This has NEVER happened in recent history: In a sudden collapse,...
The Kobeissi Letter@KobeissiLetter
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Jan 08, 2025
~3 min read
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1
This has NEVER happened in recent history:
In a sudden collapse, 30-year interest rates are now LOWER in China than Japan.
China's economy is currently being described as a "deflationary spiral" as seen in Japan in the 1990s.
What does this mean? Let us explain.
(a thread)
In a sudden collapse, 30-year interest rates are now LOWER in China than Japan.
China's economy is currently being described as a "deflationary spiral" as seen in Japan in the 1990s.
What does this mean? Let us explain.
(a thread)
2
Here's a chart showing 30-year government bond yields in China vs Japan.
As China cuts interest rates, Japan is raising interest rates.
Not even the 2008 Financial Crisis saw Japanese yields rise above Chinese yields.
China is now facing "Japanification" of its economy.
As China cuts interest rates, Japan is raising interest rates.
Not even the 2008 Financial Crisis saw Japanese yields rise above Chinese yields.
China is now facing "Japanification" of its economy.
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Investors in China’s $11 trillion government bond market have never been so pessimistic about the world’s 2nd largest economy.
As a result, we are now seeing the largest gap in US/Chinese bond yields in HISTORY.
China's $11 TRILLION bond market is flashing warning signs.
As a result, we are now seeing the largest gap in US/Chinese bond yields in HISTORY.
China's $11 TRILLION bond market is flashing warning signs.
4
China has had 6-straight quarters of deflation for the first time since 1999.
Population dynamics are shifting and the real estate collapse is worse than 2008.
This is similar to what Japan saw in the 1990s.
25+ years later and Japan has still not recovered from this.
Population dynamics are shifting and the real estate collapse is worse than 2008.
This is similar to what Japan saw in the 1990s.
25+ years later and Japan has still not recovered from this.
5
Population dynamics are one of China's largest similarities to Japan in the 1990s.
In 2050, the proportion of Chinese over retirement age will be 39% of the total population.
45% of people will be aged 65 or older, up from 13% in 2010.
This is due to the one-child policy.
In 2050, the proportion of Chinese over retirement age will be 39% of the total population.
45% of people will be aged 65 or older, up from 13% in 2010.
This is due to the one-child policy.
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This has led to a collapse in Chinese real estate.
Since 2021, China's real estate collapse has destroyed $18 TRILLION of Chinese household wealth.
If you adjust 2008 losses in the US for inflation, it equals ~$17 trillion today.
China's 2008 is happening as we speak.
Since 2021, China's real estate collapse has destroyed $18 TRILLION of Chinese household wealth.
If you adjust 2008 losses in the US for inflation, it equals ~$17 trillion today.
China's 2008 is happening as we speak.
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So, why aren't markets around the world crashing?
After all, China is the world's 2nd largest economy, behind the US.
Wouldn't a 2008-like event in China have ripple effects around the world?
For now, China and the US are in polar opposite situations.
Deflation vs inflation.
After all, China is the world's 2nd largest economy, behind the US.
Wouldn't a 2008-like event in China have ripple effects around the world?
For now, China and the US are in polar opposite situations.
Deflation vs inflation.
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Our premium members got ahead of this trend and bought market dips in 2024.
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Since August 1st, subs are up ~2,000 POINTS on S&P 500 trades.
Subscribe at the link below to access our upcoming alerts for 2025:
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Below are some alerts we posted recently.
Since August 1st, subs are up ~2,000 POINTS on S&P 500 trades.
Subscribe at the link below to access our upcoming alerts for 2025:
thekobeissiletter.com/subscribe
9
Now, consumer confidence has COLLAPSED in China and not even stimulus is helping.
Over the last 3 years, consumer confidence in China is down ~ 50 points, to a near 30-year low.
Such a drop in consumer assessment of the Chinese economy has almost never been seen before.
Over the last 3 years, consumer confidence in China is down ~ 50 points, to a near 30-year low.
Such a drop in consumer assessment of the Chinese economy has almost never been seen before.
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This has led to the RAPID weakening of the Chinese Yuan, another crisis within a crisis.
The Chinese Yuan is nearing its weakest level against the US Dollar since 2007!
Currency markets are, in fact, trading like China is in their own modern-day 2008 real estate collapse.
The Chinese Yuan is nearing its weakest level against the US Dollar since 2007!
Currency markets are, in fact, trading like China is in their own modern-day 2008 real estate collapse.
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Suddenly, it all makes sense why China is stocking up on gold reserves.
China's central bank resumed gold purchases in November.
They now hold a record ~73 million fine troy ounces of gold.
China's central bank knows exactly what is happening; it's a crisis.
China's central bank resumed gold purchases in November.
They now hold a record ~73 million fine troy ounces of gold.
China's central bank knows exactly what is happening; it's a crisis.
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The implications of China's real estate collapse will spread well beyond real estate in China.
As we head into 2025, we are positioning ourselves for more volatility in the market.
Subscribe at the link below to access our premium analysis and alerts:
thekobeissiletter.com/subscribe
As we head into 2025, we are positioning ourselves for more volatility in the market.
Subscribe at the link below to access our premium analysis and alerts:
thekobeissiletter.com/subscribe
13
Sum it all up and you end up with this chart, the collapse of Chinese government bonds.
The collapse that is happening now will be studied for decades to come.
China needs a MAJOR economic restructuring.
Follow us @KobeissiLetter for real time analysis as this develops.
The collapse that is happening now will be studied for decades to come.
China needs a MAJOR economic restructuring.
Follow us @KobeissiLetter for real time analysis as this develops.