Auto Lending Trouble

A Twitter thread. tl;dr Car prices have plunged so much that consumer would owe on loans when trading in a car. The lenders will give them new loans anyway and ignore that part, assuming they'll default on the older loan. Yay auto sales!

If California Didn't Exist, Austrians Would Have to Invent It

Clownifornia delivers another lesson in central planning and interventionism gone wrong. Retail sales spiked in October when California issued a stimulus check. Retail sales fell in November.

If America chose a pet rock for president, it would be a successful term because the pet rock would not intervene. Unfortunately, there are bad policies that do constant intervention that must be unwound, but a pet rock would come up with no stupid ideas, which it seems is the only thing the Baizuo ruling class can come up with.

Snack Empire

Still holding this one.

China Consumer Confidence Implodes

You have to see the chart over at The Sounding Line.

Gold Bugs, Inflationists Body Slammed

What caused the spike from March 2020 to August 2020 in GDX? What caused the implosion since April 2022?

Is the bottom in for gold yet? No. All the gold bugs and inflationists think inflation is roaring. In reality, the economy in plunging into a deflationary abyss. They will panic sell when the deflation comes into full bloom. The gold mining shares will implode like Newmont did today. Selling will be relentless. There will be total revulsion. Then if you are smart, you will be buying. Days to weeks later, the Fed will make its major pivot and restart the economy's inflationary engines.

Related: 

Walmart Plunges, Drags Down Market, After Slashing Profit Outlook, Blames Fuel Costs

The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars. We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.” said Doug McMillon, Walmart Inc. president and chief executive officer.

The plung on the chart includes the 8 percent after hours drop. Whether it holds, we'll find out tomorrow.

A generalized rise in prices is a hallmark of inflation. A localized increase in food and energy that triggers collapsing spending on everything from gold to consumer items, is the hallmark of not-inflation. If your monthly bills are going up and you don't have more money coming in via inflated wages or inflated credit usage, then there is no generalized rise in prices. There is a giant "food and energy tax" on the economy. The Federal Reserve's answer is to tighten monetary conditions such that rising debt costs join fuel and food in soaking up spending. Eventually, the Fed will stop tightening, but will they ease? Not as long as oil prices remain high. The economy could well be on its own, at least until a deflationary collapse similar to 2008 causes an implosion in food and energy prices.

Morning Brief: What Good are Economists and Rally

There are a lot of great economists out there. The majority of them work at the Federal Reserve, the Bureau of Economic Analysis, the Census Department and various private firms. They collect data, they clean up the data, they adjust for seasonal factors. They provide us with great resources.

How about the forecasters? the modelers at the Fed who estimate government reports ahead of time are useful. I don't know what the others are worth.

Retail sales were released this morning. Here's the rundown:

Retail Sales 1.0% M/M, Exp. 0.9%

Retail Sales ex-auto 1.0%, M/M, Exp. 0.7%

Retail Sales ex-auto and gas 0.7%, M/M, Exp. 0.1%

Retail Sales Control Group 0.8%, Exp. 0.3%

There figures are not price adjusted. The CPI increased 1.3 percent in June. One can't simply adjust the sales for the CPI to estimate actual sales, but for my purposes it's close enough. My estimate is headline sales were roughly flat. However, what I want to talk about are the forecasts. Look at what economists were forecasting, particularly the ex-auto ex-gas figure of 0.1 percent growth. Knowing these figures are not inflation adjusted and knowing roughly where inflation forecasts were, economists were forecasting that sub-category of sales fell at a conservatively-estimated annualized run rate of around 10 percent in June. 

In what type of economy do sales fall 10 percent annualized? Why do only a minority of mainstream economists predict a recession in 2022? I don't know of any that say the recession is already underway. I know economists out there have forecast that, but they don't work as the face of Wall Street firms. 

Probably no shock for readers here, but this is yet another example of the failed "intermediary class." We have fairly good information systems, but terrible analysis in the mainstream. You can profit in the markets and in life by ignoring mainstream information filters that are biased to the point of being subversive of truth.

On to the charts.

