Bank CEO and Director Sentiment on Negative Rates.
Does being smart make you rich? 80% of wealth is owned by 20% of the people. Intelligence is measured by IQ, where the average is 100, but nobody has an IQ of 1,000. Or, hard work is measured by the hours you work where some people work more hours than average, but nobody works a million times more hours than the average. But when being rewarded (earning), some people get millions or billions more than the average ($$$$). The wealthiest people are not the smartest or most talented or most hard working, they are the luckiest according to a study.
Debt and Equity. What is the cheapest financing option, a company selling debt or a company selling equity? The answer is debt financing. Reasons: you get an income tax benefit on the interest component that is paid to the lender. If the firm goes bankrupt, equity investors lose everything, but the debt holder has the first claim on company assets. You do not give away ownership or a stake in the company. The cost of equity is more expensive due to its riskiness (cost of debt is lower than the cost of equity). Generally, companies in stable industries with consistent cash flows use debt financing (taking out a loan or selling bonds) more than equity financing (selling shares of the company).
The UC Endowment Fund. Strategy, keeping with set fundamentals and standards, and being able to adapt and innovate quickly can easily differentiate the best-performing funds with the worst-performing funds. The UC fund thanks its “agility” for their investment success. Agility means the ability to move quickly and easily, and their agility allows them to find investment opportunities and prosper. “We move quickly and hold what we believe to be lucrative assets for the long term,” (2018-2019 Annual Report). With the current economic environment plus the instability and uncertainty in geopolitical events and climate change, agility is a strength. As of the beginning of 2019, the fund’s assets under management totaled $126.1 billion with a 1-year return of 8.2% for their endowment portfolio and a 1-year return of 6% for their pension portfolio. The UC Endowment Fund believes in: less is more, risk rules, creativity pays, concentrate and build knowledge. Interestingly, they recently adopted a sustainable strategy and are starting to sell out of their fossil fuel assets and starting to buy into ESG investments. The fund has been performing well, cutting costs, leveraging, building and cultivating better relationships, and this has been partially due to the leadership. The CIO and Treasurer of the fund, Jagdeep Bachher, has said, “Leaders are measured by how they lead when things turn bad.” The biggest determinant of returns is asset allocation. They are changing their investment strategy to a concentrated set of assets that they understand deeply, they are reducing their number of investments, and their main focus is risk management and growth. In order to perform well as an endowment fund or an investment fund, this is a great model to follow.
Business Ethics. We all know that the bottom line for a business is the cash they bring in. At the end of the day, a typical business exists only to generate profit. That is how a capitalist society operates. Accordingly, there exist some extreme lengths that people will go to in order to make money. Often times, these measures are taken as a result of a conflict of interest between an individual and a company. Ethical considerations have to be made, and it is important to not fall victim to moral myopia (where you let your own unethical behavior slide due to some false rationalization) or ethical fading (where you are so focused on one aspect of a situation, such as the potential revenue, that you lose sight of ethical considerations).
Recently, there was a revelation about a giant company that is the epitome of all ethical issues fusing into one perfect storm. Boeing, who is now infamous for several fatal crashes that took the lives of hundreds, is the perpetrator here. The crashes happened last year, but it was revealed last week that the malfunction in the design was known about as early as 2016. A message conversation between two Boeing executives/pilots showed that they knew the plane was malfunctioning. We are no aviation experts here, but the MCAS was erroneously engaging itself frequently, and causing planes to nosedive. Even though they were aware of this, either they or other upper management would not bring it to light in front of the FAA. They were too concerned about competing with Airbus and making money. As a result, hundreds of people are now dead, and the willingness to accept unethical behavior is to blame.
