Après 45 ans sans récession

Access the shareholder letters of the world’s top hedge funds and discover the opportunities they are seeking to maximize their returns in 2023. For weekend reading, Gary Alexander, senior writer at Nevlier & Associates, offers the following commentary: August 8th, or 8-8, is the luckiest day of the year in China, as 8 is pronounced « ba » in Mandarin, which sounds like the word « luck » or « prosperity, » making 8 an auspicious number. Doubling or tripling your eights can double or triple your fortune. The Beijing Summer Olympics, for example, opened at 8:08 pm on August 8, 2008, with a quintuple « 8 » connection, like the Olympic logo with 5 loops. Approximately 10,000 Chinese couples get married on this day and hour to ensure good fortune for their union. When our investment group visited China in 1996, every room in our Wuhan hotel, on every floor, started with the number 8. Mobile phone numbers without 8 are cheap, but an investor offered $2,788 for the mobile phone number 2008-0808, and a mobile phone with six consecutive alleged eights sold for $6,750. Unfortunately, in history, August 8th has brought misfortune to China (see below), but that doesn’t stop them from honoring the number 8. This week, I would like to address another superstition: the fear of negative growth. Since the end of the Cultural Revolution and the death of Mao Zedong on September 9, 1976 (it’s 9-9, not 8-8), and especially since the emergence of reformist Deng Xiaoping in December 1978, China has seemingly delivered years of positive GDP and GDP growth of 14,500% over these 45 years! Moreover, these are significant growth figures, mostly with double-digit rates during 15 of the 45 years. Most of these figures are likely accurate. Anyone who has seen China in the 1980s or 1990s compared to today can testify to the enormous growth in wealth and infrastructure there. Anyone monitoring China’s commercial dominance can attest to the monopoly of the « Made in China » label. Trade statistics don’t lie. China’s GDP has grown from $150 billion in 1978 to $22 trillion in 2022, a gain of over 146 times, or +11.5% annual growth over these 45 years, but the pace has significantly slowed down in the last decade. Do you know which under-the-radar stocks the top hedge funds and institutional investors are investing in right now? Click here to find out. Prior to the COVID years of 2020-22, the closest China came to a recession was the year following the Tiananmen Square in 1990 at +3.9%, and if there was ever official data manipulation, that was the time China declared a recession. Its collective hands are on the scale, but the overall growth record is phenomenal. Well, let me say that it’s unprecedented. Such growth happened once before in Japan before China. Japan made this 45-year rocket ride before China. I wrote my first series of economic articles in late 1967, 55 years ago, right out of college, after studying Japanese shipbuilding papers. It became a three-part series in a national magazine about the coming economic megastar, Japan, starting in 1968. Since the first atomic bombings on August 6th and 9th, 1945, Japan by 1967 was beginning to become the kind of world economic power that China is today in the 1980s. All the stories you read about China soon replacing America as number one were the same stories we read about Japan replacing America « by the year 2000. » Here is a logarithmic-scale chart of Japan’s phenomenal growth between 1945 and 1990, which once outpaced Britain: [1945 to 1990, the United States’ bombing of Japan] took it from the depths of 45 years (1946-1990) of rebuilding to the same 45-year boom that China just had. Recently like China, Japan built up its export growth, aided by shipping. Over 55 years ago, I wrote: « The sun of Japan has risen again – and it is bigger and brighter than ever before! From the ashes and destruction of World War II, a new Japan has emerged. A powerful economic giant… For 12 straight years, Japan has led the world in [shipping] tons launched, or 47% of the world’s total output… Only Japanese shipyards currently have the ability to build tankers between 200,000 and 300,000 deadweight tons…. Once launched, these ships steer themselves… The world’s two largest ships – both of Japanese construction – have crews of 29 and 32, respectively! » – « Japan – The Industrial Supergiant » by Gary Alexander, Plain Truth Magazine, January 1968 In 1989, the Japanese market was at its peak, and its economy was at its peak. Japan was stuck in a deflationary crisis for 34 years. In 1989, some people were saying, « One square mile of land in Tokyo is equal to all of California, » but me, and any rational person, would say, « No, that’s not the case. Could Japan’s fate now be China’s future? Several fundamental factors point in that direction – including a 300% debt-to-GDP ratio, an impending demographic time bomb of fewer young workers to repay that debt and support the elderly, and damaged trade partners. An arrogant dictator demanding total obedience from expensive labor and a lifetime of … The Wall Street Journal (Monday, July 31, 2023, « Deflation fears deepen as growth stagnates in China ») shows how deflation has quickly outpaced inflation in China and threatens its growth momentum: China’s GDP only grew by 0.8% in the second quarter (compared to the first quarter, seasonally adjusted), so we will see if 2023 breaks China’s 45-year winning streak. The next mega-trend in China could be a repeat of Japan. August 8th hasn’t been so lucky in China in the past 50 years. Despite the