The DC Today - Wednesday, August 16, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 16 August 2023
⏱️ 10 minutes
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Summary
Today's Post - https://bahnsen.co/3EicX1X
Following yesterday’s dismal economic data out in China and the largest rate cut there in 3 years (mind you, we are only talking about 15 bps), there was some add-on stress revealed in the real estate and financial markets today. One of China’s larger wealth management and shadow banking firms, with over $138B in assets, missed some repayments on some of its investments and is under review.
It is too early to tell if more financial contagion will occur definitively, and of course, you have a government there that can act if needed, but having managed client capital through the GFC in the US myself, a declining real estate market followed by several cracks like this in the financial system are eerily familiar warning signs and worth following. I do suspect the likely path is continued easing in monetary policy and, eventually, some form of stimulus to revive the Chinese economy, but since I know David will have more insight in this Friday’s Dividend Cafe on the subject, I will leave it there for now.
Interestingly in Asia, however, is Japan’s economic resurgence. Japan’s GDP last quarter was up a shocking 6% q/q on exports (recall how weak the Yen has been), which was the best organic reading since 2015. Going around the horn to the US, we had Fed minutes released from July’s meeting, leaving further potential rate increases on the table and some better-than-expected housing and industrial production numbers out. So what do you get with such a divergent economic paradigm amongst the first, second, and third largest economies of the world?
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:14.5 | Hello and welcome to D.C. today. My name is Brian Saitel. It is Wednesday, August 16th. It's good to be with you all today. |
| 0:22.2 | Kind of a choppy session in markets. We had an upmarket in the morning following sort of a give-back last couple of days. |
| 0:30.2 | We were up upwards of 150 points, sort of mid-morning, and got a slew full of different data points and markets just sort of |
| 0:38.4 | seem to sell off and trade lower from there. We closed down ultimately 180 points on the day, |
| 0:43.9 | which was a swing of 360 points, you know, peak to trough. So basically close right around the |
| 0:51.8 | lows for the day. There was some data out of China that moved markets. |
| 0:57.0 | There was minutes for the last meeting, the Federal Reserve meeting from July were released today. |
| 1:03.0 | And that moved markets a little bit around 11 or so Eastern. |
| 1:08.0 | And so we'll kind of go through this stuff here. But the 10 year today closed at 426. |
| 1:15.5 | We were in the morning trading it around 418. So you had a decent move and interest rates today. |
| 1:20.7 | The yield curve somewhat dramatically, relatively speaking, steepened a little bit on the day. |
| 1:27.4 | So in other words, the short end of the curve was steepened a little bit on the day. |
| 1:31.5 | So in other words, the short end of the curve was down just a little bit, |
| 1:33.3 | long end of the curve was up a little bit. |
| 1:34.7 | A little steeper yield curve. |
| 1:38.1 | We're still inverted by about 70 basis points, though. |
| 1:41.0 | So less than 100, but still inverted. |
| 1:46.9 | China yesterday had some decently poor numbers that were released economically, and they cut interest rates. They cut interest rates by the most they have in three |
| 1:52.3 | years, which is all of 15 basis points, but still, it's indicative of monetary policy that's |
| 1:58.8 | trying to aid a declining economic reality in the country. |
| 2:04.1 | Along with lower rates, especially when the rest of the world is high in rates and or even |
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