July 22, 2022
With the strong rally the past 10 days in the stock and bond markets in the face of elevated inflation reports, and the very likely continued increase in Federal Reserve interest rates, some investors are starting to feel the worst is behind us, and it is time to add to positions.
Is it wishful thinking?
Only time will tell.
However, I think very few investors are paying attention to the unfolding banking crisis in China. Last year it was reports that the major property developers, like Evergrande, were not able to pay the interest on their billions of dollars of loans, and were unable to complete many of their apartment projects.
Now we are hearing stories that hundreds, maybe thousands, of Chinese citizens, are refusing to make mortgage payments on the Apartment Units that they have purchased, but have not been completed. Does that remind anyone of 2008-2009?
This could be a another sign that the Chinese property market could be sitting on quick sand.
Also worth noting is that unlike all of the worlds other Central Banks, the Chinese Central Bank, is continuing its easy money, and money printing regime, to cushion the country’s economic slowdown. China may be selling off some of its reserves of U.S. Treasury Bonds, that it has built up over the past 20 years.
On a personal note, I am also concerned about House Speaker, Nancy Pelosi’s plans to visit Taiwan, as part of her groups planned August junket to that region. For what purpose is the Speaker getting involved in Foreign Affairs, when she has so many Domestic Issues to deal with at this time. Shouldn’t she focus on the various tight House races coming up in a few months?