Chasing the Next Destination for Mindless Surges: Taiwan or Hong Kong Stocks
It wouldn’t be an exaggeration to say that many Taiwanese or Hong Kongers will suddenly become wealthy and financially free by the end of the year for no apparent reason! Why? Because a black swan event has occurred. Japan, which owes countless money to the world, has surprisingly applied for a rate hike, essentially voluntarily paying a bit more to its creditors. Meanwhile, representatives of the Federal Reserve in the United States have also indicated that a rate cut isn’t far off.
Now, why does this concern Taiwanese and Hong Kongers? It’s because money will flow from Japan and the US to Taiwan and Hong Kong, reshuffling wealth once again.
During this period when the US is raising rates and Japan has rates in negative territory, both the US and Japanese stock markets continue to soar. The reason behind this is that savvy individuals worldwide understand that borrowing money from Japan and investing it in US stocks, or directly buying depreciating assets in Japan, is lucrative. Among those playing this game expertly is none other than the “Oracle of Omaha, Warren Buffett”.
Imagine this scenario: a Japanese person earns money through work, deposits it in a bank, and Buffett, with nearly zero interest rates, borrows it. With the borrowed money, Buffett acquires major Japanese conglomerates, which have long monopolized the daily lives of Japanese people. So essentially, if Buffett borrows $100 from you, he only needs to repay you a few cents in interest, and with your money, he becomes your boss by buying Japanese companies. The money you help the company earn ends up in his pocket. Thus, you’re essentially lending money to someone who becomes your ruler. So, during this period, not only Buffett but investors worldwide will borrow money at low costs from Japan, then use it to acquire depreciating assets in Japan or convert it to USD to invest in high-yield US bonds and stocks.
However, here’s the catch: if the story were to reverse now, with Japan borrowing money no longer at almost no cost and the US not necessarily returning it with high interest rates, would the US and Japanese stock markets collapse? And before that happens, you’ll notice that Warren Buffett, in his 90s, has already accumulated a vast amount of cash in his company, the most in 60 years. What does this signify? It seems like Buffett might be preparing to move his money elsewhere. When the US lowers rates and Japan raises them, money from all over the world will flow into Hong Kong and Taiwan. So, will the Taiwanese and Hong Kong stock markets soar this time? Is it really going to happen this way?
Why do many financial tycoons like Buffett suddenly hold so much cash? It’s not because they intend to flee or because they fear impending danger and need emergency funds. Instead, they are preparing to harvest elsewhere. So, who exactly do American capitalists want to harvest?
The following are just assumptions: What happened in 2018? The US-China trade war, right? How was this trade war waged? It wasn’t just one side firing bullets; it was more nuanced. The first thing the US did was force Chinese stocks to delist from US exchanges and then prohibit US money from investing in Hong Kong, leading to a significant withdrawal of US capital from Hong Kong. Then came the tariffs, making it difficult to sell Chinese-manufactured goods, many of which were exported through Hong Kong. As a result, business dwindled, and Hong Kong naturally suffered.
You’ll notice that since 2018, Hong Kong has faced numerous issues, from political unrest to immigration problems, and so on. Also, you’ll see that the stock markets of Japan and India seem to be continuously pushed upwards, only knowing how to rise, not fall. Consequently, much of Hong Kong’s money has flowed into Japan and India.
So here’s the question: When people who spend money in Hong Kong leave, business exports decrease, and investment money moves to other markets, resulting in reduced government revenue and spending, what ordinary people are concerned about is economic downturn. Meanwhile, what we capitalists are focused on is how to short-sell assets in Hong Kong.
The simplest example is the Hang Seng Index! From 2018 to the present, Hong Kong’s Hang Seng Index, which represents the overall stock market, has plummeted by 56%. Many people like to hold stocks for the long term, but how can you hold onto them when you’re losing money?
