McVEAN
Trading Trading & & Investments, Investments, LLC LLC
Is the Chinese Roller Coaster Near the Bottom? ROCKY MOUNTAIN ECONOMIC SUMMIT VICTOR, IDAHO JULY 12, 2018
Michael Drury Chief Economist McVean Trading and Investments, LLC
Past Performance Is Not Necessarily Indicative Of Future Results.
1
AVERAGE PRICE FOR NEW RESIDENTIAL BUILDINGS IN CHINA % CHANGE FROM YEAR AGO
12.5
10.0
7.5
5.0
%
2.5
0.0
-2.5
-5.0
-7.5 05 05 06 06 06 07 07 07 08 08 08 09 09 09 10 10 10 11 11 11 12 12 12 13 13 13 14 14 14 15 15 15 16 16 16 17 17 17 18 18 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 / 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 30 31 31 /30 /31 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ 4/ 8/ 12/ Apr-18 4 8
Past Performance Is Not Necessarily Indicative Of Future Results.
2
CHINA SOCIAL FINANCING 12 MONTH AVERAGE
1750
1500
1250
1000
750
500
250 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 b- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- ebe F A F A F A F A F A F A F A F F A F A F A F A F A F A F A F A F A
May-18
Past Performance Is Not Necessarily Indicative Of Future Results.
3
CREDIT CRUNCHES FOCUS ON THE ELITE
Source: Strategas Past Performance Is Not Necessarily Indicative Of Future Results.
4
CHINESE RAILROAD FREIGHT VS ELECTRICITY PRODUCTION 3 MONTH AVERAGE % CHANGE FROM YEAR AGO 3 MONTH AVERAGE
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 / 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 1/1 7/1 1/1 7/1 1/1 7/1 1/1 7/1 1/1 7/1 1/1 7/1 1/1 7/1 1/1 7/1 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ 1/ 7/ May-18 RAIL ELECTRICITY PRODUCTION
Past Performance Is Not Necessarily Indicative Of Future Results.
5
CHINA EXPORTS VS IMPORTS
6 MONTH AVERAGE %CH FROM 6 MONTH AVERAGE YEAR AGO 66.0%
49.5%
33.0%
16.5%
0.0%
-16.5%
-33.0% 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 l-07 -08 l-08 -09 l-09 -10 l-10 -11 l-11 -12 l-12 -13 l-13 -14 l-14 -15 l-15 -16 l-16 -17 l-17 -18 l-18 n- ul- an- ul- an- ul- an- ul- an- ul- an- ul- an- ul- an- EXPORTS n n n u an Ju an u an u an u an u an u an u an u a J J J J J J J J J J J J J J Ju Ja Ju Ja Ju Ja JIMPORTS J J J J J J J J J J J May-18 J J J J J
Past Performance Is Not Necessarily Indicative Of Future Results.
6
YUAN PER US DOLLAR (INVERTED SCALE)
0.17 0.17 0.16 0.16 0.15 0.15 0.14 0.14 0.13 0.13 0.12 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 0 0 0 1 1 1 2 2 2 3 3 4 4 4 5 5 5 6 6 6 7 7 7 8 8 00 200 200 200 200 200 200 200 200 200 200 200 200 200 200 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 2 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / 21 /27 /30 2/3 6/9 /13 /16 /22 /26 /29 7/4 1/7 /13 /17 /20 /26 /30 2/3 4/8 /12 /16 /20 /24 /28 5/3 9/6 /10 /16 /19 /23 /29 0/2 2/5 /10 /14 /17 /23 /27 3/2 7/6 / 1 3 7 11 3 7 1 8 12 4 8 12 1 5 9 1 5 9 1 5 1 6 10 2 6 10 10 2 6 10 2 July 2018
Past Performance Is Not Necessarily Indicative Of Future Results.
7
CHINA NOMINAL GDP GROWTH IN US$ CURRENT QUARTER % CHANGE FROM YEAR AGO
36%
32%
28%
24%
20%
16%
12%
8%
4%
0%
Q1 2018 Past Performance Is Not Necessarily Indicative Of Future Results.
8
COPPER VS CRUDE 450
160
400
140
350 120 300 100 250 80 200 60 150
40
100
50
20
Copper
WTI Crude Oil
Past Performance Is Not Necessarily Indicative Of Future Results.
June -18
9
CHINA TRADE GAP FOUR QUARTER AVERAGE
600
8.0%
450
6.0%
300
4.0%
150
2.0%
0
0.0%
2 5 8 1 2 3 4 4 7 0 2 3 4 5 6 7 8 9 0 1 5 6 7 8 9 0 1 -1 c-1 p-1 n-1 -0 c-0 p-0 n-0 -1 c-1 p-1 n-1 -0 c-0 p-0 n-0 -0 c-0 p-0 n-1 -1 c-1 p-1 n-1 -2 c-2 p-2 ar ar ar ar ar ar ar e e e e e e e e u e u e u e u e u e u e J J J M J J J M M M D M M M D S D S D S S D S D S D S
BILLIONS OF DOLLARS
SHARE OF CHINESE GDP
Q1 2018 Past Performance Is Not Necessarily Indicative Of Future Results.
10
TRADE WAR IN PERSPECTIVE • US places 25% tariffs on $50 billion in Chinese goods = $12.5 B • US hits another $200B in Chinese goods with 10% tariff = $20 B • US firms and consumers adjust to avoid tariffs reducing effect • US Supreme Court says states may tax internet = $13 B • Trump reduces payments on Obamacare = $10.2 B • Fed raise 25 bp on $5 trillion in short term debt = $12.5 B • Price of oil changes $5 a barrel on 8 mbd imports = $14.6 B • Index capital gains for inflation = $10 B to $20 B • Consumption vs income based taxes – talk amongst yourselves
Q1 2018 Past Performance Is Not Necessarily Indicative Of Future Results.
11
2018 GLOBAL GDP $86.0 TRILLION
NAFTA $23.2T
EUROPE $19.2T
US $20.3T
EUROZONE $13.4T
JAPAN+SOUTH KOREA+TAIWAN $7.3T CHINA $13.4T
HK + MACAU+ OPEC+ BRAZIL+ RUSSIA+ AUSTRALIA+ ARGENTINA $10.5T
OTHER $11.4T
Source: IMF/McVean Past Performance Is Not Necessarily Indicative Of Future Results.
12
COASTAL CHINA = FSU + ITALY, AUSTRIA & GREECE
Eastern Europe 455 million @ $13,200 Eastern China
499 million @ $13,500
ONE BELT, ONE ROAD
Past Performance Is Not Necessarily Indicative Of Future Results.
14
CHINA CORRELATES THEIR POLLUTION PROBLEM WITH CLIMATE CHANGE
Past Performance Is Not Necessarily Indicative Of Future Results.
15