C L I F F O R D B E N N E T T
China Equities could be a greater buy?
Negative Wall Street media creates opportunity.
The Wall Street financial media, greatly influenced by a pro-USA propaganda bias, has been throwing stones at the Chinese economy for a very long time.
All along, I have argued to the contrary, that yes, there are problems and challenges, but overall economic growth would remain strong. And it is very strong at above 5%.
Indeed, China continues to outperform the USA. Yet, if you were to ask anyone on the street, they would tell you the Chinese economy is in crisis. Interesting, and has most certainly created an opportunity. I note that some of the savvy, more individually opinion investors on Wall Street, are also bullish.
Announcements on policy can have an impact from time to time, but I am encouraged by Jack Ma and other Tech tycoons having met with the President in recent days. China remains a state run society, but one with remarkable flexibility in a laissez-faire economic direction. If you think not, then compare starting a business in China, with doing so in the USA, Australia, or Europe, where you will face a myriad of government interventions and necessary approvals. A strong showing of state power that we have been conditioned to take for granted and accept? Who is the state run economy again?
Small China positions with a hold for the long term may well be worth a look.
Australia
RBA Finally Cuts 25 points
to 4.1%. Very late.
Cash Rate to 4.1%, but RBA cautious on further reductions.
18 February, 2025.
I expect 3-4 more rate cuts over the coming 12 months
The RBA is today cautious of further reductions, but the economy is in more trouble than they yet understand.
This is a paltry offering to struggling Australians.
Still, well done RBA, you only slightly understand, but at least you are moving in the right direction now.
MARKET IMPACT
Mostly expected, and we will still see runs at stop loss orders by the price makers across all relevant markets, and in both directions. This is their money for jam moment.
In the end, the vanilla is likely going to be Aussie dollar rallies, because everyone was short, but then, actually starts a substantial decline again, depending the USD too, as there will be 3-4 more rates cuts over the next 12 months.
Stocks were already tired. The market will be cleared both sides, then drift up, then begin a substantial sustained decline. Rates are only being cut, because they know they have destroyed the economy already?
Above headline AFR.com 18 Feb, 2025.
Absolutely not!
Leave the young people alone. Just figuring life out, thinking of moving out to their own places, working hard, studying hard, and the insatiably greedy super industry is targeting them for a change in the law to generate more easy money for under-performance. Are we living in a two party communist state that is happy to over-tax, over-regulate and feed big business elites?
This is everything that is wrong with the direction we are taking. Super should never have been increased to 12%. Some may be fooled that this means the employer contributes more, but that just is not the case. The super is factored into wages, salaries and packages, with some costs most definitely passed down to all consumers. The last round of increase was inflationary, but who cares as long as the big end of town and Canberra are somehow further enriched.
The whole Canberra-Super juggernaut has become an out of control mates club. It has to stop. Leave the young people alone at least.
Welcome
US Retail Sales
Industrial Production
These are more than green-shoots.
17 February, 2025.
US Retail Sales plummeted. Down a whopping 0.9% in January.
However, it was the second month in a row of reasonable growth in Industrial Production, that really impressed. ​
Severe winter weather, plus LA on hold during the wildfires, combined to greatly depress retail activity. If we where to see a further contraction next month, that would be cause for panic. This month, I think, just let it go by the wayside as being no indicator whatsoever as to the economy or the consumer.
Meanwhile, Industrial Production expanded 0.5% in January. Making that 1.5% in the past two months. This series can swing about, but this is a very hopeful sign after two years of manufacturing depression.
RBA Decision this week?
Let's be clear. They have already failed, yet again.
17 February, 2025. Chart Quarterly GDP.
The 'Reverse' Bank of Australia, or 'Remove' Bank of Australia, whichever you prefer, should already have had the Cash Rate at 3.25%. And for some time. I can assure you inflation would be exactly where it is now, or even potentially lower. The last 2-3 hikes were themselves inflationary, forcing landlords to raise rents and businesses prices.
The most important point is of course basic economics: Australia's economy has already stalled completely, and the private sector was flat in the most recent data and is likely in real time already contracting. Clearly, this is not inflation caused by an over-heating economy? And therefore, not an environment at all for having raised rates or kept them so high for the past twelve months. The RBA is devoid of any economic skill relating to the real world. It is purely a last century academic institution at best. If they do finally cut rates, as I have said they should, but forecast they would not because they are so incompetent, perhaps offer a slight applause, but ask why so late, and ignorant of the facts?
If they do not cut, then a revolution is overdue.
​
UKRAINE PEACE ?
Trump Putin lengthy phone call. Agree to talks.