Consider this: if you had $1 million, in six years you would have lost $560,000! That’s an average loss of around $100,000 per year. The money that Hong Kongers have lost won’t just vanish into thin air; if someone loses money, someone else is surely making money, right? So where did this money go? If those betting on rising stocks are losing money, then those making money must be the ones betting on falling stocks, i.e., short sellers.
So, if you’re an American capitalist or part of a wealthy family, and you know your country is gearing up to suppress and sanction China, and you know asset prices will plummet, but it’s not easy to move Chinese funds in or out, where would you short-sell? Hong Kong, of course.
That’s why many capitalists are saying that Hong Kong is now just a relic of its former self as an international financial center. Do you think these capitalists will stop at this point? Will they start pulling back? No, the most ruthless move is to aggressively raise interest rates!
As mentioned earlier, when the Federal Reserve raises rates, money from all over the world flows into the US because lending money to the US yields high interest. So, when everyone rushes to exchange for USD, the dollar appreciates. When people have no money left to spend or invest, the assets in that area devalue. At this point, American capitalists can use their appreciated USD cash to buy depreciated assets in other countries. Before, $100 million could only buy one piece of land; now it can buy two.
The most brutal aspect of raising rates is triggering a real estate market collapse in mainland China because mainland developers, like Evergrande, have borrowed a lot of USD loans. So, when the US raises rates, previously owing $10 billion, they only needed to repay RMB 65 billion; now, with the USD appreciating, these developers need RMB 73 billion to repay their debts.
So, what American capitalists truly want to do is to topple Hong Kong’s stock and financial markets, then transmit the risk to mainland China. Ultimately, their goal is to force mainland China to compromise, necessitating the introduction of external funds to rescue the economy, and then being forced to open up its financial markets. Once China does this, USD can freely flow in.
So, just as mentioned earlier, the purpose of raising interest rates is to strengthen the US dollar while devaluing assets in other countries. That’s why American financial magnates are now holding onto USD. Since the Federal Reserve has raised rates to the limit, the USD is now at its highest value. The next step they’re waiting for is for China to open up its financial markets. Then, they can use the USD they have at low cost to acquire high-quality assets in mainland China at bargain prices. Once acquired, they can continue printing money as before, inflating the prices of the assets they hold.
Doesn’t this sound a bit like what happened in Thailand and Japan back in the day? This is what’s known as “shearing the sheep.” They use printed USD to exchange for high-quality assets elsewhere, thereby manipulating and influencing a region from behind the scenes. This is the financial offensive launched by American capitalists.
But will China allow them to succeed? In the 250 years since the founding of the United States, the world owes the US $32 trillion. However, in the past six months alone, the interest rate hikes have added another $2 trillion to the US debt. They don’t even have enough to cover the interest because their rates are inverted, and several banks have already collapsed.
What does this mean? Simply put, if you borrow $1 million from a bank at an interest rate of 4%, and then deposit that $1 million back into the same bank, the bank will give you a 5% interest rate on your savings. As long as you keep borrowing and depositing like this, making a 1% profit each time, you can profit without investing anything.
How do banks make money? By lending out your deposits and pocketing the interest difference. Now, with interest rates inverted, banks’ costs increase. Already, second-tier banks can’t hold on, and if first-tier banks collapse, it could trigger a global financial crisis like Lehman Brothers did.
So, what the US is worried about now is not only failing to harvest China after raising rates but also blowing up themselves. What can they do? First, they’ll pacify those medium and small banks, telling them they’ll soon be lowering rates, but don’t just listen to what they say; watch what they do.
In reality, even if they don’t raise rates anymore, they’ll maintain a high-interest rate environment because they haven’t yet defeated China. So, they need to up the ante, using their secret weapon to get Japan to raise rates too. You see, much of Japan’s money has already been borrowed by Southeast Asian countries like Thailand, Malaysia, and Vietnam. Now, with rate hikes, their borrowing costs increase, and they’ll need to find ways to repay Japan. This could severely impact Southeast Asian economies.