Quantum Supremacy. In November 1939, John Vincent Atanasoff flipped the switch on the world’s first electronic digital computer and fostered in the digital age, an age of untold potential that connected people and spread information across the world allowing for a period of unprecedented technological development and economic growth. As of this week, Google had claimed “quantum supremacy”, marking the beginning of the end of the digital age as the world prepares for the quantum age. Quantum supremacy is a term used to mark the point at which quantum computers have passed the capabilities of the current computer architecture and is something physicists have been after for decades. The latest test of Google’s Sycamore quantum computer proved that it could complete a complex calculation in 200 seconds. The reason this is such a big deal is that it would currently take the world’s best supercomputer roughly 10,000 years to complete that same problem. That makes Google’s Sycamore computer an unbelievable 1.5 trillion times faster. The reason is traditional computers use bits to process data where the data can exist as a one or a zero, quantum computers process data in quits which can exist as a one, a zero, or a zero and one simultaneously. This small processing difference allows the processing power of a quantum computer to scale exponentially. Physicists even believe that quantum computers will double Moore’s law, meaning the power of these computers could quadruple every couple of years. Google’s achievement has allowed the U.S to surpass China as the world’s leader in quantum computing, but this lead won’t last long. Quantum computers have the potential to make an entire country un-hackable or hack into the communications of any other country, so the first country to truly reach and apply this technology will instantly have the most secure military possible. The U.S may not remain in 1st place for long, as China is already years ahead of the U.S in Quantum communication technologies, has launched the first quantum satellite, and is investing billions of dollars more than the U.S into quantum computing.
Tesla's Profitability. Big news for Tesla this week as they achieved their first profitable quarter since last year, earning $143 million. Tesla short-sellers, on the other hand, lost $1.5 billion. Despite being a company that is valued at over $50 billion, Tesla is still largely running like a “Silicon Valley start-up”, focused on growth rather than profits, taking on large amounts of debt, and making “bet the company” business discussions. Shareholders have been (somewhat) patiently waiting for Tesla to transition to a company that is focused on earning regular profits and achieving steady and sustainable growth. Tesla may finally be at a place to allow this to happen. Tesla has $5.3 billion in cash, is earning an automotive gross margin of 22.8%, while their energy business is growing, and their new Shanghai Gigafactory has started production for the Chinese market. With the lessons learned from producing the Model 3, Tesla’s management believes that they will be able to easily and efficiently scale production for their new crossover utility vehicle, the Model Y. In other news, Tesla owners will get some significant updates in the comings weeks. Tesla’s engineers have found another way to increase the efficiency and power of their vehicles and will send a free update giving Model 3s 5% more power, while the standard range plus will receive a mileage boost to around 250 miles per charge; other Tesla models will also receive a power increase around 3%. Tesla recently released “smart summon”, which allows owners with the full self-driving package to summon their car from within a parking lot to come pick them up. While this update was impressive, many drivers reported minor flaws, with some reporting major flaws in the software. Thanks to Tesla’s large fleet of cars and their neural net commuter, Tesla has compiled data from over 1 million smart summon uses and will send an update next month to improve its “smart summon” software.
Our Rights. With the rise of authoritarian leaders across the world, it is important to remember that as citizens of the United States of America we are endowed with certain rights. As long as you do not infringe on the rights of others you are allowed the freedom to express yourself, speak freely and worship as you wish. You have the right to vote in elations once you are 18 years old and run for office once you are of proper age. The right to vote comes with the responsibility to participate in the democratic process, which means if you don’t agree with the course of action your government is taking you should educate yourself on the process and on potential candidates who intend to change this process and then vote for them. In criminal or civil circumstances; you have the right to sue anyone, you have the right to a fair trial in front of a jury of your peers, you have the right to not be subject to unreasonable search and seizure of you or your property, if arrested or accused you have the right to remain silent, and you have the right to a speedy trial, legal counsel and to face your accusers.
The Alchanati Campbell and Associates Team
Identity. What makes you, you. The masks we wear — or don’t wear — shape the way that we interact with the world around us, and they determine the space in front of us. That inner person (your inner voice) is who you are. What you tell yourself and what you express to others is what you are. And your reflections on life and your reactions to life will determine where you are. Your identity is only as valuable as its ability to help you create a sense of order in your mind about what is going on in the world. Live what you preach and accept your reality as best as you can. In a world dominated by distractions, we are increasingly getting out of touch with our ability to direct ourselves to where it matters most. We don’t become who we are by staying as we are now. There’s a constant fight between who I want to be versus who I should be. Should I always be nice and genuine? Positive and soft-spoken? Or can I benefit from being ruthless and emotionless? With a thick face and a black heart.
Characteristics of a Fund Manager. When people compete, their success is often predicted by their techniques and their track record. Mutual fund managers rely on a variety of techniques when trying to beat their benchmarks. We can tell whether a manager is skilled by comparing his investment decisions with the decisions of other skilled managers. These managers have strong leadership, are open to experimentation and risk, are willing to challenge the status quo, and focused on the customer. Managers who make similar investment decisions have similar skills.
