Finance/Crypto thread by @KobeissiLetter

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China is panicking:

Today, China announced that WIDESPREAD economic stimulus is coming in 2025, including raising their deficit.

Currently, parts of China's real estate sector are down -80% from their high and at 2008 levels.

Is China entering a recession?

(a thread)

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To put things into perspective, China's HY real estate sector entered 2024 down -82% in just 2.5 years.

Meanwhile, one of China's largest property developers, Evergrande, filed Chapter 15 bankruptcy.

Real estate demand in China collapsed with the onset of deflation.

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Currently, China is facing its longest period of DEFLATION since 1999.

Not even 2008 came with 5 straight quarters of deflation, as we are seeing now.

While everyone is fighting inflation, China is dealing with severe deflation.

This is arguably even worse than inflation.

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On September 26, China began its largest stimulus since 2020:

1. Cutting reserve requirements by 0.5%
2. Cut 7-day RRP rate by 0.2%
3. Lowering mortgage rates
4. Injecting $142 billion into banks
5. Implement "forceful" rate cuts

As we said then, it was "only the beginning."

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Immediately after a week of record inflows, Chinese ETFs saw record outflows.

The largest China ETF, $FXI, saw a record $984 million in withdrawals in 1 week.

$FXI saw 5 consecutive weekly outflows.

Needless to say, investor and consumer confidence was not restored.

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China's central bank just resumed gold purchases.

Our premium clients got ahead of the move back to $2750, as seen below.

Most recently, when gold fell into $2,600, we called for a rebound into $2700+.

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Even as hundreds of billions of Dollars of stimulus have begun, Chinese consumer sentiment is terrible.

Over the last 3 years, consumer confidence in China is down ~ 50 points.

Such a drop in consumer assessment of the Chinese economy has almost never been seen before.

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As a result, China announced the below stimulus for 2025:

1. Raising its budget deficit ratio
2. Deliver rate cuts
3. Lower reserve requirement for banks
4. Increase issuance of ultra-long treasury bonds
5. Increase issuance of local government special notes

Will this help?

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As confidence is lost in other markets, US equities have become the "safe" risky option.

Our premium clients got ahead of this move as we bought the dip in $SPX at 5850.

We called for 6100+ and just got there.

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One of China's biggest issues is the rapid decline in consumer sentiment.

China home sales fell -6.9% in November, now down in 17 of the last 18 months.

Prior to the last 18 months, home sales fell in EVERY month during the 2022 bear market.

This is 2008-like behavior.

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The next generation of homebuyers in China is not doing so great either.

Currently, more than 1 in 5 people aged 16-24 in China are unemployed.

Excluding students, ~19% of Chinese individuals in this age group are unemployed.

This is ~5 TIMES to overall US unemployment rate.

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It's also interesting that China and other central banks have been stockpiling gold.

Central banks gold purchases are nearing 3,000 TONNES since 2022.

Are central banks bracing for a recession?

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Lastly, foreign firms are also concerned about China, pulling money out of China for the first time in 30+ years.

Investors have withdrawn$12.8 billion from China this year, the most since at least 1998.

Follow us @KobeissiLetter for real time analysis as this develops.

China is panicking: Today, China announced that WIDESPREAD economic...

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