The slightest noise, movement or shuffle wakes me up. God forbid I check my mobile phone for any urgent emails…my night is all but over.
I envy deep sleepers.
I have a friend who can sleep virtually anywhere.
From swanky restaurants to hot nightclubs, he is consistently seen around Hong Kong passed out without a care in the world (especially if he had a few drinks).
He’s the type of person that would need one of those alarm clocks that sprays water in your face, or makes you do 10 bicep curls before it shuts off.
His blessing (or curse) of being able to sleep through anything reminds me of none other than the current snoozefest of the markets right now.
As the end of the 3rd quarter came and went, markets continue their dreamlike slumber, warm and cozily drifting up and up with each subsequent trading day.
Nothing…not Fed tightening, Catalonia, Trump, or even North Korea seems to be able to wake us up to the harsh reality of the actual world we live in right now.
From afar it appears that the global economy is in decent shape.
Last week kicked off with Wall Street’s Q3 earnings and while all the major banks have signaled a slowdown in trading revenue, overall corporate sentiment appears solid when you look at the data coming out of the ISM, Chinese PMI, and Japanese tankan survey.
The IMF further confirmed this positive trend by upping their global growth revisions citing developing countries as the fuel for economic expansion.
All of these factors allow the markets to keep on snoozing despite a slew of potential geopolitical and macro risks…
In fact the only thing anyone seems to wake up for right now is Bitcoin! Surprise surprise. (I swear I saw some hipster wearing an “ICO” shirt the other day…)
As bitcoin ripped through $5,000 for the first time last week it seemed that even the reporting US financial institutions were more preoccupied with addressing their FOMO than their actual earnings.
Marianne Lake, CFO of JPMorgan said they were “open minded” about exploring cryptocurrencies and Citigroup’s John Gerspach was excited to say they were taking an “intense” look at blockchain and crypto.
And of course Mike Novogratz, billionaire and former Fortress hedge fund manager announced a $500 million cryptocurrency fund, predicting the price of BTC will be $10,000 in “less than a year.”
Snoooooze.
On this side of the pond the situation isn’t all that much different either.
Asian markets are fully banking on a few more minutes of sleep ahead of thegreat twice a decade “meeting of the minds” that occurs in China, which starts this week.
This Thursday Oct. 18, over 2000 “chosen” delegates from China’s various provinces, military, and state-owned and private companies will make their pilgrimage to Beijing for the 19th National Congress of the Communist Party.
Since they only have to do this once every 5 years it gives them plenty of times to rehearse their lines and choreography.
What will likely ensue is a changing of the guards on a number of the lower ranks, but the only thing what everyone cares about is the the top 7 leaders of the venerable “Standing Committee”.
These seven men arguably wield penultimate power in China…and the candidates for the political “rerack” have all committed to a life of civil service in the hopes of landing one of the coveted top spots to help lead what will soon be the largest economy in the world.
Funnily enough, this politburo process reminds me a lot of what I’ve been told about the Goldman partnership process, in which ambitious bankers spend their entire careers trying to play the “long game” in hopes of gaining admittance to the hallowed Goldman partnership aka “The Promised Land.”
Sadly, many hopefuls squander years of their career chasing after this carrot…only to be disappointed when they get passed over for partner despite their decades of loyalty.
At least ex-Goldman employees can put their years of service on their resume.
The high stakes chess game of the China Politburo leaves little consolation prize for tactical errors at that level. (remember Bo Xilai?)
The markets have baked in the fact that President Xi Jinping will be “re-elected” to serve a second five year term.
Barring a long tail event of him NOT being re-elected, for global investors it looks like we’ll get another 15 minutes of shut eye.
Given the current frothy valuations, China certainly would not want to be blamed for a sell off at this point.
We’ve already established the fact that China will be calling in it’s “national team” to protect the tape (save face) to the world during this symbolic event.
They’ll just want to get through the next couple of weeks without too much volatility.
History tells us that both China and Hong Kong markets rally into National Congress week with the SHCOMP usually selling off as soon as the meetings begin and the HSI following suit in the weeks thereafter. (HSI -2.4% and SHCOMP -9.7% on average a month after the congress)
Short term traders should be mindful of the price action around this event.
And would be wise to remain cautious of any number of geopolitical or macro events which may cut this snoozefest short for a rude awakening in the markets.