There is no confirmed rally until ES cracks the 3950 level, which is about 3 percent away. I'm long and staying long because I'm betting on a rally and as levels such as 3950 fall, it will ignite more short covering and bull buying. There could be pullbacks at the 3875 level, plus the prior two areas of consolidation that led to reversals. Once those are gone, a move into the prior congestion area from 4070 to 4200 is likely. That's the potential terminus zone for a decent rally of 15 percent. A rally of 20 percent off the low would take the ES to 4370 area. The gains from pre-market levels: 6 percent to 4070, 9 percent to 4200 and 14 percent to 4370.

I have been focused on areas such as biotech, semiconductors and social media because the stocks are most depressed and offered cheap OTM options, as opposed to ARKK. If the market goes up 15 to 20 percent, I expect individual stocks in these areas of the market can rally as much as 50 percent and the ETFs will outperform the overall market. XBI is already up about 35 percent from its low and may not have much further to go from here. Another 10 percent would take XBI up around 50 percent from its low. SMH looks better here, with an uncompleted reversal pattern. If it completed, a move into the prior consolidation area around $250 is possible. That would be a 30 percent rally from the lows, but about 17 percent from here. That seems extremely possible for three reasons: Nasdaq should lead the ES, semiconductors should lead the ES, and my "middle" target for ES is a 10 percent gain.

I took profits on oil puts yesterday because as I discussed here, oil has been rising with stocks. That'll be negative for the rally if it keeps up. I suspect it may not, but I'm not shorting oil yet.

Restoration Hardware CEO is Back With Another Warning

Back in early April, I posted Wall Street Ignores Margin Collapse Warning. The CEO of RH talked about how dealing with inflation involved a number of bad choices, that collapsing margins were coming and that it reminded him of the scene in The Big Short, when people are listening toa speaker say the company is fine while the stock price is imploding. Now he's back...

ZH: US Consumer Implodes As RH Cuts Guidance For 2nd Time This Month, Warns Of Cratering Demand

Well, fast forward to today when moments ago RH - aka Restoration Hardward - just pulled a Snapchat and just three weeks after the company with the outspoken CEO saw its shares tumble after it guided lower for Q2 and the full year despite sold Q1 results, RH just cut guidance again with CEO Gary Friedman saying that “the deteriorating macro-economic environment has resulted in lower than expected demand since our prior forecast, and we are updating our outlook, particularly for the second half of the year.”

Taking into account the macro-economic conditions and our current business trends, RH provided the following outlook for the second quarter and full year, which assumes demand will continue to soften during the remainder of fiscal 2022:

Fiscal 2022 net revenue growth in the range of (2%) to (5%), with adjusted operating margin in the range of 21.0% to 22.0%.

Previously the company had seen revenue growth of 5% to 7% and operating margin of 23.0% to 23.5%, so a huge hit to both the top-line and profit margins.

For Q2, RH sees net revenue growth in the range of (1%) to (3%), with adjusted operating margin in the range of 23.0% to 23.5%. The second quarter outlook remains unchanged versus our prior forecast due to faster backlog relief offsetting lower than expected demand.

Friedman's catastrophic forecast continued, “With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year.”

The economy is imploding and RH is first in line because they report weeks before the rest of the market, plus have high exposure in the housing market.

While the past week or so have been focused on technical warfare between bulls and bears, the macroeconomic picture is rapidly deteriorating. It's a matter of if, not when, the Fed pivots now, and from what level of SPX. After the pivot, then we'll get confirmation on whether a cyclical turn to inflation is underway or not.

US Imports Collapsing

According to the Financial Associated Press, on Tuesday, the well-known data analysis website Freightwaves mentioned in an article "US import demand is falling off a cliff" that although the number of goods entering the United States in the first five months of 2022 is strong, import demand is still strong. Not only is it softening, but it's also falling sharply -- down 36% over the past few weeks.

Containerized imports to the U.S. have fallen by more than 36 percent since May 24. The latest sea container bookings data show that despite strong levels of U.S. cargo imports in the first five months of the year, import demand is not only weakening, but falling sharply.

Analysts said the buildup of U.S. merchandise inventories will inevitably lead to a slowdown in new import orders abroad. Furthermore, it is a fait accompli that inflation affects the distribution of consumer spending.

Market analysts also believe that the unrelieved situation of high inflation has further reduced consumer demand in the United States, so the number of imported containers will further return to the level close to 2019.

iFeng: 全线暴跌，美国进口需求断崖式下跌，发生什么？

Lockdown Damage

I thought stocks like Haidilao might bounce following the lockdowns, but with them being extended and spreading around the country, consumer companies are rolling over. I wonder to what extent the government is psychologically damaging the public. I'd wager about 20 to 30 percent of the American population is permanently scarred from the lockdowns and propaganda, or at least will take years to recover. At some point, repeated lockdowns alter behavior because the public assumes they are possible at any time.

