"I was sitting in the sunshine on Park Lane last Friday admiring Mies van der Rohe's Seagram Building when I got a notification from Bloomberg to let me know that 'White House Weighs Limits on US Portfolio Flows into China'. It would be difficult to imagine a clearer signal of a move to a China containment [as opposed to engagement] policy."Apparently not, however, as this is still just seen as another attempt to gain leverage on a trade deal, at least based upon the follow-up flurry of emails from investors!"Well, perhaps, but when one considers there is now a capital, trade, intellectual property and military escalation against the Chinese Communist Party, one does wonder if this may be part of something bigger than a drive to sell more soya beans."This news on possible restrictions on the free movement of capital to China will come to be seen as a crucial turning point in the history of this century. It will be seen as a turning point of a magnitude commensurate with the free movement of capital across borders that ultimately defined what globalisation is, rather than the free movement of goods. Since the Global Financial Crisis, The Solid Ground has argued that this era is coming to an end and for many people, primarily those living in emerging markets that have now imposed capital controls, it has already come to an end."I left for North America puzzled as to why almost everyone thinks that President Trump will strike a trade deal with China. However, that puzzlement has lifted somewhat during the week as I increasingly realised that the opinion on the likelihood of a trade deal is being reinforced by every major bank that issues investment research. Given these institutions' investments in China, and their hope for business from China, one should not expect a full and frank assessment of the outlook for US / China relations from that quarter. Companies and executives expressing too frank a view on the appropriate relationship between the People's Republic of China and Hong Kong have already paid a heavy price for voicing such opinions."
"...what sparked this piece is simply a realisation that some things which I thought would 'obviously' happen after 2008 did not happen -i.e. as a journalist, some of my predictions were wrong. I expected banks to shrink, the shadow banking world to decline, bankers to be prosecuted and the backlash against the elite to swell. It didn't happen."
- unconstrained 'value' equities predicated entirely on quality and undemanding multiples (and, since we raise the topic, no current exposure to China);
- uncorrelated assets, in our case systematic trend-following funds pursuing pure price momentum strategies; and
- real assets, notably the monetary metals, gold and silver, and related mining interests, again at undemanding multiples, but with sound underlying earnings and earnings growth.
"...these days all manner of assets are now being propped up by a sunny investor belief that central bankers know what they are doing with quantitative easing; even though nobody has tried it on this scale before, or knows how to exit."