Google is Done

The run from March 2020 to now is like the run into the March 2000 top. Google is exhibit A in this move. It had a very bullish trend in place from the 2008 low. The stock did about a 12x from than 2008 low before the pandemic hit. It then proceeded to double from its pre-pandemic all-time high amid the Fed-induced euphoria. The move looks crazy on the log chart and it looks like a classic bubble on the linear chart.

Normally, a trendline break is a good bearish setup for the short-term, but nothing to get excited about. It wouldn't carry much predictive value. I'd be nervous about a fakeout move. Two things are different this time. One, the market downturn seems to be starting, not finishing. I see higher probability, but no guarantee, of a bigger loss even in a short-term blip of a pullback. Two, the extreme move that preceded it. When a bubble pops, it doesn't go from extreme to normal. RCA in 1929, the Nasdaq in 2000, the Nikkei in 1989, the Shanghai Composite in 2015 all look similar because when bubbles pop they go down the same way they went up. If this turns out to be a decisive break of the trendline, then it is a very significant break for the rest of the stock market.

The trendline is at $2693 and change today...please not that despite the headline and that I do think the end game is unfolding here, as a trade Google might not be done yet. I can and do reverse positions quickly based on price action.

Update: Here's a zoom on the price. The move out of this area is going to be powerful in either direction. If the broader market stabilizes and moves higher, I will exit my puts.

Google Shenghuo still up

Google Shenghuo Google 生活搜索 is still up and running. Google doesn't offer this service in the U.S. It aggregates information on apartments (rent or buy), jobs, trains, food, entertainment, etc. Very useful and still up and running. They've only redirected their main search engine at this point.

Google Chrome experiencing technical difficulties

I noticed that some Chinese websites are not loading at all or loading very slowly in Google Chrome, but I have no trouble with other browsers...

Yuan revaluation will be inflationary for the world

It looks as though the talk of RMB revaluation is heating up, thanks to recent tightening efforts by the Chinese central bank. Maybe the Google situation is another factor though, as the situation is ugly politically. Nothing soothes an ornery Schumer or Graham like RMB appreciation.

Hugh Hendry made the case last year for the yuan-oil connection, arguing that RMB appreciation led to oil appreciation. I'm not sure whether oil will be the commodity of choice (or even whether commodities will be the asset class of choice), but I believe yuan appreciation will be inflationary* for global markets.

I reproduced an RMB-crude oil chart to track changes myself. Last time it took six months for faster appreciation to translate into faster oil price increases.


*Update: I should clarify the use of the word inflationary. Inflation is the increase in the money supply of the currency. Only the Federal Reserve can inflate dollars, only the Russian central bank can inflate rubles, only the Bank of Japan can inflate yen (assuming no major counterfeiting operations are going on).

However, the raising of the RMB will be inflationary because RMB is undervalued. The inflation or devaluation of other currencies, especially U.S. dollars, has been hidden by the currency peg. When RMB is revalued, therefore, U.S. dollars come closer to their true lower value. Other countries have inflated as well, though, so what will happen is that China will strengthen versus the world and whatever the Chinese buy most will go up in price for everyone else. In 2008, that was oil.

Now, everyone else is also inflating like crazy, some worse than the Federal Reserve. In the U.S., for one, much of the inflated money is sitting in bank reserves because banks are financially weak and borrowers do not want more debt. There's a big inflation/deflation debate going on and the deflationists are winning right now, because the reserves lack a transmission mechanism to move out from beyond the bank reserves.

Revaluation of the RMB will lead to higher commodity prices, is my best guess. After that, one of two things will happen. One possibility is that it switches the world to high inflation. I don't see a direct link here, but I can't rule it out. More likely, it acts to repeat the 2008 crash, as high commodity prices sap the nascent recovery.