It’s a Whole New China Syndrome

Real Vision: Finance & Investing

Real Vision

Business News, News, Investing, Business

4.1 • 1.1K Ratings

🗓️ 28 November 2022

⏱️ 34 minutes

🔗️ Recording | iTunes | RSS

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Summary

Historic protests over the weekend have pushed President Xi Jinping into perhaps the most uncomfortable position of his tenure, as China’s continuing struggle with COVID-19 restrictions weighed on market sentiment ahead of Monday’s open. All three major U.S. equity indexes were down more than 1% heading into the close, while investors sought safety in government bonds. Already skeptical of the recent rally, in his most recent research note Tavi Costa shared ample evidence a recession is imminent. Tavi, a portfolio manager at Crescat Capital, joins Maggie Lake for today’s Daily Briefing to assess the global implications of growing domestic unrest over China’s lockdowns, to explain why we should be paying attention to the U.S. Treasury yield curve, and to identify a potentially highly profitable macro trade for the next two years. We also hear from Victor Shih about the future of China’s relationship with the rest of the world. Watch the full conversation between Victor Shih and Maggie Lake here: rvtv.io/3W0wYBt. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

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0:00.0	How do we price the protest in China? Hi, everyone. Welcome to the Real Vision Daily
0:11.7	briefing with me today is Tavi Costa, partner and portfolio manager at Crescat Capital.
0:17.6	Hi, Tavi. Hi, Maggie. Thanks for having me. Thanks for being here. Interesting start to the week.
0:23.3	We have US stocks, which just closed down, bond yields and the dollar up on what seem like a whole host
0:30.2	of concerns. We heard hawkish comments from a couple of federal reserve officials, BlockFi,
0:35.9	another crypto firm file for bankruptcy. And of course, these reports of protests in China all
0:42.0	seem like they combined to sort of weigh on sentiment today, kind of creating this risk off
0:46.8	environment. What's top of mind for you as we kick off this week?
0:50.6	Well, look, it's been top of my mind at least to be looking at what is likely to be the
0:56.4	role map for this market, which is mostly of the darlings of this prior cycle are all
1:03.2	retesting the COVID lows. And you can look at Chinese stocks, you can look at some software stocks,
1:08.5	you can see our investments. They're all retesting the COVID 2020 or the March 2020 lows already,
1:15.7	even Amazon, Netflix, Facebook. And there are other parts of the market are yet to
1:22.3	in my opinion, retest those those lows. And there's a significant downside from here in my opinion.
1:28.0	So when you have markets right now showing a relief rally that we had in the last weeks or so,
1:35.4	I think it's in my opinion, when you have those situations, I think you want to systematically
1:41.2	increase your short exposure as the market moves higher. And now it looks to me, I don't have
1:48.5	a crystal ball, but certainly looks like it's a first day down for most markets, especially this
1:54.3	was a very broad sell off. You look at the equal weighted index in S&P was down over 2% today.
2:02.3	And so it's it's really not driven by one or two sectors. And the other thing I would like to
2:07.2	comment is the mega cap side. The mega cap stocks have been underperforming the overall market.
2:13.6	And today was another example of that Apple being one of them, but really across the board when
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