Breakout Imminent

Update: The breakout will have to wait. Platinum was pummeled midweek and then the Tesla bubbled popped (maybe), and that had knock-on effects on nickel and lithium miners.

News of the day: NCP's CEO left for HYMC. The latter is down about 8 percent on the day, the former is on the cusp of a breakout. I do not see resistance until around $0.30, could be a quick double if the miners take off again. I posted on platinum miners a few days ago. I found another one that looks good, will discuss after my orders fill.

Arbitrage on the Ark, Lands in Japan

Southern Arc Minerals (SA.V) has a plan to spin-out its asset holdings to shareholders. See: Southern Arc Proposes to Unlock Shareholder Value Through Return of Capital Transaction
Southern Arc Minerals Inc. (TSXV: SA) ("Southern Arc" or the "Company") announces it is proposing to carry out a return of capital transaction (the "Transaction"). Pursuant to the Transaction, the Company proposes to distribute securities (currently owned by the Company) of Japan Gold Corp., Tethyan Resource Corp., and Rise Gold Corp., to the shareholders of the Company on a pro-rata basis.
This plan is not yet approved.
I looked at the value of these shares last week, and by my count it was 96 cents per share, or a 37 percent discount to the share price on Monday. This does not include warrants on Japan Gold and values the rump SA assets at zero. I used SA's fully diluted share count for my calculations. Tethyan is being acquired by Adriatic Metals (ADT.AX), I valued the SA holding at 23 cents per share last week. Rise Gold (RYES and RISE.CA) is worth 12 cents. The rest is Japan Gold, which I estimate at 61 cents per share.

Beyond the potential arbitrage here, the charts look good. First up is SA.V. It has been basing, but clearly the market isn't valuing the sum of its parts. If the market were to fully value the parts today, it would complete the base. Unfortunately, the spinout will create an entirely new situation for this company. Nothing can be projected for SA.

Rise Gold has been basing. It needs to clear CAD$1.10 for a breakout. I'm not too keen on this stock, I owned it before and sold it.
Next up is Tethyan. It will become Adriatic Metals. There's not enough history on this stock for a chart read, but I like their assets. It's a keeper for me.
Finally, there is Japan Gold. The chart on this is gorgeous. Moreover, a breakout will put SA's warrants in the money.
In sum, the SA spinouts look like undervalued shares that are posied for breakouts.

An additional bit of info that may be relevant: John Proust is the CEO of Southern Arc Minerals and Japan Gold. My sense from watching the video below is that Japan Gold has been moving too slowly on Japan.

Irving Resources (IRV.CA) is also in Japan, and its stock is already a 30-bagger that looks similar (chartwise) to Kirkland Lake and Wesdome, two that I own. Irving focused on moving their projects forward, while Japan Gold accumulated assets but hasn't done much to develop them.

Japan Gold has deals with Barrick and Newmont to evaluate their assets over the next two years. If the spinout deal means Proust will focus on moving Japan Gold forward, this could be what it takes to break JG out of its base.

This is an arbitrage play, but most of the assets themselves look undervalued or readying for a technical breakout. In addition to getting more assets than you paid for, you get assets with great charts and underlying value, with the cherry on top being a potential catalyst that triggers a rerating of Japan Gold.

I have bought shares of SA based on my research. I'm not sure how brokers will handle the spinout of assets. I use Interactive Brokers and can trade shares on multiple exchanges. There are pink sheet shares of these companies in the U.S., but you may want to check with your broker.

New Funds in China Raise Record 2 Trillion Yuan

New investment funds in China have raised 2 trillion yuan, a new record. iFeng: 历史首次!突破2000000000000元,大资管时代到来?
For the first time in history! The issuance of new funds exceeded 2 trillion yuan!

As of August 28, 973 new funds have been established this year, and the annual issuance scale has exceeded the 2 trillion yuan mark for the first time.

Fund issuance this year has shown a blowout as a whole. The total scale of new fund issuance exceeded 1 trillion yuan in six months. After that, fund issuance has accelerated. The second 1 trillion yuan only took 2 months.