Time to Cut Down on Spending

WSJ: Cut Your Retirement Spending Now, Says Creator of the 4% Rule

The combination of 8.5% inflation with high stock and bond market valuations makes it difficult to forecast whether the standard playbook will work for recent retirees, said retired financial planner Bill Bengen, who first devised the 4% rule in 1994.

He now recommends retirees take a less aggressive approach to drawing down their nest eggs, at least until we determine whether the current surge in prices that has been particularly stressful to those on fixed incomes is a long-term trend or a short-term blip.

The longstanding method calls for spending 4% in the first year of retirement, and then adjusting that amount annually to keep pace with inflation. Such an approach would have protected retirees from running out of money in every 30-year period since 1926, even when economic conditions were at their worst, Mr. Bengen said.

“The problem is that there’s no precedent for today’s conditions,” he said. His concern echoes a recent report from Morningstar Inc. , which recommends a 3.3% initial withdrawal rate for those retiring today who want spending to keep pace with inflation over three decades and a high degree of certainty their money will last.

Playing With SlopeTools: Expensive Consumer Goods

I've posted this chart before, five "expensive" consumer goods companies. RVs, four-wheelers, expensive lawn care machines, swimming pools. The thesis: inflation will curtail these middle-class luxuries. These are all items that will see their purchases delayed when household finances become tight. These would all be good long targets if and when wage growth finally exceeds inflation...

Sun Communities (SUI): Sun Communities, Inc. is a REIT that, as of September 30, 2020, owned, operated, or had an interest in a portfolio of 432 communities comprising nearly 146,000 developed sites in 32 states and Ontario, Canada.

Pool (POOL): Pool Corporation distributes swimming pool supplies, equipment, and related leisure products in the United States and internationally.

Toro (TTC) :The Toro Company engages in the designing, manufacturing, marketing, and selling professional and residential equipment worldwide. The company's Professional segment offers turf and landscape equipment products, including sports fields and grounds mowing and maintenance equipment, golf course mowing and maintenance equipment, landscape contractor mowing equipment, landscape creation and renovation equipment, and other maintenance equipment; rental, specialty, and underground construction equipment; and snow and ice management equipment, such as snowplows, brush, snow thrower attachment, salt and sand spreaders, and related parts and accessories for light and medium duty trucks, utility task vehicles, skid steers, and front-end loaders.

Polaris (PII): Polaris Inc. designs, engineers, manufactures, and markets power sports vehicles worldwide. It operates through six segments: ORV, Snowmobiles, Motorcycles, Global Adjacent Markets, Aftermarket, and Boats.

Thor (THO): Thor Industries, Inc. designs, manufactures, and sells recreational vehicles (RVs), and related parts and accessories in the United States, Canada, and Europe.

I used two tools at SlopeCharts for the chart below. One was auto-trendline from the top and bottom. The other was a regression line for the entire period.

Here are the individual charts. What I see is either major topping patterns or very long-term trend that has stayed in the upper half. PII may be the best example. There are two breaks through the middle trendline and the result was a plunge to long-term support. A repeat would send the stock down more than 50 percent from here. The only one of these I have puts on right now is POOL.

SITE is another stock that expanded similar to POOL. Has a great setup too. I left this, and others out of the index, because I think 5 is a good enough sampling. Speculators should be going through all the companies in these sectors, no doubt there are many more bearish setups.

CPI-Adjusted Oil Price

Why The Nasdaq Is Doomed

The sell-off in the Nasdaq hasn't even really started yet because there are still dip-buying fools out there, but a big one is coming. Door number one is a taper correction. The Fed decides to actually fight inflation. Since most of the Fed's monetary emissions flowed into tech and growth stocks, they will be at the epicenter of a correction. That's already underway. If the Fed is serious, the correction could end sometime in the first quarter as inflation comes out of the economy. This would require a plunge in energy prices.

Door number two is the 1973-1974 bear market analog.

