It’s this morning. I find myself munching on an egg and bacon roll. I’m standing in a primary school yard.
Little blue jumpers are running around with strawberries and paper cups of apple juice.
Yep…it’s the Father’s Day breakfast at my daughter’s school.
I get to talking with one of the other dads. We start talking about cars.
(At this point, I need to confess that I’m not a “car guy”. Never have been. Never will be. My dad took me to the Formula 1, once. Boring! Holden or Ford? I couldn’t care less. Admittedly, I just got a $400 speeding fine…for going 51 in a 40 zone. What the f…?)
Specifically, the other dad and I were talking about Chinese cars.
I don’t know about you, but we were both saying that we’re seeing more and more Chinese brands around on the road.
The AFR reports that nearly 20% of new car sales in August were Chinese car makers. Four Chinese brands are now in the top ten for sales.
That reminds me. I’ve driven one – in Spain. My father in law has a Chinese ride. Can’t remember the brand. It didn’t have much in the way of guts, but it got us from A to B, comfortably.
Earlier in the week we were chatting about how Apple’s biggest problem in China is that Chinese phones now (arguably, I suppose) have better tech and at lower cost.
China is doing the same thing in the car market.
In phones, the US has Apple. In electric cars, Tesla.
However, China has multiple, powerful brands bursting out of the pack on these fronts.
It’s very hard not to see China as “Japan 2.0”.
You might remember the days, about 40 years ago, when Japanese companies were plundering the globe for market share.
People assumed Japan was going to be the number one economy. The land around Tokyo palace was said to be worth more than the entire state of California.
It didn’t happen. But it looks like Chinese muscle is flexing in a similar way.
We just saw a big military parade in China, in fact. But China’s economic muscle is pretty scary these days too.
Arguably, China’s market is MORE capitalist than America’s. Competition is ruthless in China. There are less rules and regulations to hold back entrepreneurs, at least as I understand it.
I can’t say for certain, but I’m going to hazard a guess that “diversity” and gender aren’t a major preoccupation of the Chinese Communist Party, either.
Shit gets done in China, in other words.
In fact, one of the points in the book I mentioned earlier in the week (Apple in China) is that there’s something called “China speed”. It’s lightning fast. Then there’s the West.
Why mention all this?
Back in 2016, Fat Tail hosted an investment conference. The esteemed hedge fund legend Jim Rogers was a speaker.
One of his (few) slides was the 5 year plan (at the time) of the Chinese government. His point was that China tells you what they’re going to do.
What do we know, now?
China is going after the world auto market. Chinese brands may be viewed as lower premium now.
But markets in Latin America, Africa, the Middle East and Russia? They are there for the taking. These sales will no doubt fund the next assault – on the premium markets of the West.
How to participate in this?
One way is to consider Chinese stocks. That’s not my area of expertise. But it is an idea.
Another is Western suppliers that feed into the Chinese supply chain, if there are any, and on a public market.
A third is, of course, via the raw materials.
Not all Chinese cars are electric…but that’s their edge. They can use EVs to circumvent German and Japanese expertise in petrol engines.
As we’ve discussed this week, that puts the lithium supply lines into play. These are international – from Australia to South America.
So keep your eye on the roads when you’re driving. The more Chinese cars you see, the more bullish on lithium you should be getting.
And you can cash in – without going into the Chinese stock market to benefit from it.
There are plenty of lithium stocks right here at home.
Best Wishes,
Callum Newman,
Australian Small-Cap Investigator and Small-Cap Systems
***
Murray’s Chart of the Day –
Silver and Platinum
Source: TradingView
[Click to open in a new window]
As money flees from long-term bonds all over the world, precious metals are seeing another surge in buying interest.
It could be as simple as some of the money coming out of bonds looking for a home.
Or there is something more sinister going on behind the scenes.
If there is anything I have learned over decades watching markets, it is that someone always knows more than you.
When you look back after a crisis hits you can always see telltale signs, such as key markets making large moves in unison prior to the bad news hitting the wires.
That’s how it feels at the moment.
The 160 point plunge in the ASX 200 yesterday is noteworthy even if it is still too early to call a top in the current rally.
Silver and platinum look incredibly strong. After the recent breakout above key resistance levels, the buying momentum is increasing and there is the prospect of a solid uptrend taking shape over the next few months.
Gold is confirming the bullish posture for precious metals with a breakout to a new all-time high after four months of treading water.
If the breakout can hold we may even see gold flying higher.
It all depends on whether the smouldering problems beneath the surface of global long-term bonds sparks into a crisis or not.
Regards,
Murray Dawes,
Retirement Trader and International Stock Trader
Comments