As of August 28, 973 new funds have been established this year, and the annual issuance scale exceeded the 2 trillion mark for the first time, reaching 2.02 trillion yuan.

Financial commentator Wang Chao:

In 8 months, 973 new funds raised a total of more than 2 trillion yuan, which created a new history in China's fund industry.

Looking back over the past ten years, only 2015 and 2019 fund issuance exceeded RMB 1 trillion. In the first eight months of this year, the scale of the newly-developed funds has created a new amount of sky, and more importantly, this trend has not stopped.

Why is public fund issuance so hot this year? I think that in addition to the good atmosphere brought about by the good stock market, the decline in interest rates and the relocation of bank wealth management funds are also very important factors this year.


Ding Ding Ding Keep Their Heads Ringing

The parallels to the 2000 market top are piling up. Here's the Nasdaq breaking away from its upper bollinger band. They do ring a bell at the top, but unfortunately it keeps ringing until the blowoff move completes.


Platinum Miners Ready for Launch

 Waiting on a breakout in platinum above $1,000 an ounce, but it looks like the miners might lead this move. I don't like the jurisdiction, but ELR has the strongest chart. It could lead a breakout. 


Suzhou Civil Servants Paid in Digital Currency, McDonald's in Xiongan Accepts It

iFeng: 苏州已有人领取到数字货币形式的工资
Various tests and preparations for the central bank's digital currency are proceeding in an orderly manner. In Shenzhen, the internal testing of digital currency is being carried out in an orderly manner; in Suzhou, some civil servants have received part of their salaries in the form of digital currency; in Xiongan New District, 19 companies including McDonald's have begun to pilot digital currency. It can be expected that although it is not the same thing as Alipay and WeChat Pay, in the future digital currencies will be as ubiquitous as Alipay and WeChat Pay.

At present, the global central bank digital currency field is surging and competition is intensifying. According to data released by the Bank for International Settlements in January this year, 80% of central banks in the world are studying digital currencies, and 10% of central banks are about to issue their own central bank digital currencies. France, Sweden, and Thailand have begun to test digital currencies. Nearly 15% of gas stations in Venezuela have used petrocoins. The United States' attitude towards digital currencies has also changed from negative to positive.

As the world's second largest economy, every move in China's financial sector will affect global nerves, and digital currency is no exception. Yi Gang, governor of the People’s Bank of China, once stated that the development and application of legal digital currency is conducive to efficiently satisfying the public’s demand for legal currency under the digital economy, improving the convenience, security and anti-counterfeiting level of retail payments, and boost China's digital economy has accelerated development.

From the public's perception, digital renminbi can be "dual offline payment", as long as the mobile phone has electricity, even if the entire network is disconnected, payment can be realized. In addition, the current mobile payment must be bound to a bank card, and the central bank's digital currency does not need to be bound to any bank card, which can not only maintain the properties and main value characteristics of cash, but also meet the requirements of portability and anonymity. In terms of financial policy formulation and wealth management, the application of digital currency will enable the financial sector to have a stronger grasp of currency flows, the central bank's monetary policy will be more accurate, and the wealth management plans of financial institutions will be more targeted.

The construction of software and hardware for digital currency applications is speeding up, but there is no timetable for the official issuance of digital RMB. For the financial system, preventing and controlling risks is always the top priority. The first internal closed pilot tests in Shenzhen, Suzhou, Xiongan, Chengdu and future Winter Olympic scenarios are to test theoretical reliability, system stability, functional availability, process convenience, scenario applicability and risk controllability.

Even if there is no timetable, it is an indisputable fact that China's central bank digital currency is currently at the forefront of the world. People have reason to believe that China will accelerate on the "new track" of digital currency, which will bring us a higher-quality consumer experience, and will also more effectively promote the development of China's digital economy and reduce economic operations. Increased efficiency provides one more possibility.

China, along with other governments, will soon have real-time control over every economic transaction. Increased central planning occurs at the same time as information technology because planners see the illusion of complete knowledge. No doubt some governments will try again, with MMT madness a threat in the United States. Tyrants love it too. It will be easy for governments and corporations to shut off the accounts of regime dissidents, or any group of people they wish to injure, harass or destroy, such as business competitors.