Bloomberg: U.S. Retail Sales Slid Last Month Amid Inflation, Omicron Hits

U.S. retail sales slumped in December by the most in 10 months, suggesting the fastest inflation in decades is taking a greater toll on consumers just as the nation confronts more coronavirus infections.

The value of overall purchases decreased 1.9%, after a revised 0.2% gain a month earlier, Commerce Department figures showed Friday. The figures aren’t adjusted for inflation, suggesting price-adjusted receipts were even weaker than the headline number.

A recession is the natural consequence of USG stimulus and Federal Reserve quantitative easing. It is called a boom-bust cycle for a reason. Inflation and debt-financed stimulus creates an unsustainable boom. When the stimulus and central bank support end, the boom collapses. Asset prices reverse. The more deformed (inflationary) the boom, the bigger the bust when those malinvestments fail. The economy will be smaller post-bust than it would have been without the original stimulus.

Inflation cannot be sustained without more money creation. The Federal Reserve faced this moment in the 1970s and each time, they chose to ease to prevent a recession. End result: they caused the worst depression since the 1930s in the early 1980s. If the Federal Reserve backs off its taper plans for fear of economic weakness, it will drive an inflationary knife into the heart of the stock market and the U.S. economy. The U.S. consumer will come under more pressure. Retail sales will be even worse. Eventually, the stock market will be suffering the worst bear market since '73-'74 or the 1930s, the economy will be in recession, inflation will be double-digits, and the Federal Reserve will be discussing crippling rate hikes.

In the Carboniferous Epoch we were promised abundance for all,

By robbing selected Peter to pay for collective Paul;

But, though we had plenty of money, there was nothing our money could buy,

And the Gods of the Copybook Headings said: "If you don't work you die."

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew

And the hearts of the meanest were humbled and began to believe it was true

That All is not Gold that Glitters, and Two and Two make Four

And the Gods of the Copybook Headings limped up to explain it once more.

Inflation Will Bring Part of the American Dream Back

Inflation is bad for the economy, but the return of inflation will signal that long-term economic trends will reverse. This article from Macrobusiness: Higher wage growth could crash the property market discusses this situation.

In a nutshell, over the past 40 years wealth transferred from labor to capital. Falling interest rates increase the value of existing capital assets and investments made at higher interest rates. Globalization was a separate force, but it exacerbated the this trend. Globalization is now reversing. For the American retiree and the corporate class, falling interest rates made housing more expensive and it made financial assets more expensive. Saving was difficult because low rates of interest delivered a lower return than investment assets. If inflation, interest rates and wages reverse trend, financial assets and homes will fall in price because interest costs will rise. Hard working labor will be able to save up and buy a house with cash. The 20-percent down payment could make a comeback and not kill the housing market, because the housing market will already have been killed by risig interest rates.

Wealth will start flowing out of housing and financial assets that are not productive, and into labor and capital goods (mines, oil wells, factories, etc.) that are productive. There may be a brief political battle over immigration (wage suppression) and my forecast is that domestic labor will win in most places.

Shortages? Why is Available Warehouse Space Shrinking?

WSJ: Tighter Warehouse Space Adds to the Supply-Chain Squeeze

The third-quarter demand for industrial real estate exceeded supply by 41 million square feet, pushing the vacancy rate to 3.6%, down from 4.3% in the same quarter of 2020 and the lowest level in data going back to 2002, according to new figures released by real-estate firm CBRE Group Inc.

CBRE found the vacancy rate for warehouses near the ports of Los Angeles and Long Beach, Calif., the gateway complex that is a major chokepoint adding to global supply-chain snarls, reached 1% in the quarter. The region’s vacancy rate was 2.3% in the same quarter of 2020.

The Boston, central New Jersey and Charleston, S.C., markets showed a 1.9% vacancy rate during the quarter, the lowest rates outside of the Los Angeles region, according to CBRE.

“Space in our markets is effectively sold out,” said Thomas Olinger, chief financial officer of logistics real-estate firm Prologis Inc., in an Oct. 15 earnings call. “In the last 90 days, supply-chain dislocations have become even more pronounced, with customers acting with a sense of urgency to secure the space they need.”

Here is retail inventory data indexed to February 2020.

jeff Snider discusses more in What *Seems* Inflation Now Is Something Else Entirely

US Already In Recession, Here Comes the Taper

The Fed is trapped six ways to Sunday.

