“Foreign exchange reserves in China declined for a third straight month to $3.188 trillion in March of 2022, the lowest value in a year. Figures compare with market forecasts of $3.2 trillion. Gold reserves stood at 62.64 million ounces at the end of March, unchanged from that at the end of February. 2022-04-07”
You sound uncharacteristically upbeat about future prospects this time, compared to your previous articles! I'm not sure if this is just a dip like any typical dips before: something about China and also its perception in the world has been fundamentally altered. In the stock market, past behavior is usually a reasonable predictor for future performance, until we suddenly encounter events that are historically unprecedented.
Assuming you are referring to the prospects for Chinese equities, by the standards of the past 50 years, the current situation is indeed extreme. Less so if we were to include the 20 years prior to that. Extreme situations are usually the best buying opportunities, are they not? "Buy when there is blood in the street," as the saying goes. Does this not qualify in your opinion?
Could matters deteriorate further? Clearly. But that is always the case and cannot be a basis for successful investment decisions. The difficulty in calling a bottom makes it prudent never to go "all in." But doing nothing is typically a sure way to lose, is it not? What course would you recommend?
No, I fully agree with your investment philosophy. However, I am less optimistic about the timeframe as I think there is more pain ahead after Shanghai reopens and we start to see the rubble under the ruins, and also as more spill-over effects get triggered. I don't feel it is an "all-in" moment, today. Anyway, thanks for another thought-provoking article.
Thanks for the feedback. In such troubled times going all-in on equities, or even, say, investing 50% of one's liquid assets, is definitely not something we would recommend. When equity prices are down 90%, as happened with some Russian companies, that's when it's time to consider a big buy. Here we are merely talking about the prospects for a substantial short/medium-term correction. The point is that we don't know when a turning point will take place, but when it does, there is likely to be a major market move in response. The same is true of the potential short to medium term upside when buying CNY and/or CNH. You're not likely to make 3x, but you might make 20-30%, in exchange for a fairly limited downside risk.
This is really valuable. (I’ll try and post any quibbles to the extent I have any)
“Foreign exchange reserves in China declined for a third straight month to $3.188 trillion in March of 2022, the lowest value in a year. Figures compare with market forecasts of $3.2 trillion. Gold reserves stood at 62.64 million ounces at the end of March, unchanged from that at the end of February. 2022-04-07”
You sound uncharacteristically upbeat about future prospects this time, compared to your previous articles! I'm not sure if this is just a dip like any typical dips before: something about China and also its perception in the world has been fundamentally altered. In the stock market, past behavior is usually a reasonable predictor for future performance, until we suddenly encounter events that are historically unprecedented.
Assuming you are referring to the prospects for Chinese equities, by the standards of the past 50 years, the current situation is indeed extreme. Less so if we were to include the 20 years prior to that. Extreme situations are usually the best buying opportunities, are they not? "Buy when there is blood in the street," as the saying goes. Does this not qualify in your opinion?
Could matters deteriorate further? Clearly. But that is always the case and cannot be a basis for successful investment decisions. The difficulty in calling a bottom makes it prudent never to go "all in." But doing nothing is typically a sure way to lose, is it not? What course would you recommend?
No, I fully agree with your investment philosophy. However, I am less optimistic about the timeframe as I think there is more pain ahead after Shanghai reopens and we start to see the rubble under the ruins, and also as more spill-over effects get triggered. I don't feel it is an "all-in" moment, today. Anyway, thanks for another thought-provoking article.
Thanks for the feedback. In such troubled times going all-in on equities, or even, say, investing 50% of one's liquid assets, is definitely not something we would recommend. When equity prices are down 90%, as happened with some Russian companies, that's when it's time to consider a big buy. Here we are merely talking about the prospects for a substantial short/medium-term correction. The point is that we don't know when a turning point will take place, but when it does, there is likely to be a major market move in response. The same is true of the potential short to medium term upside when buying CNY and/or CNH. You're not likely to make 3x, but you might make 20-30%, in exchange for a fairly limited downside risk.
the situation is hopeless but not serious. Anyway, never forget Murphy's law