Earnings Season. Q3 financial earnings season started off with a boom earlier this week. Out of the major financial companies, we saw only Wells Fargo miss earnings by a large margin, with Goldman hitting expectations, and Charles Schwab, JPM, BNY Mellow, PNC, BOA, and Morgan Stanley significantly beat earnings. In the current economic environment, this financial earnings season was very important, as the underlying reasons for beating/missing earnings for financial companies are usually indicators for how the economy is forecasted to perform. Jamie Dimon (CEO of Morgan Stanley) attributed, “the consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels,” with the opposing being, “this is being offset by weakening business sentiment and capital expenditures are mostly driven by increasingly complex geopolitical risks, including tensions in global trade.” This is the current sediment from most financial institutions as they are releasing earnings. Wells Fargo earnings miss seems to be attributed to previous controversies they were facing earlier this year with the fraud.
We are Melting. According to a report from the National Oceanic and Atmospheric Administration, the Arctic has lost 95% of its oldest ice, and 78% of its ice volume or roughly 10 trillion tons of ice since 1979. Rather than working to find solutions to combat this massive geological crisis and emplace restrictions to protect what’s left of the Arctic, the World’s leading nations are scrambling to gain territorial and political ground to capitalize on the resources opened up by the melting ice. Large amounts of oil and natural gas have been discovered in the Arctic, shipping routes are staying open for more months of the year, and soon enough ice will melt to allow for a Northwest Passage where ships could sail north from the U.S to China in 20 days fewer than it currently takes. Last weekend world leaders, politicians, scientists, and environmentalists met at the Arctic Circle Assembly to discuss climate change, security and the exploitation of new oil and gas discoveries. Representatives from the U.S, China, and Russia expressed their interest in Arctic exploration and asserted their right to do so. Russia laid out its plans for new liquified natural gas fields, which they plan to continue their skyrocketing industry that has already quadrupled since 2016. Russia is currently sailing a nuclear powered, ice-breaking ship through the Arctic to emplace infrastructure along with small villages in preparation for the coming Arctic boom. China has proclaimed itself a “near-Arctic” power which the U.S and its allies have condemned. China has planned several multi-billion dollar initiatives to reduce its trade logistics costs in the Arctic as part of China’s Belt and Road initiative. The melting ice is forcing nations to redraw their maps and disputes are already breaking out overfishing, mining, and land rights. To protect resources and shipping routes potentially worth 100’s of billions of dollars, Arctic powers are expanding their military’s presence in the arctic and tensions are rising quickly. The U.S, Russia, China, Canada, and Norway are all slowing increasing their Arctic military might with new military bases, increased troops, and large scale drills. Over the next decade, we may see the Arctic turn into the next geopolitical flashpoint similar to the South China Sea today.
Behavioral Finance. “The human mind is fundamentally not a logic engine, but an analogy engine, a learning engine, a guessing engine…” The study of behavioral economics allows us to understand the decisions we make. Behavioral finance aims to influence and improve our financial decisions. We are more sensitive to losses than gains and overly influenced by short-term considerations. We seek to conform to group behavior and prevailing norms. We overweight the importance of recent events. We are poor at assessing risks and gauging probabilities. We over-estimate our own abilities. We focus on outcomes. We are often persuaded by captivating stories. Have a long-term investment plan. Automate your savings. Rebalance your portfolio. Don’t check your portfolio too frequently. Don’t make emotional decisions. Don’t trade, invest. Save more tomorrow. Individuals should build reserves that can provide an acceptable standard for living in retirement. To achieve this, they should start saving early. What’s hurting us is our tendency to think that the present is more important than the future, and limits to our self-control. Ask yourself these questions: What is the problem or issue? What is the rational or optimal decision? How do you actually behave? What is causing this difference between what you should do and what you actually do? How can we alter behavior to deliver better outcomes?
Reasoning Logic Down to its Roots. What drives us? What formulates our thoughts? What makes us do what we do? It starts with nurture. How our parents raised us, taught us, punished us, rewarded us, loved us… Then nature. How community-based your family is, how close your family is, where you live, who you hang out with, where you went to school, religious beliefs, economic-political standing… Then when you leave the nest and go out into the world, it ends with individual growth and understanding, and your contribution to the world when you no longer exist. Who you make yourself out to be, the core rules and principles that you live by, the experiences and mistakes that you learn from, the relationship you have with yourself and with others, the restrictions and disciplines you impose on yourself… We now live in a world where we’ve connected to everything except ourselves. We read up on others, obsess over the latest gossip and keep up with the hourly following. We lost our courage and increased our insecurity. The secret? You will become way less concerned with what other people think if you when you realize how seldom they do. Everybody else is too worried about themselves to really care what you do.
