The Insane China Problem | Inflation Disaster

remember to lock in that flash sale

linked down below 69 for v-day now we

gotta talk about China what's going on

in China because there's a lot of talk

that China is going to substantially

drive up inflation in the United States

and we want to know what's going on with

the Chinese consumer because the Chinese

consumer usually only makes up about 32

of the Chinese market the real estate

market making up substantially more some

say over two-thirds of them of the uh

Chinese uh essentially GDP is made up by

moves in a real estate market and

housing uh and so the Wall Street

Journal put together a good piece on

what's going on with China we've got

some additional evidence as well that

we're going to look into to see what's

Wall Street thinking is going on with

China because initially the thesis That

Wall Street had was that you're going to

see a move up in inflation because of

the Chinese reopening now I've been

really bearish on that idea my opinion

has been no I don't actually think

you're going to see a massive

inflationary surge in China because the

amount of excess savings that an

individual has in China is next to

nothing compared to what individuals had

in the United States per person in China

you potentially have excess Savings of

about 500 per person in the United

States you had excess Savings of about

six thousand dollars per person when it

came time for us to have a reopening

event that suggests that the U.S

inflation was obviously able to be a lot

stronger because you had 12 times as

much money in a shorter period of time

you also had the belief that the US

government was going to bail you out

that's where you had in the United

States you don't actually have that in

China China actually provided more

corporate welfare than it gave

individual uh sort of stimulus of money

you didn't really have that sort of

individual support you had Chinese

individuals who had to save a lot more

money and essentially fend for

themselves to prevent uh being damaged

by the economic moves now uh let's talk

about this Wall Street Journal article

then we'll get into the some of the

pieces regarding what Wall Street thinks

about this keep in mind I live stream

every day the mark actually just every

day of the week around 4 30 to 5 a.m I

usually start in the morning California

time and I bring you the day's news so

look forward to seeing here it's also

then posted to Google podcast Apple

podcast and Spotify all right let's take

a look at this Wall Street Journal here

yesterday posted don't count on China to

save the world China has historically

relied on government stimulus and heavy

investment for corporations to power

itself out of out of slumps however that

mix may not happen so well in 2023 the

reason for that is China is already

deeply in debt its housing market is in

distress and much of the infrastructure

that the country needs which is usually

where you would spend money has already

been built remember you have a country

China that spent billions of dollars

building essentially ghost cities hoping

that if you you build it they will come

and people just didn't end up coming

consumer confidence in China remains low

and really what you're starting to see

in China is this opening of wallets from

wealthier individuals that people are

spending more money locally in China on

restaurants bars and travel and folks

Wonder hey are we going to see inflation

because of that in the United States and

there are some insights that we can get

from earnings calls from some other

companies to suggest hey how is that

spending going in China and so when you

look for example at a win this is wind

Resort's earnings call they tell us that

the strength in Macau and sort of this

post-covered recovery in Macau has been

really strong now Macau is just a a

region of China it's sort of deemed like

a semi-autonomous region they speak

their official languages are traditional

Chinese which is slightly different from

Mandarin and Portuguese yeah they've

only got like a 680 000 population but

it's it's a destination for people and

wealthier people tend to go to Macau to

gamble and so wind talks about a

substantial increase in uh in in

gambling during the Chinese New Year but

they also talk about how the strength

seems to be continuing post uh Chinese

New Year now they do mention that their

hotel occupancy is only at about 89.9 a

little bit of a potential red flag if

you're starting to see less Hotel

occupancy you want to be closer to 95

plus percent Hotel occupancy because it

makes hotels more desperate to fill

rooms compared to like airbnbs so a

little bit of a red flag for Airbnb but

what you have over here is we have seen

typically after post-chinese New Year in

the past the period does see a Slowdown

but we have been very encouraged to see

the business remaining very strong very

strong with mass gaming direct VIP and

retail sales better than a previous uh

periods in the past so what you're

seeing is

more uh Chinese spending than you have

seen in the past at this reopening now

of course it seems like this would be a

unique opportunity so questions are

given that you know how often do you go

away from covet zero but some folks are

saying hey you know what if the Chinese

recovery keeps going maybe people are

just going to keep spending and if they

keep spending maybe maybe you could

really prop up Global GDP you're seeing

a similar report from Las Vegas Sands uh

they're saying that this right now feels

like a different animal you've got sort

of a a special customer spending a lot

of money in Macau and so maybe if you

wanted to play a bet on a Chinese

reopening Maybe

you focus on some of the casinos who are

going to benefit from increased

visitation and travel amongst China but

is that travel in China going to lead to

a sort of an inflationary impulse that's

the big question in fact that's the

question not only the Wall Street

Journal continues to delve into but also

some Wall Street analysts who look at

Commodities inflation she'll talk about

Commodities in China in just a moment

