Raphael Stevens

When china’s Politburo, the 25-member committee that oversees the Communist Party, met this time last year to ponder the economy, China’s rulers seemed quite confident. Their annual growth target was in easy reach and they were keen to crack down further on the country’s overstretched property developers. As The Economist went to press, the Politburo was preparing to meet again. But the economy looks quite different. China’s attempts to stamp out any outbreak of covid-19 have crippled manufacturing intermittently, and consumption more persistently. Distressed developers have stopped working on pre-sold flats—and aggrieved homebuyers have refused to pay their mortgages until construction resumes.This has put China’s rulers in a pickle. They seem determined to stick to their zero-covid policy. And they would no doubt love to cling to their official gdp growth target of “around 5.5%”. But it has become clear they cannot do both. Unless, of course, they fiddle the growth figures.That is not beyond them. But there is so far little sign of it. The most recent data showed that the economy grew by only 0.4% in the second quarter, compared with a year earlier. This was not only bad, but worse than expected by private forecasters. In a large teleconference in May, Li Keqiang, China’s prime minister, urged local officials to do more for the economy. But he also cautioned them to seek truth from facts, abiding by statistical regulations.When he was himself a local official in the north-eastern province of Liaoning, Mr Li sought the truth about the provincial economy from three facts in particular: the electricity it consumed, the cargo travelling on its railways and the amount of loans disbursed by its banks. These indicators, he felt, were more reliable than the official gdp figures. In a similar spirit, John Fernald, Eric Hsu and Mark Spiegel of the Federal Reserve Bank of San Francisco have shown that a judicious combination of eight alternative indicators (including electricity consumption, rail cargo, retail sales and consumer expectations) does a reasonably good job of tracking China’s economic ups and downs. Seven of these indicators (all except consumer confidence) have already been updated for the three months from April to June. They can therefore be used to cross-check the latest official growth figure.The chart shows our attempt to do that, using much the same method as Mr Fernald and his co-authors. Our calculation is not designed to show if China has systematically overstated gdp growth over the past two decades. But it can detect if reported growth is nearer its underlying trend than it should be, given how far the other seven indicators have strayed from their own usual trajectories. The awful data on retail sales and construction in the second quarter were, for example, far outside the norm. But these shocking figures were partly offset by respectable numbers for rail freight and exports.In all, these indicators suggest the official growth measure was honest. (They would be consistent with gdp growth that is, if anything, a little higher than the 0.4% reported.) Our approach cannot reveal every kind of statistical skulduggery, but it does suggest China made no extra effort to fudge the figures in the second quarter, despite the unusual ugliness of the time. China’s rulers want to fight the downturn, the virus and doubts about their country’s data. They are doing a better job on the last two counts than on the first. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