The Alchanati Campbell and Associates Team
Fed Minutes and Market Sentiment. Inflation and inflation expectations are quite low. There is much support in lowering interest rates, where cuts could help the US economy ‘power through’ recent signs of economic weakness. But lowering interest rates more may take away ammo that the Feds might need later. If there were a really big shock, we could expect interest rates to go down to zero. The goal is to use this unconventional monetary policy, cut rates, bypass the recession, and then raise the policy rate back up. We may be seeing a flatter yield curve as a norm with long treasuries becoming a favorite hedge. We will most likely see another rate cut before the end of the year, meaning, interest rates will lower again, the cost of borrowing will decrease, and everything pegged to interest rates like bank account savings rates, credit card APR, and mortgage rates will decrease as well. We should be cognizant of the upcoming earnings season, with lower expectations of positive earnings growth. Housing has been a drag on GDP for 6 straight quarters but it appears it will be positive this quarter. New home sales, housing starts, and permits are all up double digits year over year. Lastly, we should realize that if a recession does occur, it will be the most anticipated recession of all time.
Poker and Hedge Funds. There is a correlation between skill in poker and skill in hedge fund management. Hedge fund managers who have won at least one poker tournament significantly outperform managers who have no wins. Skilled poker players are better at hedge fund management and fund managers experience an economically significant increase in net inflows after winning in a poker tournament. Poker is a game of luck and strategy. “The Perfect Bet” by Adam Kucharski is a great book to learn about probability and the ‘smart way’ to gamble in blackjack, poker, other card games, trading, and horse racing. One tip out of the many tips given is: [In poker] bet if your cards show very low or very high numbers and check otherwise. Bluff only with your worst hands. Bluffing won’t persuade someone with a decent hand to fold, and it’s not worth betting on the off chance that your mediocre hand will come out on top. The best option is to check and hope for the best!
The Art of Thinking. There is no real structure that you are forced to operate within unless your life depends on it. You can create your own rules if you build the right supporting systems. Our environment controls far more of our behavior than we realize. Creating better habits and opportunities begins with deliberately shaping your surroundings. The real purpose of life is to create a story in which you can constantly define what it means to be better tomorrow than you are today. That’s what we are programmed for. Happiness, productivity, presence, and fulfillment all find their roots in your ability to proactively control where you direct your mental energy. Take control of your attention. You don’t have to be an expert scientist, artist or psychologist, but you should know the fundamentals in all of the major disciplines if you want to optimize your thinking. Over a long enough timeline, if you seek to reduce uncertainty, you can optimize your exposure to luck. Success is often random, but that doesn’t mean it can't be designed.
How the Trade War could End Up. The trade war will end with both the Chinese and American people less prosperous than they would otherwise have been. President Trump’s objectives are to raise economic growth and create jobs by boosting investments. China’s long-run goal is to become a modernized and prosperous economy’ by the mid-twenty-first century. The trade war started when the US imposed tariffs on steel and aluminum imports in March 2018. So far, the US has imposed duties on more than half of its imports of Chinese goods and China has retaliated with tariffs on more than 70% of its imports if US goods. A trade war is costly for both parties. While the US will impose a larger cost on China in the initial years, it will suffer an impact on growth. We are currently seeing positive trade talks from this week and positive sentiment for the talks to come in the upcoming weeks, where we may see a resolution to this almost two-year global disruptor.
Largest Offshore Banking Country. When you think of offshore banking, most people consider the Caymans, Luxembourg, and Switzerland as the main sites. Well, all three of these countries fail in comparison to the largest of the offshore banking countries. Offshore banking refers to a location off-coast from one's domestic country, which offers tax advantages, and other favorable attributes one couldn’t get in their own country. As of 2014, the United States is considered to be the largest offshore banking country, to those not actively living here, due to the refusal to sign the common reporting standard, which means our government does not actively report foreign holdings. This has effectively made the United States the largest tax haven in the world, for foreign capital.