Bloomberg: U.S. Is in Recession If History of Consumer Sentiment Repeats

In the research dated Thursday, David Blanchflower of Dartmouth College -- who set interest rates at the BOE during the 2008 financial crisis -- and Alex Bryson of University College London say that consumer expectations indexes from the Conference Board and University of Michigan tend to predict American downturns 18 months in advance.

“However, downward movements in consumer expectations in the last six months suggest the economy in the United States is entering recession now,” they added.

Eighteen months being from the March 2020 lockdown.

I would be skeptical of this data point except for the fact that the Atlanta Federal Reserve's GDP Now model has fallen off a cliff. The Atlanta Fed was reliable a few years ago, but has been less reliable with all the disruption in the economy. I took the drop in GDP forecast with a grain of salt. Seeing this forecast from consumer sentiment adds a data point that says the Atlanta Fed might be on to something. Note that the Atlanta Fed's forecast of 1.3 percent GDP growth is for Q3 and it is based on incoming data, so that's not including a chunk of September data. Some August data sets only came out a week ago. In other words, if the Atlanta Fed is in the ballpark and the trend hasn't abated, it is possible GDP growth is already negative. We might get some more corroborating or contradicting data very soon because third quarter earnings season kicks off later this week.

Wanda Plaza at Hanjie Closes for Upgrades

This is an anecdote from on the ground in China. There's a popular shopping street called Hanjie, filled with lots of international brand stores and local shops. The Wanda Plaza is next to the street and has a huge movie theater along with many shops and restaurants. From what I hear, many shops on Hanjie have not reopened or closed. Now the Wanda Plaza is closing for upgrades, I suspect because it's making the best of a bad business environment. Even though Wuhan was quick to reopen and they were celebrating big crowds in the summer of 2020, the full recovery from Wuhan's total lockdown will take longer than expected. Also, the economic conditions in China may be worse than the markets realize.

163.com: 突发！汉街万达广场将闭店停业！

According to the "Closed Store Announcement", in order to meet the new market environment changes, improve service quality, and conform to the city's plan to create a new first-tier city, Wuhan Hanjie Wanda Plaza will close its store at 22:00 on August 31, 2021 .

After the closure of business, our company will start the overall upgrade plan of the square.

Golden Week Home Sales Slow, Shenzhen Records Four Existing Home Sales

iFeng: 惊呆！深圳二手房凉了？国庆期间仅成交4套 新房也在打折促销…

New home sales were strong in Shenzhen, but that was boosted by huge price cuts:

According to data from Shenzhen Centaline Research Center, during the National Day this year (October 1st to October 7th), the transaction of new houses in Shenzhen was 1081, a year-on-year increase of 163%. However, in the eyes of industry insiders, there may be reasons for the delay in online signing of this data.

Recently, the supply of new houses in Shenzhen has increased sharply, but the "new craze" has been uneven. There are not only the new “Sunlight” of Shajing Internet celebrity, but also the price-cutting promotions of rigid demand and investment disks that have attracted attention. In particular, Kaisa Yiduhui, located in Buji, Longgang District, became the focus of Shenzhen's property market during the National Day. Recently, Kaisa Yiduhui launched a second- and third-level linkage to launch a discounted house purchase activity. The original house price of 1.2 million yuan once dropped to 750,000 yuan, with an average price of about 19,000 yuan per meter, which maxed out the real estate agency’s WeChat circle of friends.

Shenzhen saw only four existing home sales recorded during the holiday week:

In terms of second-hand housing, there were 4 transactions in Shenzhen during the National Day, with a total of 351.22 square meters. This figure hit a record low for many years, and during the National Day holiday last year, due to the impact of regulatory measures, the volume of second-hand housing transactions in Shenzhen also fell by nearly 47% year-on-year. In addition, data from the Shenzhen Association of Real Estate Agents shows that from September 27 to October 3, Shenzhen's second-hand housing network signed only 303 sets, a decrease of 18.5% from the previous month.

"Most of our store managers choose to take vacations because business is very poor." In the Futianyuanling area, a real estate agency manager told reporters that there were not as many customers as usual, and with the increase in new houses, second-hand houses almost entered. Quick freezing period.

