I believe we are at a tidal shift in markets. A thread. 1] China's aggressive purchases of soybeans, the 5 year plan meeting w Xi's dovish tone, and subtle shift from Navarro and others re: China combined w Biden's abrupt hawkishness has major market moving potential
2] Illustrating how much this has moved, Brazil $EWZ has dropped 8% in the past month while agriculture $DBA is up over 5%. This is significant because China was shiftings its soybean / ag purchases to Brazil. This has, apparently, stopped. 3] This sets up the next big move.
4] I believe by October China will have aggressively increased purchases of ag products and a "Phase 2" trade deal will be announced which combines Tik Tok, Huawei and other issues into a single package. An Ant Financial NYSE listing is also on the cards imo. Why now?
5] Biden's policies are just as anti China as Trump's - if not more so - and Biden has a real chance of driving international consensus vs China around human rights, and Huawei. His campaign calling China genocidal was the final straw that kicked off the "Big shift".
6] The most recent tell was that China today agreed to allow US auditors more purview into their stock market. They would not do this if they did not intend to make another trade deal. And would certainly not do it if they thought Biden's SEC was in charge of investigations.
7] This has a large number of asset implications. It is bullish for the USD, crude oil, natural gas, the energy sector, the agriculture sector. It is bearish for clean tech. It's also very bullish Chinese stocks. It is bad for Europe.
8] Substandard European companies, namely Ericcson and Nokia that have benefited from the trade war are likely to collapse upon a phase 2 deal. Clean energy stocks like Sunrun which require a Green New deal to deliver earnings will similarly implode.
9] China and the US collaborating opens the door for a large up move in the USD as the Euro goes from a reserve diversification story to a reckless Central bank printing money without a real economy. Companies like Goldman Sachs will prosper while Deutsche and others lose.
10] None of this is consensus yet. Put option structures on solar stocks out to January have 15-30x pay offs if this is correct, just as one illustration. Exciting times in markets, as usual.
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