It is telling that one of the best books about financial markets was published almost a century ago. “Reminiscences of a Stock Operator”, by Edwin Lefevre, is a fictionalised account of the exploits of Jesse Livermore, a speculator. Livermore made a fortune selling the market short during the financial panic of 1907. He would repeat the trick in 1929. The book captures a particular time—of bucket shops, insider pools and dandy tips on Western Union or American Steel. But it is also timeless.As this writer finishes a four-year stint as Buttonwood, the one tentative conclusion he draws from the experience is something that Livermore realised a century ago: there is nothing new on Wall Street. What happens today in the markets has happened before and will happen again. Every extreme of greed or fear has a precedent. Technology changes, but people do not.The beginning for this Buttonwood was May 2018. At the time there was a good deal of optimism among American and European asset managers about business prospects in China. There was much talk about its “Wild West” stockmarket—with lots of retail trading on tips and a rapid turnover of shares. Rich-world entrants fancied they would add a dash of professionalism. But instead of China’s market becoming more American, the reverse happened. In 2020 there was a surge in new accounts at no-fee brokers, notably Robinhood, catering to small investors in America. A gaggle of social-media pundits emerged to mobilise this new army of speculators. They piled into tech darlings, such as Tesla, but also bombed-out stocks, such as GameStop, a video-games retailer. This “meme-stock” craze seemed new, but it wasn’t. What it most resembled was the bucket shops of early-20th-century America, where Livermore first learned to read the markets. Here ordinary punters exchanged tips and could bet on the direction of favoured stocks for a tiny initial outlay. The Robinhood crowd, though they had better technology, had similar preferences. They were keen on call options on stocks that had the characteristics of long-odds bets. As with bucket-shop punts, these options mostly expire worthless, but can reap a spectacular profit if the share price surges.Manias, scams and iffy schemes are recurring evils. “I used to think that people were more gullible in the 1860s and 1870s than the 1900s,” says the narrator of “Reminiscences”. But Livermore only had to pick up his newspaper to read about the latest Ponzi scheme or crooked broker. More recently, there has been the Wirecard fraud, the Archegos blow-up, the shell-company boom and any number of dodgy digital currencies. This year has so far been a rejoinder to such excesses. As Livermore knew well, tighter money and a giddy stockmarket are a dangerous mix. His big short in 1907 was in response to signals from the money markets, which were “megaphoning warnings to the entire world”. But they were not the only warnings he ever heard. In the world of “Reminiscences”, bull markets are marked by the “calamity howling” of “old-stagers [who] said everybody—except themselves—had gone crazy”. Doom-mongers are forever with us. Indeed, there is a kind of punditry that echoes the millenarian sects of medieval Europe, the adherents of which believed they were living in the “last days”. It anticipates an endgame in which all excesses will be washed from the markets. Perhaps such a reckoning is already in train. But it cannot be the endgame, because the game never ends. If history is anything to go by, a big bust would merely set the stage for another phase of play. Injuries heal with time. Memories of the last brutal bear market eventually fade. The unceasing contest between fear and greed resumes. The thoughtful investor has a lot to reckon with, and that won’t change either. There are constant judgments to be made about company managers, business strategy, economic policy, politics and geopolitics—as well as the opinions and likely reactions of other investors, who may or may not be as thoughtful.And as Livermore knew well, any investor has also to fight the “expensive enemies within himself”. This endless wrestling with powerful emotions, such as hope, doubt and fear, is a big part of what makes Wall Street so fascinating. It has been a great privilege to watch the unfolding drama from this perch and to try to make sense of it all. The honour now passes to others. Thank you so much for reading. Read more from Buttonwood, our columnist on financial markets:The Fed put morphs into a Fed call (Jul 23rd)Why markets really are less certain than they used to be (Jul 14th)Crypto’s last man standing (Jul 9th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Self-driving tech start-up Pony.ai announced Thursday it plans to mass produce autonomous driving trucks in China with equipment manufacturing giant Sany Heavy Industry.
Small-scale deliveries are set to begin this year and next, with mass production set to start in 2024, according to a release.
Companies from Daimler to Walmart are testing self-driving trucks.

Self-driving tech start-up Pony.ai announced Thursday it plans to mass produce autonomous driving trucks with equipment manufacturing giant Sany Heavy Industry.

BEIJING — Self-driving tech start-up Pony.ai announced Thursday it plans to mass produce autonomous driving trucks in China with equipment manufacturing giant Sany Heavy Industry.
Annual production is set to reach about 10,000 trucks “within a few years,” according to a press release. Small-scale deliveries are set to begin this year and next, with mass production due to start in 2024.

The trucks are slated to come with “Level 4” autonomous driving technology, which would allow full self-driving on highways and urban roads, according to Pony.ai. “L4” is part of an industry classification system that designates full self-driving under specific conditions.
Under current rules in China, the robotrucks won’t be able to operate fully autonomously.
Pony.ai said it only has testing permits in Beijing and Guangzhou for autonomous trucks. But the company said it expects to operate L4 trucks in China as regulations develop.
Pony.ai’s autonomous driving system uses the Nvidia Drive Orin chip, similar to several Chinese electric car companies that offer drivers assisted-driving technology.

Some, but not all, of the planned trucks will be “new energy vehicles,” a category that includes electric vehicles.

Pony.ai declined Thursday to share additional information about cost per truck and whether the trucks would only be available in China.
Sany has offices globally, while Pony.ai also operates in the U.S. The robotruck mass production deal is part of a strategic joint venture between Pony.ai and Sany Heavy Truck, a Sany subsidiary.
Analysts generally expect robotrucks to take off more quickly than robotaxis due to the more uniform nature of truck routes along highways. Daily truck drives typically last for hours versus far shorter taxi rides.

Read more about electric vehicles from CNBC Pro

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Morgan Stanley’s Mike Wilson believes stocks are on a collision course with more pain due to the economic slowdown.
The firm’s chief U.S. equity strategist and chief investment officer said on CNBC’s “Fast Money” that investors should resist putting their money to work in stocks despite the market’s post-Fed-decision jump.

