Spot on. It is obvious that 10Y is the thing to watch. I even do something different and compare 10Y with SP500 EPS, so how much you can get from bonds vs stocks and q3 reporting is not that far. Very exciting 4 weeks ahead now.
With evergrande my view is slightly different. I also think that this is nothing surprising that will cause sudden huge drop as it is at least going since 2 months already. I think however that this will take forever to resolve. It will just haunt us for I guess next 2-3 years bleeding like 100-200 million $ losses each month. They got still almost 2 millions properties to finish, but already payed by customers. China cant let them just fall, but can't bail them out as well, so I guess will just help from "the back seat" to manage the process mainly. Now it is all over the media, so this will affect a lot of other companies and I am sure that some new smaller developers will emerge with similar issues. Banks will also have to swallow some bitter part of it, so we may see some problems there as well. Generally long and unpleasant process for everyone involved, but everyone knows about it now, so not a surprise anymore. Just to be clear it is good and expected for China. They could sort it out in a nanosecond, but it is better for them to switch spending money (in economy) on something else as too much is going into housing, so they just manage controlled fall of this sector, so money can go into other sectors.
Great work as always Greg. All the best.
Over 50% of the market trading below 5O day MA. I don't see Fed tapering, but if China doesn't recover and crude gets too expensive, causing the American consumer to choose between paying for gas to go to work or the mortgage, they will choose the gasoline to go to work and that is when mortgage companies start to go bankrupt and so will real estate. This will be the point where it won't matter what the fed does because it won't work any more. That will be the black swan, the real one of point of no return. Then you will have margin calls. Investors won't be able to afford interest on margin accounts. People think that the black swan last year was the virus. Wrong! That is what they want you to think. Things were starting to freeze up long before the virus. 2018 selloff was the canary. Market usually have 3 major corrections (2018, 2020, current one) before the crash. This current third one will be 10-15% correction (200 day MA) and then all time highs again (blow off top) before the crash.