And where does China export most of its goods? Southeast Asia. So, when money becomes scarce in Southeast Asia, they’ll naturally reduce their purchases from China, potentially affecting China’s economy. But Japan owes even more debt than the US. It’s impossible for them to raise rates. So, why did Japan still raise rates? Why has Japan been in a slump for 30 years?
Someone knows the answer, you can leave a message.
After Japan raises rates, there are only two outcomes: either they successfully team up with the US to defeat China — everyone knows China’s electric cars are formidable and could even replace traditional cars’ engines in the future, maybe even brands like Porsche or Ferrari.
A significant portion of Japan’s earnings comes from selling cars. So, they have the opportunity to challenge China’s middle and high-end industries. But what if they fail? Many of Japan’s asset prices have actually been inflated by American capitalists. Real estate and the stock market have skyrocketed, and a large portion of these assets were bought up by Buffett and other American capitalists years ago when they hit rock bottom. Now, with prices so high, if there are problems in the US later and they need money, they can just sell at these high levels.
These are the stories behind the whole game, but what we’re really concerned about is not who wins and who loses, but what major trends emerge after this win or loss and what opportunities arise that could actually be more profitable?
Recently, I went to the bank for some business and overheard someone who seemed like a fund manager persuading a client. He was telling them how the US stock market is performing exceptionally well and went on to talk about the promising future of investing in stocks. Eventually, he successfully convinced the person to invest money into his product.
I found it perplexing because in our area, where there’s a fast-track channel, the person being persuaded likely has substantial assets. Yet, they exposed their money to such high-risk ventures without exercising any discernment. Based on my judgment, they’re probably only focused on doing business and have no knowledge about investments.
What I want to say is, if you buy stocks in the US or Japanese stock markets when they’re nearing the end of a bull market, even if the company you invest in is excellent, you’re likely to buy at the peak and end up trapped or even lose your entire fortune.
Choice outweighs effort. Some people mindlessly invest in some terrible Hong Kong and Taiwanese stocks. However, both markets may be entering a bull market, and many lousy stocks suddenly skyrocket, turning these mindless investors into wealthy individuals, especially now.
So, how should we position ourselves in the stock market in the future? As mentioned earlier, many American capitalists are already holding cash, ready to move to other places. When will they start? Not now. Even though Japan is raising interest rates, it’s only by a small margin. The gap between Japanese and American interest rates is still significant, so there won’t be a significant influx of funds from the US to Japan for the time being. So, in the end, it depends on who can’t hold out — will China open its financial markets first, or will the US cut interest rates first?
But one thing is certain: the US will eventually cut interest rates. Even if China doesn’t open its financial markets, much of the money held in banks or in the US will flow into two relatively prominent markets.
When the Taiwan stock market rises, the US dollar weakens, making the US dollar less valuable. When the Taiwan stock market falls, the US dollar strengthens, making the US dollar more valuable. Their relationship is entirely opposite. With the expectation that the US has reached the peak of interest rate hikes and may soon start cutting rates, the US dollar has been weakening during this period. So, the Taiwan stock market has been rising, possibly even breaking its previous high.
So, what will happen when the US officially announces a rate cut? The US dollar is likely to weaken further, so what will happen to the Taiwan stock market? Thus, the Taiwan stock market has already entered a bull market and might just be in the preliminary stages or the early stages, full of numerous opportunities to make money!
As for Hong Kong, the pattern is similar. When the US dollar weakens, Hong Kong stocks strengthen, and when the US dollar strengthens, Hong Kong stocks weaken. However, the difference is that Hong Kong stocks are being pursued by American capitalists. Although Hong Kong stocks may rebound when the US dollar weakens, the overall trend is long-term decline, in a bear market state. In other words, the stock markets in Taiwan and Hong Kong currently lean more towards positioning in Taiwan’s stock market.
Why do I focus on the markets in these two places? A significant reason is political, but I won’t delve into that too much. I just want to say that this time, the Federal Reserve’s interest rate hike, and the ultimate goal of this financial warfare, is China. And to attack China’s financial markets, is there really any other way?
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