Chinese Still Illegally Mining Gold in Ghana

Illegal aliens from China have been mining gold in Ghana for some time. From 2019: SCMP: Dig for gold in Ghana at your own risk, Chinese miners warned after arrests
Chinese citizens who work at gold mines in Ghana will not be protected by their home country if they get snared in a crackdown on illegal mining, China’s Ministry of Foreign Affairs warned after some Chinese nationals were detained for working in the African nation.

Although Ghana allows licensed companies to do small-scale gold mining, “it’s still illegal for foreigners” to work in the sector, “and they will not be protected by Ghanaian laws”, the ministry said on Monday on the Chinese social media app WeChat.

Some Chinese citizens had been detained “in recent days” for working at Ghanaian gold mines illegally, it said, without providing details.

iFeng: 中国人的非洲淘金梦:或身家上亿,或埋骨他乡
Although Ghana is already in recession, the myth of getting rich overnight in Ghana still attracts people from Shanglin to this African country.

In order to mine gold in Ghana, most people in Shanglin choose to borrow money domestically. Because these loans are not a small sum, and the gold rush environment in Ghana is getting worse and worse, many people cannot pay off their loans in time. Some people take the risk and go to the casino to gamble their luck, and the result is ten bets and nine loses.

Lu Silin, who died in the Ghana shooting in 2018, made almost no money in Ghana for ten years, and his family still faces more than 200,000 debts. His daughter revealed that "Father only came back once in 2013. Because he couldn't make money, he felt ashamed of his family and had something to do with debt."

In fact, after the people of Shanglin retired to Ghana in 2013, they learned the lesson of the fiasco of the "guerrillas" and linked or cooperated with companies with mining licenses to mine sand gold. The relative investment scale of this type of people has decreased. Companies required by the government to open companies have residence permits, work visas, prospecting permits, mining permits, etc., which are legal mining.

However, according to laws and regulations, their overseas investment and labor channels are illegal.

In the event of an emergency such as a shooting, the illegal identity will be exposed. "Workers cannot continue, and investment is lost."

This is the predicament of Shanglin people in Ghana.

If you stay, you may not make any money; if you leave, you are a little unwilling.

Many Shanglin people still continue to go to Ghana.

Their reasons are similar, "There, I heard that fellow villagers have been mining gold mines. No one knows what is going on. Let's try your luck."

Affected by the new crown pneumonia epidemic this year, since March 22, Ghana has closed off passenger transport across the border by sea, land and air. The increasing number of confirmed cases and the poor medical conditions in Ghana have made the people in Shanglin who are stranded there worry.

"Although the price of gold has skyrocketed recently, I still want to return to China as soon as possible," said Li Jian (a pseudonym) from Shanglin in Ghana reluctantly. ".


Attention Speculators: A-Shares Yes, Housing No

iFeng: 开发商的苦日子要来了!住建部央行座谈房企,信息量很大
The era of financing "strong supervision" has arrived! Can the real estate company's capital chain be able to carry it?

Recently, silver CIRC Chairman, Party Secretary Guo Shuqing, the central bank issued a document in the "Seeking Truth" magazine made it clear that: Housing estate bubble is the biggest "gray rhino" threat to financial security.

In fact, the "strong supervision" on financing of housing companies is becoming a norm. The running grey rhino has been put on the reins of financing.

The 21st Century Business Herald recently reported exclusively that the regulatory authorities have introduced new regulations to control the growth of interest-bearing debt of real estate companies and set "three red lines". Specifically, red line 1: the debt-to-asset ratio after excluding advance receipts is greater than 70%; red line 2: net debt ratio is greater than 100%; red line 3: cash short-term debt ratio is less than 1 time.

According to the situation of the "three red lines", the real estate companies are divided into four levels of "red, orange, yellow, and green" . Taking the scale of interest-bearing liabilities as the objective of financing management operations, the grading is set as the threshold for the growth rate of the scale of interest-bearing liabilities.

Analysts expect developers will begin inventory reduction if the government tightens regulations and credit access:
The aforementioned real estate companies pointed out that if the financing policy becomes stricter, the strategy of many real estate companies will gradually change from being aggressive to shrinking. And some real estate companies that have already seen high debts may face a tight capital chain.