Yan Yuejin, research director of the Think Tank Center of E-House Research Institute, said that there is no need to be overly pessimistic about the current real estate market. The recent credit policy can be considered to have ushered in an inflection point. Although the interest rate decline is not obvious, it is expected that the bank quotas will increase in the fourth quarter, which will obviously help support the market transaction volume. At the same time, judging from the actual process, under the control of various policies in the third quarter, there were obviously fewer actions to buy houses into the market, and various wait-and-see sentiments increased. With the advent of the fourth quarter, various types of housing demand will continue to be released, which will also help various housing companies to destock their projects. Based on this, it can be considered that although the market is still showing signs of fatigue during the November holiday, the pessimism has been significantly reduced.

Dongguan also cooled.

iFeng: 房价直接腰斩？东莞发布二手房指导价 楼市寒冬何时过境?

According to data from the Zhuge Housing Search Data Research Center, 48 second-hand houses were sold in Dongguan during the Mid-Autumn Festival this year, while only 27 units were sold in Dongguan during the "October" holiday. The transaction volume fell 44.3% compared with the Mid-Autumn Festival holiday and 88.9% compared with the same period last year.

Zhang Dawei, chief analyst of Centaline Real Estate, believes that preventing the property market from cooling too quickly is likely to become a future policy trend. In the past two years, the property market has become more and more stringent. On the one hand, there is a “price limit order” for new and second-hand houses in hot cities. Obviously, a sharp rise in housing prices will amplify financial risks, and housing prices are also unstable when they are too fast. Recently, many cities across the country have issued "restriction orders". On the surface, some real estate companies are rushing away under the high pressure of debt. In fact, it further shows that "stability" is the most certain keyword in the property market.

ZH: "Catastrophic" Property Sales Mean China's Worst Case Scenario Is Now In Play

With that preamble in mind, we bring readers' attention to a little noticed report in Shanghai Securities News, citing China Real Estate Information Corp. research (link), which revealed that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year. According to the report:

Sept. sales totaled 759.6b yuan ($118BN), down 36.2% from September 2020 and 17.7% lower from the same period in 2019, deepening a downward spiral that started in July

Among companies, 60% of developers saw sales decrease by more than 30% y/y in Sept.

Beijing, Shenzhen and Guangzhou saw transaction volume of residential properties decline 30% y/y, while Shanghai fell 45%

Real estate is the bubble in China. It is backed with enormous levels of debt that are implicity guaranteed by the state. China's wealth gap is also expressed more intensely as unaffordable real estate. China doesn't want home values to fall, but it also doesn't want home values to rise faster than wages. It is trying to control home prices by whatever means it can. China hasn't found a way to keep capital flowing into real estate without restricting credit though, and now they're restricting access to all manner of investment products that allow capital flight in any form. That looks like the behavior of a state that is contemplating a currency devaluation or policies they know will invite capital flows into foreign currencies and commodities.

Chinese consumers are also retrenching according to the central bank's quarterly sentiment survey.

iFeng: 央行报告：储蓄意愿上升 投资、消费意愿下降！银行家企业家这样看经济

In the third quarter, urban depositors' attitudes towards consumption, savings and investment also changed. On the one hand, 50.8% of residents tend to "save more", an increase of 1.4% from the previous quarter; on the other hand, residents who tend to "consume more" accounted for 24.1%, a decrease of 1.0% from the previous quarter; Residents who “invest more” accounted for 25.1%, a decrease of 0.4 percentage points from the previous quarter.

All this is happening in the context of rapidly deteriorating U.S.-China relations. Remember the good old days when trade, not regional war, were the topic du jour? Up until and incluiding the 2016 Shanghai agreement, China and the U.S. worked together with other central banks to avert a finanial crisis. With tensions frayed and U.S. leadership collapsing, if somethihng breaks this time, it might stay broken.

China Inflation Decelerates in June

One month doesn't make a trend, but in light of other data showing a slowdown, it's notable that the PPI slowed from an annualized rate of 21 percent in May to an annualized rate of 3.7 percent in June. Input prices remained hotter though, second chart below. NBS: 2021年6月份工业生产者出厂价格同比上涨8.8% 环比上涨0.3%

As for consumer prices, they have decisively tipped into deflation. NBS: 2021年6月份居民消费价格同比上涨1.1% 环比下降0.4%

Looks Like Direct Stimulus Effect to Me

This doesn't dissuade me from leaning towards the deflation/disinflation side of the argument. Actually, I just discovered an awesome potential short.