How Did you Go Bankrupt?
Gradually, then suddenly
The Sun Also Rises, Hemingway
This column has been discussing the emerging bear market which topped in late 2021. The first leg down ended Fall 2022 and the second leg up ended late July-August 2023. The third leg down is beginning. Those are conclusions from chart patterns. This week more fundamental evidence is emerging supporting the bear case. Our story begins on the other side of the world in China.
Chinese exports are down 8.8% from August a year ago. Exports fell for the fourth month in a row. Imports are also down.
The jobless rate among 16- to 24-year-olds in China is 21.3%. In the last two years the value of the Chinese yuan has fallen from 6.3 per U.S. dollar to 7.25.
Google Country Garden’s Forest City in Malaysia is the latest ghost city in China’s property inventory. Country Garden missed two interest payments on its dollar bonds but somehow managed to pay in the thirty day grace period. It owes $196 billion dollars. The original condo asking price was $280 a s.f. Now it is $116. Optimistic investors bought condos but did not occupy them. No doubt many did so with borrowed money. The ripple effect of a Country Garden default coupled with investor defaults on their loans will ripple across the Far East.
Apple will introduce iPhone 15 this next week. Chinese phone maker Huawei sold out its new Mate 60 Pro phone this past week. Team Biden has stopped export of U.S. made phone chips to China. The iPhone is now 52% of Apple’s revenue and it is made in China. China retaliated by forbidding government officials to use the iPhone. Samsung and Apple phone prices are now north of $1,000, is this a saturated market? I bought version 12 for about $350 a few months back and still have not figured out all its features.
Apple stock price fell 7% this week, recall it is the most valuable company so that mean billions of lost value. Other tech companies saw stock prices fall.
Crude oil has reached $87 from its $70 level when we predicted a rally. Don’t be surprised if it exceeds $90. Retail gasoline is up sixty cents this year. No wonder, wind projects are being cancelled due to their high cost. Offshore wind farms can cost $4,000 a kilowatt compared to onshore of $1,360. Team Biden’s expectation of 30 gigawatts off-shore by 2030 will probably fall way short.
It looks like after a stunning interest rate increase, rates may fall back raising bond prices. That is our next prediction.
October and November are the weakest stock market months of the year. Prepare now as these fundamentals unfold.