It is reported that on the basis of achieving a new high in sales last year, many companies still raise their sales targets for this year. For this reason, the market has recently set off a land acquisition boom. In some second-tier cities, the land premium rate has risen again.

Pan Hao, a senior analyst at the Shell Research Institute, pointed out that if the financing threshold for real estate companies is raised, real estate companies that are restricted by the new regulations on financing may delay or cancel their recent land investment plans, and the land market will likely cool down.

But at the same time, the tightening of financing has sharply increased the pressure on the real estate company's sales and payment end, and the real estate company will most likely start the "accelerated sales model."

iFeng: 楼市调控重磅!住建部、央行等部门立新规,目标锁定重点房企
Help curb the radical expansion of real estate companies

Experts said that the real estate market has recently become more enthusiastic, housing prices in some cities have seen rapid rises, and the land market has been active. Appropriate adjustment of financing policies will help curb the radical expansion of real estate companies and prevent the accumulation of debt risks. In this process, some real estate companies with excessive financial leverage and poor ability to pay back may face challenges.

In fact, many regions have already tightened real estate regulation, many of which involve real estate financing policies. For example, Xianyang City in Shaanxi Province issued a notice requesting to strengthen the review of the source of funds for development and purchase of land, and prohibiting real estate development companies from raising funds through bank loans, trust funds, insurance funds, capital market financing, asset management plan allocation, bond issuance, etc. Pay the land bidding deposit, deposit and subsequent land transfer price.

Sun Binbin, chief fixed income analyst at Tianfeng Securities, pointed out that with the economic recovery, housing prices in first-tier cities and some hot second-tier cities have seen a significant upward trend recently. At the same time, the land market continues to be active. On the one hand, it shows that the real estate companies are not tight at present, on the other hand, it may further stimulate the expectation of rising housing prices. The rapid recovery of real estate sales has driven residents' mid- to long-term credit to continue to increase on a large scale, and the problem of excessive occupation of financial resources by real estate may once again cause concern.

Debt financing of some real estate companies will be affected

Many experts said that under the key real estate enterprise fund monitoring and financing management rules, some real estate enterprises' debt financing data will be affected to some extent.

Yang Yewei, chief fixed income analyst at Guosheng Securities, believes that the scale of credit bond issuance in the real estate industry in July reached 64.2 billion yuan, a record high. At the same time, since the second quarter, many places have imposed penalties for the illegal flow of funds to the property market.

The China Banking and Insurance Regulatory Commission has also repeatedly emphasized in recent times to resolutely prevent the resurgence of "shadow banks", the resurgence of real estate loans, and the recurrence of blind expansion and extensive operations.

An analyst from China Securities Securities stated that it is difficult for real estate companies to expand their business scale by borrowing debts, and part of the debt repayment also needs to rely on sales returns. This will directly affect the external cash flow and operating decisions of real estate companies, prompting real estate companies to speed up cash Receiving payments and reducing leverage have a greater impact on high debt ratio real estate companies and real estate companies that rely on bond financing, while the impact on the solvency of top stable real estate companies is relatively limited.

Meanwhile, the ChiNext index will see it's first batch of IPOs following a rules revamp in June. Stocks can also fluctuate 20 percent per day at of August 24, double the prior limit.

Reuters: Companies line up to list on ChiNext on Aug 24 under new IPO rules

The first batch of companies registered for listing on Shenzhen’s start-up board ChiNext under a revamped initial public offering (IPO) system will make their debuts on August 24, the Shenzhen Stock Exchange said on Friday.

China introduced a U.S-style IPO system to the ChiNext in June, as part of efforts to reform the country’s stock markets and channel capital to start-ups.

The exchange did not say how many companies will list on August 24, but at the end of Friday, 23 firms had registered at the China Securities Regulatory Commission (CSRC) for a ChiNext listing, ChiNext’s website said.

They include software maker Tansun Technology Co, Academy of Environmental Planning and Design, and digital equipment maker Shenzhen Jame Technology Corp.

