Jim Bianco warns that China may be in a hard-landing phase right now as economic data continues to deteriorate and more funds flee the country. When asked what the implications are for other markets, he said that it will certainly cause a problem, but he’s not expecting an ’08 crash.
“China worries me the most for the moment…the economic numbers in China are looking awful. As a definition for people to understand about China, the slowest growth that the Chinese economy has had over the last 20 years has been six percent. Six percent is the slowest growth. Now, yes, I know the numbers there are somewhat made up so the definition that we use for China is seven percent. If it’s below seven percent it’s considered a hard-landing.”
Bianco cites continual fund flows out of the country as an indication that “things are getting worse” and says there’s a good chance China will announce sub-seven percent growth when first quarter GDP numbers come out mid-April.
Furthermore, he says that if economic data and earnings don’t start to improve in the U.S. over the next two quarters, the market could have a “real head scratching moment,” and will have a hard time justifying current valuation levels.
Even then, with many of the potential problems that Bianco outlines in the interview, he doesn’t expect another ’08-style correction, but look to exit if there’s protracted weakness later this spring into summer.
Investment-wise, he recommends very defensive, liquid stocks or high quality corporate bonds with a low single-digit return.
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Audio link: https://www.financialsense.com/financial-sense-newshour/james-bianco/bes...