US Stats. By total area, the United States is the third-largest country in the world behind Russia and Canada and has the third-largest population at 328 million people, after China (1.39 Billion) and India (1.37 Billion). Despite not having the largest landmass or population, the U.S has the largest GDP at $20.5 trillion, followed by China with $13.6 trillion. This gap is expected to close as over the next four years with estimates that U.S GDP will be worth around $24 trillion in 2024 and China at $21 trillion. Even with the largest GDP, the U.S ranks 9th in GDP per capita at $59,895 with Luxembourg at 1st with $105,712 per capita. International trade has consumed the news over the last two years due to a trade deficit with China. The U.S ranks second place in annual exports worth $1.54 trillion in 2017, with China exporting $2.26 trillion. The same year China led the world in imports at $2.34 trillion with the U.S at second with $1.35 trillion. It should be noted that despite an ongoing trade war with China the United States’ trade deficit has increased to a post-recession high of $621 billion. Japan leads the world in public debt with a debt to GDP ratio of 234.9% while the U.S ranks 13th with a ratio of 106.2%. This debt is in large part due to military spending where the U.S has a massive lead. In 2018, the U.S spent $649 billion on its military, with China in second spending $250 billion, the following 6 countries only spent a fraction of that, spending between $50 and $65 billion. Outside of these dollar amounts, several other rankings offer some insight into the overall country compared to the world stage. The KOF index looks at social, political and economic indicators to gauge how globalized a country is. Switzerland was ranked the most globalized country scoring 91.17 points out of 100, the U.S ranked 23rd and scored 82 points. The U.S ranked 9th in infrastructure, with Singapore in first. The Economic Freedom Index examines indicators like government spending, property rights laws, judicial effectiveness, tax burden, business freedom, and other similar aspects to rank how "Economically Free" a nation is. The U.S ranked 12th place with Hong Kong coming in first (current circumstances notwithstanding). In 1990 the U.S was ranked 1st in both education and healthcare but now ranks 27th, although its university system is ranked 1st in the world. Compared to the rest of the world’s leading countries, the United States has a low tax burden that averages 25.5% compared with several European nations whose tax burdens are around 45%. Finally, an important but often overlooked indicator is corruption, the U.S had constantly ranked 16th place but recently dropped to 22nd in corruption. Denmark ranks as the least corrupt country. These statistics should offer some context and background as we continue to discuss future economic news. It should be noted that these numbers are the latest reported for all parties and most come from 2018 or 2017.
The Alchanati Campbell and Associates Team
The Market: Charles Schwab cut their trading fees/commissions on equities and options trading to zero. This caused brokerage stocks like Ameritrade (TDA) and E*Trade (EFTC) to decline significantly, with the result of all major brokerage companies cutting their trading fees to 0. We have tariffed our way into a US and global manufacturing recession. US service industries are slowing down. Gen Xers are saving little, are the most debt-burdened of all the generational groups (balances averaging $134,000) and will be expected to have larger sums for retirement. 42% of Gen Xers are focused more on paying off debt than on saving for retirement. Rumors of tariffs placed on $7.5 billion EU, manufacturing data weakening, the labor market tightening, hiring slowing, and consumer demand decreasing… some of the reasons why stocks are falling. Expect more hedging with Gold and Bonds. Corporate insiders are selling stock at an impressive pace and corporate stock buybacks have been slowing. We might see additional rate cuts this month. US yields are relatively higher than other developed regions such as Europe and Japan, so the US has more room to compress. The European Central Bank is signaling that interest rates in the eurozone will remain negative for a long time, pushing investors further into risk to seek some return. Secret of getting people on the right track for retirement: Have a mandatory savings system in place! A robust labor market, rising wages, and low interest rates continue to support consumption and housing.
Are Markets Efficient? This theory states that market prices reflect all available information, so there is no mispricings and no such thing as “value” investing. Risk aversion shifts throughout time and readily available information changes and grows with time. But it is almost impossible to test this theory. You can ask yourself: Can you beat the market? And, are prices, right? Prices fluctuate too much to be able to be explained by a rational process, and returns do have different variations according to asset class and investment instruments. If markets were efficient, there would be no such thing as “bubbles”. Bubbles represent misinformation and “overvalued” securities. Bubbles are when prices exceed a rational valuation of the securities being traded. Is there a difference between value and pricing? In value investing, you invest on the basis of the company’s fundamentals being misrepresented and on the positive future free cash flow growth. Based on the terminal growth rate, your expected return from the weighted average cost of capital, and the intrinsic value of the company, you buy or short the company based on the difference between its intrinsic price and current price. So if markets are not efficient, where are the inefficiencies and how inefficient are they? This question shows the favor between value stocks versus growth stocks.
