Posted on 10/13/2021 9:41:03 PM PDT by SeekAndFind
NEW YORK—An economic slowdown in China could ripple through the global economy and weigh on commodity prices and growth, star stock picker Cathie Wood of ARK Invest warned in a webinar on Tuesday.
Wood, whose flagship $19.7 billion Ark Innovation fund was the top-performing U.S. equity fund in 2020, said that China’s recent steps to crack down on sectors ranging from gaming to education to financial firms are increasing the likelihood of a policy mistake that leads to a sharp slowdown.
“I really do think that the policy makers in China are beginning to play with fire,” she said, adding “We will look back at this period in six months and say ‘Wasn’t it obvious there will be a major and unexpected slowdown in China?'”
Wood reiterated her bullishness on electric car maker Tesla Inc., citing its strong September sales in China despite a 17 percent drop in passenger vehicles sales from the year earlier.
The ARK Innovation fund rallied last year due to its outsized bets on companies such as Tesla and Teledoc Health Inc. that surged during the pandemic. Yet increasing concerns about inflation have weighed on the fund, leaving it down 11.4 percent for the year compared with a roughly 17 percent gain for the benchmark S&P 500.
Shares of ARK Innovation rose 1.5 percent in Tuesday afternoon trading, helped by a 2.4 percent gain in top-holding Tesla.
(Excerpt) Read more at theepochtimes.com ...
FROM ZERO HEDGE:
China’s factory-gate prices grew at the fastest pace in almost 26 years in September, adding to global inflation risks and putting pressure on local businesses to start passing on higher costs to consumers.
The producer price index climbed 10.7% from a year earlier, the highest since November 1995, data from the National Bureau of Statistics showed Thursday, far higher than the 9.5% gain in August and hotter than the 10.5% expected.
The situation is about to get much, much more serious. If the historical correlation between Coal prices and PPI holds, were may be soon looking at a tripling of China’s PPI, which from 10.7% Y/Y in September, is about to soar to 30% or more.
Needless to say, if Chinese PPI does hit 30%+, even if CPI somehow stay in the single digits, the results would be catastrophic: profit margins would collapse, the plunge in already thin cash flows would lead to even more defaults and supply chain bottlenecks, even as the scramble to obtain commodities “at any price” keeps pushing costs - and PPI - even higher.
Meanwhile, if producers do try to pass on some of the costs and CPI spikes (the gap between CPI and PPI was already at record wide before the recent surge in coal prices) as it did in the early 90s...
... then Beijing will have social unrest on its hands.
For a couple of years, maybe. I think there is enough incentive for companies to get out of China and set up factories elsewhere.
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