Hedge Fund CIO: "Forget The Yield Curve, China Is All That Matters"

Submitted by Eric Peters, CIO of One River Asset Management


“Investors are trying to understand what yield curves are telling us,” said the CIO. “They listen to every word from the Fed, trying to figure out what they’re up to, whether they’ll succumb to the pressure to ease rates,” he said. “And strategists serve up all sorts of charts comparing what is happening in today’s economy with unemployment, credit spreads.” Then he paused. Smiled. “But never has China been such a big part of the global economy. Its influence dwarfs all else. Which renders history mostly meaningless. China is all that matters.

“We open a new store in China every 15 hours,” said Starbucks CEO, Kevin Johnson. “In the coming 3yrs, we’ll open stores in 100 new Chinese cities, each one with a larger population than Los Angeles.” Like most CEOs, he was out ahead of his skis. But China’s top 18 cities are larger than New York City (our largest). They do have 27 cities larger than LA (our 2nd largest). 43 that are larger than Chicago (our 3rd). And 140 cities larger than San Jose (our 10th). “How long can we keep doing this?” asked Johnson, rhetorically. “Beyond my lifetime.”


"The problem is that when China does business in places like Latin America it often injects corrosive capital into the economic bloodstream, giving life to corruption and eroding good governance,” explained Secretary of State Pompeo. “China’s financial interventions have helped destroy that country,” he added. “We need to talk about the Russians too. Venezuela, Latin America, should be worried. Flying in troops and opening a Venezuelan training center are obvious provocations. We shouldn’t stand for Russia escalating an already precarious situation.”