*Between 1970-2023:

The avg home price has risen 20x

The avg cost for bachelor degree has risen 18x

The avg new car price rose 16x

The avg gasoline price rose 11x

Yet nominal avg income has only risen ~6x

This is why credit/debt has soared, incomes can’t justify costs And this is a feedback loop - because even though easier access to cheaper debt has masked this divergence between incomes and prices, it’s amplified it (more credit pushes prices higher)

Otherwise demand, growth, and prices would be much lower

Stuck b/w Rock and hard place

*Russian central bank says China's Yuan settlement has risk mainly from lack of hedging tool/free conversion.

It encourages companies try to maintain old contracts in unfriendly currencies($/Euro)

As I’ve said, there is no liquid collateral (bonds) + open capital acct for yuan “Although there’re reports that in Feb + Mar this year, the Chinese yuan has replaced the $ as Russia's most traded foreign currency. However, based on reports from Russian media + Chinese financial self-media, Russia has been selling renminbi and buying $ and euros this year”

*A big issue I see with many analysts/investors is they conflate the equity markets (asset prices) and the underlying economy

The two don’t really correlate (esp since 1980’s) - US growth has slid more and more yet prices of markets soar

As I’ve said before: it’s about liqudity So whats this mean?

Simple: equity markets (generally) move on sentiment of liqudity, not underlying fundamentals (ie at the margin)

When the Fed/Gov turns off the spigots, asset prices sink (even if growth steady)

And vice versa ~ like today (fading growth but more liqudity)

*China’s productivity growth has plunged steadily since 2008 via diminishing economic returns - and getting worse

For EX: total factor productivity (TFP - aka productive efficiency) growth has declined steadily post-08 - thus leading to most of the fall in China’s GDP growth

1 Meanwhile China’s incremental capital-output ratio (ICOR - aka money invested to gain growth) has been steadily rising (a rising # = bad)

EX: China’s ICOR avg’d 3-4x the decade before 08 vs >10x since Covid

This means they’re spending >3x the money for HALF the real-growth👇🏻

2

*Here are some key charts showing the current fragility in China’s real estate market (and the far left tail-risks that come w/ it)

Chinese household borrowing for home buying has crashed YTD as elites continue tightening to curb speculative excess (pushing demand down)

(Cont) *China home sales continue plunging YTD (w/ momentum still in decline)

And w/ plunging sales, China new home prices YoY have dipped neg. ~ hitting their lowest point since the 2015-16 global slowdown (was yet again -0.25 lower in Oct ~ largest MoM decline since 2016)

(Cont)