MB Fund Podcast: The New (Economic) Chinese Contagion

In today’s investment webinar, MB Fund’s Head of Investments Damien Klassen, and Senior Financial Advisor Mark Monteiro sit down to discuss China’s new Economic contagion (their construction sector)
On the agenda:
– Evergrande a symptom, not a cause
– World wages rebounding
– Structural changes are muddying the water
– Australia has different issues
– Investment implications

Can’t make it to the live series?  Catch up on the content via Podcasts or our recorded Videos.


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Damien Klassen is Head of Investments at the MacroBusiness Fund, which is powered by Nucleus Wealth.

 

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Nucleus Wealth Management is a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.

 

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Comments

  1. MB is overly China focused.
    Its coverage of the authoritarian nature of the CCP and its dangers for democracy and sovereignty has been necessary and superb.
    However it over eggs China’s economic influence on the world to the point of obsession. Whilst China’s effect on the iron ore price and other hard commodities is hugely significant, with consequent ramifications for Australia, this does not necessarily translate to world inflation. The effects of soft commodities (food), energy, and freight difficulties are arguably more significant in a globalised, complex, reflexive socio-political system.
    Take a broader, less obsessive view guys.

    • Actually the point made in this video and others & elsewhere by Damien & David is shockingly profound and you should listen again.
      The point is that the numbers of newly urbanised chinese migrants from the countryside to cities has underpinned/ driven the growth of the largest debt, construction and real estate bubble in the world, ever. This lollapalooza is the biggest market in the world. It and it’s especially 20 year buildup effects everything. It is the air we breathe in Australia. And it is all ending. Chinese urban flows peaked in 2018 and are projected to make a steep decline into 2030 and beyond. It was in making the chart myself that I believed it. The line goes up btm right to top left from 2001 into 2018 then makes a trend change to the btm right.
      One way to illustrate this that I have found is to overlay the urban flows onto the Aust-US real HPI (each in own currencies). Well what do you know they match. This line moves from parity in 2001 to 1.8X in 2018 and now having in my view cracked its uptrend, is 1.45X US real house prices with more downside to come (of course Aust RE prices don’t have to crack for this ratio to go down, just rise slower than the US. But I do agree we are in for a shock globally so…). I will be looking for more ways to illustrate the importance of these urban flows and to handicap the timing of CCP actions as well as the risks of a crisis evading their control.
      ps: urban flows can be calculated by taking OECD china population series and multiplying it by UN china series on urbanisation rates. Then take the annual change in millions of people. The flows grew from a few million in 2001 to 25m in 2018 and are projected to fall to 10m by 2030. If you listen to the shows there are more insights that make it even worse. The already over built market, the 2020 census showing urbanisation was even higher than the world realised etc.

      • China has led the global cycle for the last decade at least. One can see this in OECD leading indicators (CLI) for example. Any problems there will also lead the global cycle lower. China is critically important even before you consider the shaky underpinnings of the china RE lollapalooza (using Charlie Munger’s appropriation).

        • The real lollapalooza here is the aggregation of psychological biases (the actual Munger contention).

          • Psych biases didn’t create those urban flows. That would be the process of investment led industrialisation by a capable & numerous people. Surprised you seem to think my conception of Munger’s term doesn’t encompass psych biases. Of course they are the sine qua non of a bubble but they take time to develop. In any case your contention was about DLS’s biases. Once more I am saying who cares. We have a massive event here. All you can do is nitpick. What a shame for you.

          • Your analysis seems worthy but your comments betray another bias – the planning fallacy.