Give us a sense of how this impedes the reopening trading.
Don't forget. I mean, this is not
a straight line, certainly. How does it affect the way you look at
stocks in China, equities and just markets generally?
A lot of interest, but people aren't really, you know, following it with
deeds. This is the problem.
Well, they're not diving in yet because there's been so many false dawns.
But it's always good to look at what's happened in other markets.
The trends you see there. And second and third quarter in the West
when we had the lockdowns is we had substantial increases in economic
growth. You know, China's obviously gone through
a bad patch. But I think we have to assume that
China's also now going to see a real resurgence of growth.
And of course, a lot of people are saying that while maybe President Xi
will appear to be approved. Right.
Because we will see growth coming out of Covid.
And of course, the declaration of victory will go along that.
So, yes, I am reasonably positive on China on a tactical basis.
But I also think Hong Kong is interesting.
I think Hong Kong could be a leveraged play on this China move because so many
people want to get into Hong Kong. A lot of the top businessmen work here.
Some of them live here. And I think Hong Kong will benefit,
especially because of that. But you are also seeing that markets are
going away from Asia generally are a little bit passive.
Sanguine, I think is the word you used here.
And that would really surprise me.
You if the bonds are dead money. Well, I mean, markets are in a real
state of flux at the moment. We've got quite high inflation and yet
we've got interest rates that don't seem to be able to catch up.
That's terrible for bonds because you're not going to get the yields on that you
necessarily want. And yet your money is degrading all the
time. If ISE can look at three tactical moves
at the moment, it would be China. It'll be stand the US dollar because if
we do see problems in the global markets, we want to be there and it
would be equities. Careful with equities, of course,
because you need to be careful with your selections.
But I think equities are still a better bet than bonds at the moment.
Richard, some say that you by China on cheap valuations.
Is it also now time to look at China in terms of fundamentals?
You talk about growth coming back. Can we buy China on the basis of both
valuations and fundamentals as well? I think fundamentals are extremely
difficult with China at the moment because we don't really know what kind
of figures are coming out. It's difficult to get anecdotal evidence
for what's happening because at the moment it's quite difficult to travel
into China. You can't go and see factories.
You can't go and see what stock they've got.
You can't interview management particularly well.
So it is difficult to look at China on fundamentals.
I think basically you have to look at China in terms of why would you buy
China? Well, you probably want to buy China for
things like electric vehicles. You probably want to buy China for its
tack because they're very good attack. You might want to look at one or two
exporters, although they may be subject to issues from global slowdowns.
So I think China is a market where you have to be selective.
You have to look at particular areas. And with every investor in a country,
you have to look at what's China going to be good at, not necessarily just
looking at China as a whole. For 2023, one of the big questions will
be whether we see a hard or soft landing, whether we see a recession,
when you take a look at the dollar and you take a look at the bond market.
What are they telling you? Well, the bond market, the reason I said
I think markets are quite sanguine is because I don't think they're really
building. And the true impact of what we're seeing
with inflation and also what we're seeing is inflation is things like labor
conflicts. We're seeing strikes in the US, strikes
in the UK, threats of strikes in Europe. You know, these are all big issues that
are likely to keep inflation stubbornly high.
That means the Fed and other central banks are going to have to control that
by putting interest rates up. Now, we've had a bit of a hiatus
recently, a bit of a bump because the Fed said it's going to reduce its stages
from 75 basis points to 50, but we still could get a series of 50 basis points
happening on a fairly continual basis in order to fight inflation.
Inflation's insidious. Once it gets its hooks into an economy.
It's very difficult to get it out. We're restoring the Volcker years that
it took a very high interest rates well into the double digits for that actually
to happen. Yes.
Was it worse than your comment that could the Reagan quote on
this? Anyway, welcome to the second.
But you are suggesting that I think you could you call it not vain gloriously at
all. Naturally.
The Harris Law of quarterly reversal. Okay.
What is that? I mean, we had a bad time of it already
in many of these markets, especially developed ones in December or now.
Well, actually, we've talked about this before.
I know it's extraordinary how at the end of a quarter, maybe just before the end,
maybe just after the end, we do get these reversals.
Now, we've had a pretty good quarter. All in all, in the fourth quarter, the
news coming out isn't particularly good. So I think there's probably quite a good
chance that the early part, the early week or so, the new year, we could see a
reversal in that reversal is likely to be negative.
In fact, we saw it last year, January 2nd, I think was the the high of the
markets. And since then, the markets pretty well
gone down. I think we're looking at pretty well 20
percent now. You know, it's it's a bear market in the
year. Now, students of history will say that
you don't often get a bad year after a bad year.
But of course, you know, this time it's different for generalizing.
Absolutely. And it's quite feasible that
we may get another bad year again. The fundamentals are not good.
And I think the Fed is fighting against the tape.
Fundamentals not good. We could get another bad year.
Big question here, Richard, how do you hedge?
Well, it's very difficult to hedge. You know, you can run, you can't hide,
you can run deep. But I think basically you have to look
at your portfolios in terms of risk. You know, investors these days at the
moment are risk managers. You've got to be an active investor.
You can't just invest in indices because they're probably going to stay flat for
a long time. Go down, go up, but probably stay flat
for a long time. So gain I think if you're looking at
equities, you need to look actively. You need to look at companies that have
pricing power that can companies like Staples, where they can increase prices
a little bit day by day, a penny or two a day.
People don't notice. And I think that's the thing with
inflation. That's the thing with these kind of
companies that you have to focus on the ones that are doing that.
Richard, I want to get a sense here. I mean, you're doing a deal.
And we all know that news fundamentally moves markets.
I mean, that's exactly what you've been doing, a deep dive into this into this
subject, which we all seemingly know about.
And we've been uncovering a lot of stuff.
Give us a sense of. Very quickly.
I mean, it is a piece in you can't just do it in very possibilities.
Well, I'd like to think I could. It's called narrative finance.
It's how stories move markets. And I mean, you're a great purveyor of
stories. And Bloomberg moves markets because
that's why it's there. The thing is, it's been very rarely
research in a proper way. What we're really looking at is how does
that narrative signal you have a shock event.
How does it move through the market? How do you classify those different
areas of the signal? And the important thing to an investor
comes down to the question you often ask me.
Is this news in the market? Well, what I'm trying to do is find by
analyzing the narrative signal, how much of the news is in the market, should
investors just sit on their hands or should they take action?
So it's as simple as that. The answers in the stories.
Richard, before we let you go, we have an end live question for you what
prisons, what prison, what gift are traders expecting?
I didn't quite catch what the traders expecting.
What is the gift? Why would you want Christmas?
Yeah, yeah. Well, I guess it's economic growth.
Stratospheric Fed interest rates down to zero and the.
And the fairy comes to visit. It's tough to see there any free gifts
this Christmas. I think basically we're all gonna be
looking at a piece of coal. Well, you could press it.
You can press coal. And I'm a half full kind of guy.
You're not today. But if you compress coal enough, you get
a diamond. So there you go.
Good points right away. ISE in time.
And the Reagan quote was inflation is as violent as a mugger, as frightening as
an armed robber and as deadly as a hitman.
Excellent. Thank you very much indeed.
Port Shelter Investment Anna Edwards C E.