Yesterday, I wrote with acquiescence, a sense of release from the notion that I have to analyze a market bent on behaving like a petulant child. In that writing, I echoed a sentiment prevalent in many of my columns and found in the common wisdom of the market – confidence is key to any economic rebound, and, thus, to any upturn in the current market trend. A reader found a different nugget in the writing, one I would like to share with you now.
Ah, what happened to the misplaced optimism that you have constantly pounded as an important part of your market view? Are you ready to admit that the bears have won?
My first response is bravo. Taking the bull by the horns is one way to throw it down. The reader clearly came right at me, and I like that. But even though the bulls are on the ropes, here, I am not giving up on ultimate victory. I have two reasons for this. The first is inspiration from a famous American athlete and the second is the pragmatic nature of the Chinese culture.
Some thirty-five years ago, Muhammad Ali fought his way back to a fight with George Foreman, the undefeated and incredibly dangerous heavyweight champion. In that fight, not many gave the aging and less powerful Ali much of a chance. Long story short, Foreman pounded and punished Ali on the ropes for eight rounds, and then, boom. Ali came off the ropes to knock Foreman out.
This week, Vice President Biden visited China to assure them about their ownership of U.S. debt. Here is some of what their pragmatic thinking is …
“The U.S. economy is highly resilient and has a strong capacity for self-repair,” said Xi [Chinese Vice President]. “We believe that the U.S. economy will achieve even better development as it rises to challenges.”
This thinking is not wishful. The U.S. economy has shown a remarkable capacity to come off the ropes and turn the whole fight around. And in that move, the U.S. has, historically, quantitatively and qualitatively improved the economy and the lives of American citizens.
Xi reiterated the need for China the United States to work together to restore confidence in international markets, adding that “confidence is more precious than gold.”
Well, ain’t that the truth. Regaining confidence could well be the move that gets the bulls off the ropes, and it could well supply the energy behind the punch that turns the whole fight around. What makes me even more confident is the two most powerful economies in the ring understand that one knocking out the other is not an option.
Dong Xian’an, chief economist of Peking First Advisory in Beijing, said, “China and the United States are walking through this crisis together. If one loses, the other will, too,” Dong said.
Trade in the day – Invest in your life …
