Author | Xie Xiaobai
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The two most shocking news today, one comes from British Prime Minister Johnson officially announced his resignation as the leader of Conservative Party , and the other comes from Sri Lanka Prime Minister "Bankruptcy" .
The former one is hotly discussed, but the latter one is rarely mentioned.
In fact, there is a common background behind these two messages- continued high inflation.
But we have all ignored a more cruel reality, the harm caused by high inflation. The most injured people are often the most innocent people - they are the poorest people in the world and those who have not been born yet.
Why do you say that?
In fact, there are many such examples around us. You must have heard the saying "increasing prices will reduce the population" .
Just yesterday, someone finally stood up and said that he "has fallen into the low fertility trap."
Although urbanization will definitely bring about a decline in the birth rate, the number of births dropped by 40% from 2017 to 2021 (17.23 million to 10.62 million). Such a dramatic decline cannot be explained by common sense.
Behind this, it is not the direct result of one or a few isolated factors, but the joint effect of the entire social chain on multiple mutually embedded links, coupled with the background of inflation, the joint effect allows everyone to spontaneously act. Choose the “optimal solution”.
You may say, we didn’t have inflation in the past?
is wrong. In the past, our inflation was mainly reflected in "house prices", so prices were relatively stable.
However, the high housing prices have not spawned more high value-added industries, but have significantly increased the cost of living, such as:
The social costs of meeting the opposite sex, emotional risks, marriage costs and the energy to bring together the families of both parties, and living together. Changes in personal life, settlement housing prices and mortgages, childbearing costs, parenting expenses and family support, career planning after the increase in rigid expenses, etc.
Behind every thought, there are probably several small and sad stories that happened around us:
Little A bought a house for a wedding loan, so he became a grandson in the company;
Big B’s parents did not deal with it;
C After my brother got married, the money he spent to buy games turned into diapers. The most relaxing time every day was smoking in the underground garage;
A D would have to be physically and mentally exhausted after giving birth to a child;
Old E is still complaining that getting married is It was a mistake to get married, and it was a big mistake to have a baby. What on earth was the school district going to do?
......
With all the current difficulties, coupled with the difficulty of finding employment in the context of inflation, every individual has a sense of powerlessness and weakness.
Of course, we are not the only ones who have this problem. Inflation is the straw that breaks the camel's back, and this is true all over the world.
It is just a big country that has savings and can still carry it. Small and weak countries have already declared to "lie down on the spot".
Going back to the first piece of news, why did British Prime Minister Johnson resign at this time?
Many media outlets have used a lot of words to describe Johnson as an incompetent and willful guy, but they have not mentioned the "bad economic situation."
I think the main reason for Johnson's resignation is that he failed to control the inflation situation, but continued to manage people's "anti-inflation expectations", trying to prolong the cycle of interest rate hikes as much as possible to allow the economy to land smoothly.
But what I didn’t expect was that inflation remained high, people’s lives became increasingly difficult, and the old tricks could not fool the aborigines.
The upper-class elites are also doomed. The financial market has dropped by two or three levels, but inflation is still that high.
In the end, it was difficult to escape the betrayal of the people. The fundamental reason is that it not only wants the satisfaction of the common people, but also the satisfaction of the upper class, and also needs empty accounts for inflation, but it underestimates the seriousness of inflation.
Especially Johnson overestimated the UK and underestimated inflation!
You must know that for ordinary countries to digest inflation, there is only one way, internal control! Unless it has a common currency like the United States, it can export inflation.
At this time, let’s look at the unlucky Johnson. He neither wants to offend the powerful nor suffer the people. Isn’t it the best ending to pack up and leave?
Sri Lanka on the other side is not so lucky. Although they are now starting "unprecedented regulation" , the Prime Minister of Sri Lanka said "The government's goal is to stop printing rupees to curb inflation. "
But it is already too late, According to reports, Sri Lanka, with a population of about 22 million, currently has almost no gasoline across the country, and the government has shut down non-essential public services to save fuel.
Supporters and opponents of Sri Lanka's ruling party run as riot police fire tear gas.
Image source: Sky News
According to the BBC report, UNICEF pointed out that Sri Lanka is on the verge of a humanitarian crisis.
Since the beginning of this year, 70% of local families have not been able to afford three meals a day, and stocks of fuel and basic medical supplies have been rapidly depleted. In June alone, food prices in Sri Lanka soared by 80%, and countless people are fleeing.
It is foreseeable that the crazy holiday of is coming! It will come too!
Historical data shows that whenever an interest rate hike cycle enters, the global financial market will be violently turbulent, and most of the time it will plummet.
So the question is, can we be alone in ? How can we avoid risks?
01
What will be the impact of the Fed's interest rate hike ?
The current interest rate target in the United States is 1.5-1.75, which means that in the next six months, it will be raised by a cumulative 150-200 basis points. If we continue to raise interest rates aggressively, it will only take two 75 basis points to complete.
But at the hearing yesterday, the Federal Reserve said that the interest rate cut in July may be 50 basis points or 75 basis points.
