HiddenLevers War Room China Reckoning

1. China Reckoning
18 December 2019

2. War Room
Idea Generation
Macro Coaching
Scenario Updates
HiddenLevers runs on SCENARIOS like Instagram runs on PHOTOS

3. Scenarios in Play
sources: HiddenLevers
CURRENT TRANSITION
China Reckoning

4. PRE-ELECTION RALLY: Trump Toolkit
sources: HiddenLevers, MarketWatch, WSJ, Bloomberg, Mercury News, Washington Post
PRESSURE FED
BIPARTISANSHIPAPPROVE MORE VISAS
TRADE WAR VICTORY
- real deal
- optics win
- abandon
H1-Bs flat
since 2018
OPM

5. PRE-ELECTION RALLY: Trump Toolkit
sources: HiddenLevers, MarketWatch, WSJ, Bloomberg, Mercury News, Washington Post
PRESSURE FED
BIPARTISANSHIPAPPROVE MORE VISAS
TRADE WAR VICTORY
- real deal
- optics win
- abandon
H1-Bs flat
since 2018
OPM
UNLIKELY
WORKED IN 2019, NO MORE IN 2020
NAFTA REPLACEMENT
DEC SHUTDOWN AVERTED

6. CHINA RECKONING: Trade War Impact
sources: HiddenLevers, United Nations, Int’l Business Times, Bloomberg, Business Insider
TRADE WAR TIMELINE

7. CHINA RECKONING – Bigger Issues than Trade War
sources: HiddenLevers, Bank of Finland, Bank of International Settlements, Fox Business, CNBC
Growth near
US levels
China Corporate Debt-to-GDP
Manufacturing exodus driven by China
labor costs, not only trade war
China GDP Growth + Forecast
55% of Chinese pigs dead
pork crisis amplified trade war impact
Debt far exceeds
USA levels

8. CHINA RECKONING: Is De-globalization Working for US?
sources: HiddenLevers, CNBC / Nomura, Nikkei, US Census Bureau
WINNERS
Vietnam phones / furniture / data processors
Taiwan computers / phones
Chile copper / soybeans
Malaysia integrated circuits / semiconductors
Argentina agricultural commodities
LOSERS
China MANUFACTURING
CONSUMERS
USA AGRICULTURE
MANUFACTURING
CONSUMERS

9. New
Silk Road
BASELINE
GOOD
S&P 500
2550
-20%
S&P 500
3400
+7%
S&P 500
3350
+5%Manufacturing
Exodus
UGLY
China Recession
NEGATIVE GROWTH
CURRENTLY MASKED BY
GOVT SPENDING
CHINA CREATES ECONOMIC
ECO-SYSTEM WITH NO US
INVOLVEMENT
RELOCATION OF MNC
FACTORIES DUE TO RISING
LABOR COST +
TRADE FRICTION
CHINA RECKONING: Scenario Outcomes
China GDP
0%
(-6)
China GDP
+7.5%
(+1.2)
China GDP
+4.5%
(-1.5)
Shanghai
3650
+20%
Shanghai
2840
-6%
Shanghai
1800
-40%

10. China + EM
Rebound
BASELINE
GOOD
S&P 500
2550
-20%
S&P 500
3715
+16%
S&P 500
3360
+5%Low Rates Ease
US Pain
UGLY
China Recession
DEC 2019 TARIFFS MIGHT
HAVE TRIGGERED
CHINA CRASH AND
CHAIN REACTION
EM CODEPENDENCY
WORK BOTH WAYS
FED LOWERED RATES TO
1.5% WHICH JUICED
US ECONOMY
TRADE WAR: Scenario Outcomes
GDP
0.6%
(-1.4)
GDP
+3.1%
(+1.1)
GDP
+2.5%
(+0.4)
10y Bond
2.25%
10y Bond
2.0%
10y Bond
1.75%

11. CHINA RECKONING: What to Say
US halting DEC 2019 tariffs may have been
averting an economic Cuban Missile Crisis
Trump took optics victory due to US politics,
but could have gotten a better deal based on
US economic strength
China Recession risk outlives the trade war
Big winner in US-China trade war is Vietnam

12. HOUSING + IMMIGRATION
BOOMER EXODUS
POTUS ELECTION
2020 SCENARIOS