The context of the policy shift includes the U.S.-China trade dispute. Chinese companies could be delisted from U.S. markest if they do not comply with SEC regulations. China has neglected its capital markets in recent years, but the trade war has spurred renewed focus on reforming and opening equity markets for entrepreneurs. iFeng: “深圳这个政策一出台,中美技术战争又升级”
Reuters believes that Chinese technology companies are facing increasing US scrutiny and the risk of delisting from the US market. With the establishment of the Science and Technology Innovation Board, China's expanding IPO reform will help increase the attractiveness of China's capital market.

The report quoted PricewaterhouseCoopers' global TMT industry leader Wilson Chow as saying that this reform has "very strong competitiveness" in attracting potential listing targets in the Shanghai and Shenzhen markets.


Where are the Bubbles? South Korea Edition

Reuters: S.Korea to tighten property curbs as home prices surge

The median apartment price in Seoul was 920 million won ($759,873) as of May, having increased every month so far this year through the course of the coronavirus outbreak. They are up about 52% since Moon took office in 2017.

Bloomberg: South Korea Urges Officials to Sell Their Second Homes as Prices Fuel Anger

Prime Minister Chung Sye-kyun, a Moon appointee, urged high-level officials Wednesday to sell such properties as soon as possible. The demand comes after rising discontent over prices prompted fresh scrutiny of the property holdings of senior Moon administration officials, including his chief of staff.

“If high officials own multiple properties, it is difficult for us to earn trust from our people,” Chung told a meeting of top government officials. “High-level officials must set an example. To be honest, we should have done this a lot earlier.”

Home prices have continued to surge in some parts of the country, despite a series of property-related measures launched by Moon since he took office in May 2017. Moon pledged an “endless” stream of steps in January, after earlier moves -- including higher property taxes, tighter lending rules and limits on using mortgages to buy apartments -- failed to stop the rise.

Reuters: Lost Seoul: South Korean middle-class dreams spoiled by soaring house prices

Even with unemployment spiking as the coronavirus pandemic swept South Korea in February, Baek Seung-min asked his wife to quit her nursing job to help reach a dream they had spent a lifetime chasing: buying their own apartment.

The 35-year-old interior designer said giving up his wife’s 58 million won ($48,000) salary would improve their chances of securing a property after the government introduced a host of measures aimed at cooling rampant property prices.

The unusual plan was to cut his wife’s income for a while so the couple’s annual earnings were low enough to be eligible for a quota system in new property developments designed to give more low-income newlyweds access to housing.

Even so, Baek and his wife decided to settle two hours west of his Seoul workplace in Incheon, where borrowing rules were looser and apartments far cheaper.

“Seoul home prices grew way out of reach, we had to go all the way to Incheon to buy our place,” Baek said. “The government is crushing our dreams when they curb loans and tell us not to buy homes, it enrages me.”

Achyde: Persistent real estate inflation weakens South Korean President Moon Jae-in

Another cause of inflation is the so-called “Jeonse” system, specific to South Korea. In this context, the tenant does not pay rent, but pays a deposit of between 50% and 100% of the total price of the accommodation when moving in, which he recovers at the end of the lease, generally for two years, if he leave the accommodation. In the meantime, the owner has made the money grow, sometimes by investing in a new property.


Government Debt: It Doesn't Matter Until It Matters

The U.S. federal government will soon have a budget that reaches $5 trillion. It will also soon spend roughly $3 trillion on mandatory programs such as Social Security and Medicare. This leaves about $2 trillion in spending, but a substantial portion of that is net interest on the debt. The remaining 30 percent is the whole government. Everything you associate with government, from courts, to defense, to regulatory agencies to various welfare programs, all falls within that 30 percent of the budget.

The year 2020 is an outlier because of the coronavirus pandemic, but the deficit could run over $1 trillion for years. Put another way, deficits will likely be 65 percent of discretionary spending at a minimum next year. In some years, like this one or when there is a recession, the entirely of the actual government will be funded by deficit spending. 


