China offers cryptic response on military drills around Taiwan

Well, they definitely are – at least from what can be observed in the region. The situation on the ground hasn’t changed all too much since last week. China were supposed to conduct military drills around Taiwan for four days (4 to 7 August) but they have continued operations until today. It was reported earlier that Chinese navy ships remained active off both Taiwan’s east and west coasts on Wednesday morning.

As mentioned yesterday, don’t expect China to relent on the pressure and they are likely to keep up military presence surrounding the Taiwan island for the foreseeable future.

Citi indicator at levels last reached in 2000, 2007: “after which global equities halved”

Posting this as an ICYMI. Dow Jones news/Market Watch have the piece, highlighting

a fat red flag investors may want to heed

It’s an index calculated by Citigroup equity stategists of global sell-side recommendations:

Our index of global sell-side recommendations is back to peak bullishness levels reached in 2000 and 2007, after which global equities halved”
“Analysts are net buyers of every sector in every region, but then they usually are,”

“They are still bullish on cyclical sectors suggesting few fears of oncoming global recession.”

Here is the link to the Market Watch article, which does caveat with:

Citi’s bear market checklist, which has eased to 6 from a potential 18 flags. Note, this particular flag gave a false sell signal in 2012, when global stocks were flat for the following 12 months.

spx month 10 August 2022

Global economy headed into a stagflation era, central bankers may be trapping themselves

Nouriel Roubini in an op-ed.

Roubini teaches at New York University’s Stern School of Business and has earned the moniker ‘Dr. Doom’. It may well be his time.

Main points:

  • “During the Great Stagflation, both components of any traditional asset portfolio — long-term bonds and US and global equities — will suffer, potentially incurring massive losses,”
  • Global economies carry larger debt ratios than before, setting up central banks for potential failure, Roubini said. “Central banks are thus locked in a ‘debt trap’: any attempt to normalize monetary policy will cause debt-servicing burdens to spike, leading to massive insolvencies, cascading financial crises, and fallout in the real economy,”

Full piece is here

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