January 31, 2024, 10:13 am EST
The Big Bursts
It takes time for a bubble to blow bigger and then burst. When it happens, its power would be massive and unpredictable.
Let’s take an example to explain. We reported China Evergrande Group on 09/14/2021. It was officially declared bankrupt yesterday. Liquidation started which means most investors will get pennies back from their investments.
This is not the end of the burst processing. We believe China-HongKong is also going through one of the largest bursting in recent decades. While the stock markets in US, Japan, India are reaching new highs, China Shanghai, Shenzhen, and Hang Seng indexes are reaching the multi-years lows. Of course, the Evergrande breakdown is not a standalone event. We believe the 20+ years of prosperity of China is over. We shall monitor it in real time.
Lastly, the 15 years of the bulls in the US stock markets with 814% gains (Dow Jones ETF DIA from March 2009 47 to 384 January 2024) is at the late stage as well. However, before the bubble bursts we see a crazy rally like we saw in the past 3 months (November 2023, January 2024) in which major indexes advanced more than 20%.
The bursting process would not limit to the financial markets, in our opinion. The change of the global dynamics is spreading out in the forms of wars, inflation, and domestic confrontations. Therefore, it would be important to keep this in mind so that each individual could adjust investment strategy and portfolio setting properly.
We tend to believe that many rare events could rise during this period of the year of 2024. Since nobody would know what these things are, we take conservative approach by staying more cashes and less exposure to the stock markets.