Time's Up for the Dollar

The 2019/2020 time frame was my expected limit for the U.S. dollar bull market going by the previous cycle. I expected things would have blown up by now. Fundamentally, the case for a dollar bull market remains. Central banks have gone to extreme lengths, but they're doing more of the same since 2008. The significant change is government spending. If austerity is over, then the conditions in place from 2008-2020 have changed. Additionally, cycles matter. It is possible this dollar bull market missed its moment. 

There aren't enough time periods to make for a sample set with the U.S. Dollar Index, but the behavior of the dollar in this cycle has been very similar to the prior two, particularly the last one. There was a choppy consolidation after the bear market, a bullish breakout followed by a test of the 7-year moving average, before running for a couple more years. In the early 2000s, the dollar would make a new high. This time it failed to do so. 

The prior two bear markets broke the 7-year moving average like it was nothing. The 14-month RSI moved into oversold territory and stayed there for 2 more years. The SlopeChart below is quarterly to highlight the ensuing plunge-o-rama.

If the dollar doesn't enter a bear market, it's because something shocks it back into a bullish trend. A "gray rhino" from China or an unforeseen Black Swan. Otherwise, the chart is pointing down.

Recession As Soon As Stimulus Ends

The inflation meme is going around, but it's not your father's inflation, at least not yet. For now, the economy is ready for deflationary depression the moment the stimulus ends. ZH: Walmart Gives Up All Gains After Company Warns Of Revenue Slowdown Amid Stimulus "Taper"
According to RBC analyst Scot Ciccarelli, WMT comments that sales begin to "normalize" in July "may suggest that the outsized gains experienced over the last few months may be starting to ebb" as government stimulus money “tapered off." He adds that while Wall Street should be expecting a slowdown from the quarter’s "nearly 10% run rate, the magnitude of change may give some investors pause as sales sustainability is one of today’s key topics in retail." His price target: $132, or just where the company closed on Monday. Separately, Bloomberg notes that while MKM’s Bill Kirk wrote that the retailer’s “strong” gross margin was a positive sign for peers, he too would be listening for comments on call regarding the "interruption of stimulus checks" impact on August and what Walmart intends to do with its ~$17bn cash balance.


Agriculture Bottomed?


Bull Narrative Has Wily Coyote Moment: Chinese M2 Fell in July

Chinese credit growth slowed in July, banks will crack down on individuals and companies using unapproved credit for housing and A-share speculation, and many real estate developers are hitting financial ratios that will restrict their borrowing. China's M2 money supply fell 0.44 percent in July, the largest drop since a 0.34 percent decrease in October 2019. By my count, it is the largest one-month drop since July 2014. Historically, July (and October) have seen declines in M2, July because it comes after the June credit surge when governments and SOEs borrow for their second-half investment plans. In a typical year then, a July dip wouldn't be remarkable. In the midst of global central bank easing however, it stands out because the three-month M2 growth rate has collapsed to pre-coronavirus levels. This doesn't mean accelerating inflation is over. It does mean that bulls assuming ceaseless central bank support lost the support of the world's second most important central bank in July. Whether it accelerates again or not is one of the most important questions for world markets going forward.

Total social financing slowed from its recent pace, but growth increased to 12.9 percent year-on-year from 12.8 percent a month earlier.

For investors focused on Chinese assets, regulators are also planning a crackdown on housing and stock speculation.


Trying to extract credit card funds for stocks and house purchases? note! If you have these behaviors, part or all of your credit card functions will be terminated by the bank, including but not limited to adjusting the credit limit, locking the account, stopping payment in an emergency, and trading limits to merchants, etc.

Recently, many commercial bank credit card centers have issued announcements stating that they will further strengthen the use of credit cards, and clearly require that credit card overdrafts should be used in the consumer sector and not in non-consumer sectors such as production, operation and investment, including house purchase, securities investment, Financial management, other equity investments and other prohibited areas.

In addition to clarifying the above prohibited areas, the Ping An Bank Credit Card Center also stated that cardholders shall not use any illegal or false consumption such as cash-out, fraud, malicious swiping of orders to obtain bank credit funds, points, rights and interests, prizes or value-added services; cardholders shall not Use any fraudulent means or illegal tools to maliciously obtain rights or benefits.