Morgan Stanley is urging investors to resist putting their money to work in stocks despite the market’s post-Fed-decision jump.
Mike Wilson, the firm’s chief U.S. equity strategist and chief investment officer, said he believes Wall Street’s excitement over the idea that interest rate hikes may slow sooner than expected is premature and problematic.

“The market always rallies once the Fed stops hiking until the recession begins. … [But] it’s unlikely there’s going to be much of a gap this time between the end of the Fed hiking campaign and the recession,” he told CNBC’s “Fast Money” on Wednesday. “Ultimately, this will be a trap.”
According to Wilson, the most pressing issues are the effect the economic slowdown will have on corporate earnings and the risk of Fed over-tightening.
“The market has been a bit stronger than you would have thought given the growth signals have been consistently negative,” he said. “Even the bond market is now starting to buy into the fact that the Fed is probably going to go too far and drive us into recession.”

‘Close to the end’

Wilson has a 3,900 year-end price target on the S&P 500, one of the lowest on Wall Street. That implies a 3% dip from Wednesday’s close and a 19% drop from the index’s closing high hit in January.
His forecast also includes a call for the market to take another leg lower before getting to the year-end target. Wilson is bracing for the S&P to fall below 3,636, the 52-week low hit last month.

“We’re getting close to the end. I mean this bear market has been going on for a while,” Wilson said. “But the problem is it won’t quit, and we need to have that final move, and I don’t think the June low is the final move.”
Wilson believes the S&P 500 could fall as low as 3,000 in a 2022 recession scenario.
“It’s really important to frame every investment in terms of ‘What is your upside versus your downside,'” he said. “You’re taking a lot of risk here to achieve whatever is left on the table. And, to me, that’s not investing.”
Wilson considers himself conservatively positioned — noting he’s underweight stocks and likes defensive plays including health care, REITs, consumer staples and utilities. He also sees merits of holding extra cash and bonds at the moment.
And, he’s not in a rush to put money to work and has been “hanging out” until there are signs of a trough in stocks.
“We’re trying to give them [clients] a good risk-reward. Right now, the risk-reward, I would say, is about 10 to one negative,” Wilson said. “It’s just not great.”
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Stock futures moved slightly lower in overnight trading after markets staged a major rally on Wednesday following another 0.75 percentage point hike from the Federal Reserve.
Futures tied to the Dow Jones Industrial Average slipped 27 points, or 0.08%. S&P 500 futures lost 0.12% and Nasdaq 100 futures dropped 0.35%.

Shares of Meta Platforms dipped 3% in extended trading on the back of disappointing quarterly results while Ford gained more than 5% after a beat on the top and bottom lines, and as it raised its dividend. Teladoc’s stock cratered more than 22% after taking another large goodwill charge.
Following the rate hike from the Fed, DoubleLine Capital’s CEO Jeffrey Gundlach told CNBC’s “Closing Bell Overtime” he believes the central bank is no longer behind the curve on inflation and Powell has regained credibility.
“This market reaction seems less of a sugar high than the prior two in June and May,” Gundlach said.
The after-hours moves came after markets saw a broad-based rally during regular trading on Wednesday as the central bank hiked rates by another 75 basis points and investors continued to bet on whether the Fed can halt surging prices without pushing the economy into a recession.
All S&P 500 sectors ended the day higher, with communications services posting its best daily performance since April 2020.

During Wednesday’s regular trading session, the Dow gained 436.05 points, or 1.4%, the S&P 500 added 2.62% and the Nasdaq Composite closed 4.06% higher, boosted by shares of Alphabet and Microsoft.
“For the most part, what’s really driving this move is that the economy is still performing okay and it looks like the Fed is probably going to slow the pace of tightening down by the next policy meeting,” said Ed Moya, Oanda’s senior market analyst.
Investors have grown increasingly concerned in recent months that the central bank’s attempts to tame surging prices would move the economy closer to a recession, if it hasn’t already entered one.
Fed Chair Jerome Powell on Wednesday said during a press conference he does not believe the economy has entered a recession.
“I do not think the U.S. is currently in a recession and the reason is there are too many areas of the economy that are performing too well,” he said.
Investors looking for further clues into the state of the economy are awaiting a reading on second-quarter GDP slated for Thursday. While two back-to-back negative quarters of growth is viewed by many as a recession, the official definition is more nuanced, taking into account additional factors, according to the National Bureau of Economic Research.
Economists surveyed by Dow Jones expect the economy to have barely expanded last quarter after contracting 1.6% in the first.
On the earnings front, investors are looking ahead to results from Apple, Amazon, Intel and Comcast slated for Thursday.

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