but to finish off here with the Wall

Street Journal piece The Wall Street

Journal talks about China's economy

being forced uh basically forecasts to

grow strictly because of the consumer

some suggest that in 2023 the consumer

might end up Supply supporting the

Chinese economy to the tune of about

two-thirds of GDP growth which is

usually how much housing grows so you

might see a flip-flop between a consumer

taking the place of housing this year in

China it'll be really interesting but so

far where you're seeing the spending is

amongst the wealthier segment look at

this you've got Swiss watchmaker Swatch

group suggesting they're seeing a large

Revenue rebound powered by China Hong

Kong and Macau you've also got lvmh

saying that the recovery in China is

quote quite spectacular and that there's

a serious bump for everybody so a lot of

this without that a serious bump for

everybody though seems to be for travel

so a lot of what you're seeing in the

China recovery is a lot more travel and

entertainment spend and the rich people

are spending money on casinos and luxury

goods that seems to be so far where

you're seeing this Chinese recovery

you're talking about some potential

excitement about getting back out to

spending but again the big question

being how long is it going to last now

when it comes to Commodities a lot of

folks are suggesting you're going to see

a big spike in like Metals Commodities

but

there's a belief that even though

markets are pricing in this idea you

could see a Commodities price spike you

might actually not because of less real

estate investing coming to the Chinese

market now I thought that was

fascinating because if you actually jump

over to see what some Commodities

experts are saying you get a little bit

of an idea about okay well what could

actually end up happening so TD put out

a piece on this

they talk about seeing China's recovery

starting to take shape starting to see

more ridership and we know we have that

increased household savings and more

deposits more consumer spending coming

but what do they actually suggest for

Commodities well they say that so far

they actually think Commodities might

just end up moving sideways they say

they see little impact from China's

reopening in commodity markets to date

and that they do see upward pressure on

global energy markets in the coming

months so maybe upward pressure on fuel

because of travel but sideways trading

for metals and part of the reason you

might see this sideways trading for

metal is because less real estate and

infrastructure building leading demand

indicators suggests copper and aluminum

are over stocked which argues for lower

metal consumption going forward as well

as that real estate sort of slump you've

got in the country

in in China

and talk about over here that a lot of

speculation has gone into Commodities

leading to higher commodities prices but

that could suggest the recent Bull Run

in Commodities is ultimately out of

steam because you might not see that

push in Chinese Commodities who knows if

that'll also translate over to the

energy space so my conclusion on what's

going on in China so far is the

following yes we might still see oil

move up a little bit but I really don't

think you're going to see 100 and a

hundred dollar per barrel oil this is

something that I've been pretty

consistent about over the last few

months suggesting that I don't see it I

don't see that hundred dollar uh per

barrel of oil called although a lot of

people have been calling for it a lot of

Institutions saying it's coming China's

going to reopen it's going to blow up

spending and sure travel and

entertainment is blowing up which could

be good for the casinos could be good

for companies like Starbucks but

probably not good for actual metal

Commodities and if that reopening demand

isn't as wild or doesn't last as long as

we think can end up being bad for

energies and commodities so not so great

in terms of wanting to be bullish on

energy bullish on Metals for China maybe

you could be bullish on luxury goods

maybe you could be bullish on Starbucks

but the question also is how long is uh

this uh this Chinese reopening spending

going to last so far based on what we're

seeing in earnings call is yeah you've

had a boom during Chinese New Year but

uh you're seeing more of kind of like

this gradual reopening so we'll see what

ends up happening in China but so far it

doesn't feel like it's a massive

inflationary boom that a lot of people

were warning about and the leading

indicators are saying no massive

inflationary boom now obviously we just

got CPI numbers in the United States

which really gave us some head

scratchers like apparel shooting up

point eight percent used cars moving

down 1.9 which is the opposite of what

the free market was saying you got folks

like Gabe here donating 50 to save long

on uranium

but while you've got all these sort of

mixed signals nothing's really screaming

you've got a massive boom in inflation

and like this massive boom of second

wave inflation coming in the long run

we've got noisy signals all over the

place but none of the noise is really

pointing to the worst case scenario it

kind of reiterates we might be seeing

that Nike Swoosh recovery where yeah

we're gonna get mixed signals yeah we're

gonna get little pockets of spending

like Macau rich people spending more

money but are we gonna see this big boom

and more Commodities inflation probably

not are we going to see this big boom in

energy inflation probably not are we

going to see this big boom in worker

inflation so far the answer to that is

no we're seek more worker availability

and we're going to see a big boom in

product inflation probably not so far

not really seeing that although there

have been some red flags like why did

apparel go up 0.8 of the CPI reported

used car prices go up but CPI not even

capture that

it's going to be interesting sort of

like a brace for impact point of view

but this is what a lot of folks are

looking at when it comes to China and

the potential inflationary impulse that

China could bring us so