"If cardholders use our bank's credit card to carry out transactions beyond the normal use of funds, it may cause the transaction to fail." The relevant person in charge of the Everbright Bank Credit Card Center said that control measures such as derating, stopping payment, freezing, and card locking will be taken , "In order to ensure the normal use of the card in the follow-up, the cardholder must properly keep the transaction vouchers that match the purpose of the credit card transaction in order to cooperate with the bank for verification."

What a contrast with the United States, where Fed Chairman Jerome Powell could care less if all the base money he creates flows directly into stocks.


The property market sends another tightening signal!

Not only banks have tightened mortgage-related mortgages, but real estate companies are also facing tightening of debt financing. This news has caused widespread concern in the financial and real estate circles.

It is reported that real estate bonds cannot be issued in full, and the inter-bank market will issue new bonds on a scale of 85% of the planned repayment.

Real estate financing is tightening again!

Developers panicked, "three red lines" prohibit real estate companies from increasing interest-bearing debt?

Many real estate developers have crossed three red lines. A list in Chinese can be found here: 三道红线

Worth clicking through for a chuckle at the credit ratings.

Inflation Fears Rising: China Cracks Down on Food Waste

Inflation concerns are rising in China with another push to stop food waste. The policy looks more like virtue signaling than a serious attempt at combatting price increases because waste isn't a major factor in food prices. If it is a serious effort to impact prices or conserve food, it suggest the government fears catastrophic shortages or borderline "hyper inflation" in food prices, inflation in quotes because this is not mainly a monetary event.

Chinese culture is wasteful when it comes to food ordering. A good host provides for his guests and leftovers are a sign everyone has eaten their fill. THe more important the occassion, the more dishes will be ordered. This is called 面子宴席, literally translates as "face banquet." I have been at weddings where the food came out faster than you could eat it, and I was trying. The dishes then started clearing before I could even start on them, or they were buried under so many dishes I found myself playing an involuntary game of Jenga as I tried reaching the lower, inner dishes.

While Chinese order a lot of food, in my experience most of it gets eaten. People take the leftovers home, even at weddings. There may be some noveau riche attitudes towards waste, but the impact of the Great Leap Forward is still subconsciously active in China. Telling Chinese not to waste food sounds more like the U.S. cities and states that ban straws, a for-show policy of green virtue signaling. Some people see waste, but my hunch is some of this is shaped by Western Green thinking. SCMP: China’s tradition of hospitality may need reshaping if food waste is to end

This isn't the first time China has tried tackling food waste. Back in 2013 there was a push from the people: No-waste lunch: China's "Clean Your Plate" campaign

But the new campaign uses the slogan “I’m proud of my clear plate.” Zhang’s colleague, Xia Xue, a young woman with purple streaks in her black hair, says the group started the campaign in January by taking leaflets and posters to restaurants all over Beijing. “Our members of this group went to different restaurants and gave them our leaflets and posters and explained to them about our campaign,” she says. “Our members covered almost all the districts in Beijing, and have given out posters to more than a thousand restaurants.”
About the same time, Xi Jinping became President and began cracking down on extravagent dinners by party members. Maotai stock was hit as buying bottles of expensive baijiu with public money was now frowned upon.

Restaruants have been implementing various policies over the years. The "clean your plate" campaign never went away. For example, one restaurant offers free noodles if people leave half of their fish dish. The thinking is people don't take the fish because it isn't enough for a meal and they don't know what to do with it. With the noodles, they can turn it into a another meal at home. See: 剩鱼打包赠送面条回家可以再吃一顿

The campaign has surged back into the news and government policy though, because it looks like China is worried about food inflation. On the optimistic side, this is a virtue signal by the government because food waste has a small impact on food prices. On the pessimistic side, if the government thinks this policy will have a meaningful effect on prices, it means they expect roaring food inflation or even food shortages.

Nikkei: Xi calls on Chinese not to waste food as crop shortage fears grow

Chinese President Xi Jinping is urging people not to waste food as concerns grow over crop shortages stemming from the coronavirus pandemic and natural disasters. Xi has advocated legislation and supervision to prevent food waste, calling it "shocking and distressing," state media Xinhua reported on Tuesday. Floods in areas along the Yangtze River, the worst since 1998, destroyed 5.6 million hectares of crops in July, according to the Ministry of Emergency Management. Parts of the country remain inundated.