The best bars in the world.
Slowing of Global Manufacturing. Recent manufacturing data leads us to the worst period for manufacturing since the last major recession (2007-2009). This is shown through the ISM index (Institute for Supply Management), which has been in a steady downfall since the majority of tariffs were imposed on China starting in June 2018. This was only made worse this last week, with ISM falling from 49.1% to 47.8%. Although a small fall, the ISM has a key point of 50%, with numbers above indicating an increasing business environment, and below the contrary. The main reason for this sharp downward movement has to do with the trade war and tariffs the US and China have been imposing. Although the cause is pretty clear, the effects can get pretty complicated. People tend to believe this is an indicator of an impending economic slowdown, with manufacturers forecasting lower demand, and a potential recession. Personally, I disagree with both of the former arguments. I believe this is solely the effect of a decrease in the supply of raw materials from China, and manufacturing becoming more expensive in the US. Realistically, manufacturing only accounts for about 11% of the US’s total GDP, while it accounts for 27% of China’s GDP.
The single greatest mistake investors make. Recency bias. Trend following. Momentum investing. The illusion in which a thing that has recently come to one’s attention suddenly seems to appear with improbable frequency shortly afterward. Not using technical indicators and fundamentals which creates blind spots. A psychological dynamic that operates according to well-defined psychological principles based on the belief that past growth in market prices is strong evidence for more growth in the future. Most recently, this has been shown in 2019’s IPOs. IPOs are the hottest, new companies that go public; where investors like you and I can publicly trade them and buy ownership in them. Since inception returns: Beyond Meats +120%, Peloton -11%, Uber -29%, Lyft -50%, Pinterest +12%, Zoom +25%, Levi Strauss -12%, Fiverr -50%, Slack -36%, Chewy -30%, and CrowdStrike Holdings +10%. This shows that trend following and buying into “hype” is not a smart investing plan, and its very risky and most of the time not profitable.
Productivity and Motivation. Productivity is the name we give our attempts to figure out the best uses of our energy, intellect and time as we try to seize the most meaningful rewards with the least wasted effort. It isn’t about working more or sweating harder, it is about making certain choices in certain ways. Productivity rises when people do the same kind of tasks over and over. Repetition makes us faster and more efficient because we don’t have to learn fresh skills with each new assignment. To motivate ourselves, we must feel like we are in control. When people believe they are in control, they tend to work harder and push themselves more. When we start a new task or confront an unpleasant chore, we should take a moment to ask ourselves “why”. If you can link something hard to a choice you care about, it makes the task easier. The best productivity strategies: assign a fixed period of time to a task, schedule it and stick to it. Prioritize. Politely decline (say no!) so that you can focus on the most important work. Moving around does a lot for you. Clear your desk of distracting devices and see how much more you get done with fewer distractions. Take short breaks. Eat well. Choose when to check your email. Organize your workspace. Wake up early.
China’s Debt. We've all heard about how China's economy is seeing slower growth, and how many analysts believe this will lead to a global economic pull-back. One interesting aspect of China's economy is their debt level. In the first quarter of 2019, China's debt was over 300% of its GDP, up from a year ago. To put it into perspective, the United States', which has an infamous debt, debt-to-GDP ratio was just over 106, meaning total debt was 106% of GDP. China has nearly triple that.
What led to all this debt? The Chinese government pumping out credit in order to spur economic growth. Now that growth is slowing down, this debt issue is becoming more serious.
One interesting venture that this debt was used on is Ghost Cities. Essentially, China has constructed about 50 cities, each designed to house hundreds of thousands of people, and most are completely empty. On the one hand, individuals believe that this has allowed China to boost its infrastructure and investment in property. Furthermore, each city has the potential to create jobs. However, I have a more critical view. I see the construction of these ghost cities has a faux method of mimicking economic growth. Obviously, China's economy has seen immense legitimate growth. Yet, these Ghost Cities are not authentic infrastructure enhancement. It’s a way of creating fake, unsustainable jobs that there is no demand for. In doing so, they are disrupting the natural supply and demand market. Furthermore, there is no plausible way to continue this process. They can't just keep building cities that nobody will live in. I believe that this "project" headlines the debt issue, and this debt issue is one that will lead the already in progress depression of the Chinese economy.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.