, internal politics to search for their identity in each country there.
US, China, India, South East Asia are growth drivers for next few years. Latin America will do better due to commodities.