Covid-19 and floods spark China food crisis fear

上饶新闻:文明就餐 拒绝“剩”宴

"Who knows Chinese food is hard work." General Secretary Xi Jinping recently issued important instructions to stop food waste. The phenomenon of food waste is shocking and distressing! A few days ago, the reporter randomly visited some catering companies in the urban area and found that ordering the right amount of food, no leftovers, no leftovers has become the conscious behavior of the citizens, and the concept of civilized dining and "Clean Your Plate" has been deeply rooted in the hearts of the people.
FYI: Google translates the "光盘行动" campaign as "CD action."

Not every restaurant is implementing the policy well. BBC: China restaurant apologises for weighing customers

Going back to the SCMP article linked above:

Restaurants were failing in their responsibilities to remind diners to save food, he said, while some were encouraging bigger orders, leading to more waste. “It is definitely not an issue to be rectified in a short period. Cultivating a good consumption culture needs a long-term effort.”

The effort sparked by Xi’s call for a national belt-tightening has begun, with local governments issuing a range of detailed measures to curb food consumption. Wuhan, the central Chinese city where the coronavirus emerged last year, was among the first to roll out a new ordering mode for its restaurants.

Groups of 10 diners are now expected to order for nine – only adding more food to the table later, if it is actually required. Groups of two or three are to be offered half portions or smaller shares and all restaurants should provide takeaway boxes for leftovers, according to a notice from the Wuhan Catering Association on Tuesday.

Sounds like the reaction to sharply rising prices to me.

I'm skeptical about Chinese headlines in the West because, for instance, people said the Three Gorges dam would bust a couple of weeks ago. Having said that, a major drop in food production would be an extreme event for world markets because China would have to greatly increase imports. That could be the spark that ignites the shimmering seas of monetary gasoline pumped by global cental banks over the past 6 months. A smaller crisis mainly concentrated in Chinese food prices would also have global implications since it might force China into deflationary monetary policies, or it could trigger uncontrolled yuan depreciation inside and outside of China. The stakes are high because of monetary mismanagement in China and around the world.

In conclusion, I haven't seen anything except speculation about major food shortages in China. I'm not saying it doesn't exist, but I haven't seen it from reliable sources yet. The risk of high inflation is an extant threat because of monetary policy. Non-catastrophic food production and supply disruptions could cause an extreme price event because global central bankers have primed the world for extreme price events. One only need look to gold, silver and the FAANG stocks to see examples. There is nothing stopping speculators from doing the same to oil, natural gas or food if they had a mind to, but for bearish supply/demand narratives. Change the narrative and the match of consumer price inflation will be struck.

Update: I forgot to mention that price increases will do all the work of eliminating food waste. If the government were really concerned about food supply, it would be thinking about a restaurant bailout package because eating out would collapse again.

“面子宴席”食物浪费相对突出 如何做到人走桌清?


China’s online eating shows under scrutiny after state media criticism of food waste


Taco Time Returns

Southwest moved through both the 50-day MA and long-term resistance today.


Socionomics Alert: Democrats Wargame Secession of West Coast

Breitbart: Democrats’ ‘War Game’ for Election Includes West Coast Secession, Possible Civil War
In that scenario, California, Oregon, and Washington then threatened to secede from the United States if Mr. Trump took office as planned. The House named Mr. Biden president; the Senate and White House stuck with Mr. Trump. At that point in the scenario, the nation stopped looking to the media for cues, and waited to see what the military would do.

Watch Materials for Commodity Signal

Commodities are at a relative low versus the S&P 500 Index, but the relative pattern also looks like a giant top. Materials spiked up in late 2007 and 2008 before collapsing at the end of a prior economic expansion. Everyone is focused on money printing today, but will there be an abolition of recessions a la Australia, with a new growth cycle beginning, or is the economic expansion ending no matter what? Gold will win in either scenario because money creation and government deficits will follow, but commodities demand could decline in a stagflationary economy.