13 February, 2025.
This is indeed wonderful news. Real progress toward a lasting peace with an appreciation of the entire background story. Not just the over-simplified ABC style convenient version. Zelensky only proposed US NATO troops, because he knew Russia would not agree.Trump is moving forward regardless and Zelensky simply has to fall in line. Deeply unpopular in Ukraine, with elections cancelled and opposition outlawed, something democracies do not do even in time of war, Zelensky will lose the next election in a landslide. He will probably resign before hand, to escape the judgement of his own people. Who voted for him on his promise of peace with Russia.
US Inflation
January 3.0%. Month 0.5%, Core annual 3.3%.
13 February, 2025.
Extremely worrying, and will have given the Fed more than pause for thought.
The is now four straight months of re-acceleration.
The mainstream Wall Street media doesn't even want to talk about this. The latest monthly number represents an annualised whopping 6%. I am not saying that is where we are going, but inflation is already 20% higher than just four months ago, and tariffs have yet to begin to impact. Inflation could be going to 4.5% again, and the Fed just finished cutting by 100 points.
Hence my warning, there may well be no rate cuts in 2025, and do not rule out 1-2 rate hikes.
When trading equities, this may not matter at all.
The ranted rubbish about rates impacting equities is all a nonsense in any case. As I have pointed out numerous times before, both rates and stocks go up in strong economic times, and both fall when the economy falters. The exact opposite of what the Wall Street spin tells you every day.
No cuts, perhaps Fed hikes, and if this really is an on-going bull market, stocks will go up anyway. My stock view remains neutral at this long term checking point. That is, the current consolidation range. YES, Big trend coming one way or the other once we break this range. Stay tuned.
TESLA
We are short from $376. Currently $328. Risk $260 $200.
12 February, 2025.
This could be a long and sustained down-trend for the great Tesla stock price.
Elon Musk is one of the great individuals of planet Earth and Tesla ventured forth when few dared. Great achievements all round. Great company going forward into the future. Robotics and AI developments have the potential to relaunch Tesla.
However, the fierce competition with arguably better car companies from Europe now on top of their EV game, as well as specialist China EV firms such as Tesla, all add up to declining market share moving forward. The real problem is that Musk is now heavily distracted in numerous directions. The team at Tesla is strong, but the Elon factor in their success will be to some degree diminished.
Great company. The stock price is simply too high for a super competitive future. One where EVs may be replaced in 8 years by other new drive-trains like hydrogen or zero emission diesel.
GOLD/BLACK GOLD
We have been long with +$100 $200 trades. Risk of Top?
12 February, 2025.
What a great market this has been. Very kind to us.
The New York trading session just delivered a potential one day reversal price pattern however. Suggesting some cautious is appropriate after such an extended trend. Some profit taking perhaps, but as Geo-political tensions, particularly across the Middle East and also with Ukraine, core long Gold positions remain advisable.
In contrast, Black Gold just began to break back higher again after a period of consolidation/correction and could represent bargain basement buying here. It is not getting a lot of attention in the mainstream yet, but risk of war with Iran are growing. This is making people nervous, hence the strong run up in Gold, and why Oil is beginning to be bought again too. Watch for nations to be gin to ramp up their energy reserves just in case.
Chart Crude Oil Daily
Australian Consumers Remain Depressed.
Westpac-Melbourne Institute Consumer Sentiment
11 February, 2025.
Yes, I know you will point to reasonable retail sales at times, but this is distorted by the growing wealth gap empowering higher end spending.
For the majority of Australians the retail sales situation is far more bleak. This reality is reflected in this morning's data. Edging up just 0.1, and remember these are just surveys, to 92.2. This series remains at mid-covid levels. Which is a serious indictment of the bullish outlook for the economy some maintain.
The Reverse Bank is a major and entirely un-necessary factor in the financial pain of most Australian families today.
Expect the already private sector recession to deepen.
USA Stock Market
Immediately at historic tipping point of grand proportions.
9 February, 2025.
Yes, S Stock Indices are whipsawing tremendously. Precisely, because we are at a big event turning point. And the market cannot make up its mind. Are AI stocks now over-valued or still cheap? Is the Trump impact a momentary last rush to the upside, or truly a long term shift to greater corporate profits and therefore higher stock valuations? Arguments on both sides are valid. My gut feeling, well its a little disturbed, which hints at eventual downside. My point though, is that we should all hold onto our hats. This is going to be one of history's biggest mega=trends. It will be fast once it starts, and witness non-stop hedge fund chasing competition. This will be a wave to catch that will change fortunes the world over.
AUSTRALIA CPI
RBA RATE CUTS ?
still delayed
The latest Q4 inflation data had lots of good news for those who only wanted to see and spin good news. True, the quarterly numbers were good, but no one wanted to talk about what happened within the quarter?
29 January, 2025.
'REVERSE' BANK OF AUSTRALIA?
Wall Street Journal, SkyNews, ausbiz interviews.
More has to be done to improve the quality of this institution toward international standards of performance. The RBA has only served to exaggerate the extremes of our economic roller-coaster. Always behind the curve. By definition now declaring itself data driven? A serious fail.