The mainstream expectation has been 75 basis points before. Now there is an additional possibility, which is obviously better than expected. On the one hand, grain price futures have fallen; on the other hand, oil prices have plummeted, and inflationary pressure has declined.
But we must know that whether we raise interest rates aggressively or slowly, the side effects will be very serious.
Side Effect 1: Increase business costs, which may lead to the collapse of a large number of businesses
The essence of interest rate hikes is to increase deposit interest rates, and loan interest rates will also increase simultaneously.
Contemporary enterprises are almost all operated with debt. Companies such as real estate, banks, and airlines have higher debt ratios. Every time bank interest rates increase by one point, the financing costs of enterprises will increase a lot.
It is already difficult for businesses to operate at the moment. A direct increase in interest rates may crush businesses. Too many business closures will lead to massive unemployment.
But employment and inflation are destined to be the lesser of two! Someone is always going to get hurt!
is not a company, but an ordinary worker.
Therefore, we can see the radical and fanatical enthusiasm for public examinations in recent years.
Side Effect Two: Financial Market Collapse
The trend of financial markets is generally related to the risk-free interest rate.
When market interest rates are low, people have low capital costs and are more inclined to invest in high-risk products, such as stocks, futures or corporate bonds;
When risk-free interest rates are high, many corporate returns are not as good as treasury bonds. Funds will withdraw from the stock and bond markets.
It is foreseeable that throughout 2022, the stock and bond markets in Europe and the United States will fall into a sustained bear market.
Side effect three: The collapse of a small country like Sri Lanka
Because the US dollar is a common currency, many countries choose to fix exchange rates, so the US raises interest rates, and they must raise interest rates, such as the Hong Kong dollar.
Soros’s sniper suppression was taking advantage of the tidal effect of the Federal Reserve’s interest rate hikes.
If the Federal Reserve continues to raise interest rates on a large scale, there will definitely be a financial crisis in some countries, and the exchange rate collapse will only happen overnight.
We will witness many historical events in the second half of the year:
Today this country will raise interest rates by 300 basis points, tomorrow that country's inflation will be 200%, and the day after tomorrow several countries will go bankrupt.
The most interesting thing now is that even Europe is being targeted by the trillion-dollar short-selling giant Bridgewater Fund .
Now the exchange rate of the euro against the US dollar has fallen to the level of 20 years ago. If the exchange rate of the euro suddenly explodes, it is not impossible! How much influence does
02
have on us? It is impossible to say that
has no impact, but what is awesome about us is that we dare to "decouple" .
play your own game.
For example, the recent independent market trend of our A shares is an example.
The bigger variable is that the RMB exchange rate and northbound funds will be affected.
For example: the recent State Administration of Foreign Exchange announced that the foreign exchange reserves fell by 1.81%, reflecting the problem of capital outflows and weakening exports.
But specific issues need to be analyzed in detail. After all, capital is profit-seeking. For example, if the US interest rate is 3% and inflation is 8%, then there is no point in leaving.
In other words, when small countries are overwhelmed by the tidal effect of the US dollar, China still insists on cutting interest rates despite the wave of interest rate hikes. As long as there is no large-scale epidemic, then we can be sure that the main theme of Big A and the economy is - Shock and upward !
After all, we need such a large amount of funds, and we will find that companies with good tracks and decent performance have recently begun to raise large amounts of financing.
For example: Today, the results of the private placement of Azure Lithium Core were released. The issuance price of this non-public offering of stocks was 21.51 yuan per share, and the total funds raised were 2.5 billion yuan.
03
How should we respond?
We need to make a rough judgment, What is our inflation level? What opportunities are there? What are the risks?
The answer is that China's inflation is not high at present, but ppi (producer index) has always been very high. Prices are a transmission chain. A large price increase in upstream goods will inevitably lead to an increase in the price of downstream goods.
Domestic downstream inflationary pressure will definitely come, sooner or later!
Based on this, the daily necessities track will deserve our focus.
Because the impact of price increases on demand for this type of commodity is not obvious, no matter how bad the economy is, seasoning and milk are still needed, and often, when commodity prices are raised, there will be a rising tide. Currently, these stocks are all at the bottom of history. There is no rebound at all. The only problem is that the holding period is relatively long.
Another focus I think is the financial sector.
The financial sector has always been the ballast of our market. We will find that it has not performed well in this round of structural rebound.
Perhaps they will be the final nail in the coffin.
In addition, there are many policy incentives, such as automobiles, new energy, etc.
We need to have a clear understanding that these directions of are not bad, but have risen too high, and expectations have been fully met.
The risks of entering now far outweigh the benefits.
I have this experience. Whatever advocates, don’t do it.
Because it is really a good thing, there is no need to advocate it, everyone will rush to do it; if it is not advocated, you must try to do it, because if you do it, it is not necessarily a bad thing.
There is a term in economics called acting against the economic direction, which roughly means this.
is written at the end, In fact, the economic recession and consumption downgrade have become a consensus.
went camping with the owners of the community a few days ago.
a barbecue grill , a week of leisure life.
The older brother in a vest laughed at himself: In the past, I ate meat and drank wine, but now I drink wind and bake loneliness.
Finally, I hope you will like and follow me so that we will not get lost on the road of investment.
