Recession Prediction: The Reason Behind the Scare

Posted On June 26, 2018 1:11 pm
By: Steve Smith

To my favorite “flow-chart”:

FADING CHINESE “CREDIT IMPULSE” AS THE CANARY BEHIND THIS “GROWTH SCARE”

Source: Bloomberg

CHINESE 1s10s CURVE TOO INDICATING SAID “GROWTH SCARE” AND SIGNALING LOWER GLOBAL COMMODITIES

Source: Bloomberg

CHINESE GOVERNMENT BOND YIELDS SPEAKING TO “CATCH-DOWN” FOR EMERGING MARKETS EPS AS WELL:

Source: Bloomberg

As confirmation of the “growth scare” concerns, the PBoC’s “easing efforts” of the past few months are looking increasingly “frantic,” as the prior RRR cut(and small biz tax cuts, and MLF collateral rules easing) was escalated over the weekend in response to the total meltdown in Chinese Equities markets being experienced (Shanghai Comp -9.8% QTD, Shenzhen Comp -14.4% QTD, Shanghai Property Index -8.1% QTD).

This weekend’s RRR cut was far more powerful than the prior April-kind with regards to the liquidity injection it can drive via the ‘debt-for-equity’ swap program, which is designed to ease credit strains and boost small business.

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Tagged with: recession prediction

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Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

Recession Prediction: The Reason Behind the Scare

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