China “The Mother of all Credit Bubbles” Is Bursting
The comments below are an edited and abridged synopsis of an article by Jacob Wolinski
The three best macro ideas are complementary plays on the unwinding of currency and financial asset bubbles at a likely peak of a global capital cycle that is the most leveraged in history:
1. Shorting US stocks at historic-high valuations relative to underlying fundamentals with abundant catalysts for a near-term bear market leading to a US recession;
2. Shorting the overvalued and weakening Chinese yuan and China contagion plays to express the unwinding of a credit bubble that is unprecedented in scale and already bursting; and
3. Buying precious metals commodities at record valuations.
Gold is cheap compared to the global fiat monetary base. Silver is historically cheap to gold. Miners are historically cheap to their own fundamentals, and even cheaper compared to depressed gold and silver prices. Precious metals are the ultimate inflation hedge and safe-haven asset. Asset bubbles will deflate, but real economy deflation is the last war. The Fed has already proven that money printing can beat deflation. It still too accommodative to stop rising inflation, and ineffective in fighting inflation because any move to do so would risk bursting record financial asset bubbles.
So if you could choose one asset class to hedge against rising inflation as record financial asset bubbles are bursting, it’s precious metals. Next to the dollar, gold remains the most ubiquitous central bank reserve asset in the world, and central banks have been buying it since it bottomed in 2015. Be on the same side as central banks.