China China China.

Regaining the centerfold in the finance news is the Chinese US on again off again cold war.  This is not a new story, in fact it was the go to narrative for stocks in 2018.  In 2018, the on again off again trade war caused anxiety for momentum traders and ample opportunity for volatility traders.  That trade war has not been resolved, and we are now at a different stage.  China cracking down on companies listed on western exchanges is the latest escalation in hostilities.

“Roach, who is considered one of the world’s leading experts on Asia, believes the actions are signaling the early stages of a cold war.”

“I am a congenital optimist when it comes to China. But I find these actions really quite disturbing,” the former Morgan Stanley Asia chairman told CNBC’s “Trading Nation” on Friday. “China is going after the core of its new entrepreneurial driven economy, and it’s going after their business models.”

I am an optimist about capitalism.

As a capitalist, I believe that freedom of opportunity drives innovation and advancement in all aspects of society.  China, who for decades had been allowing its citizens some of this freedom, had benefited greatly from it.  So, I also find this crackdown troubling.  I see it as an own goal by China.  China has 1.4 billion individuals who when given economic freedom and freedom of thought, and most important freedom to innovate and be different, will account for their greatest advantage in the future if they choose to allow their people to be free.  Instead if they limit the innovation to the imagination of the comparatively small communist party loyalists they will never be able to match the innovations happening in countries with smaller democratic populations.

What Next?

China cold war is is not a new story, and not a reason to sell everything and wait for economic melt down.  If a true cold war happens, there will be major shifts in the supply chain causing major disturbances in economic markets.  Production will shift from China to other labor intensive countries.     Every advisor needs to have a well diversified portfolio, allocation to assets that will limit the carnage, and negatively correlated assets, if a trade war escalates into something worse than 2018.

Disturbing actions by China signal cold war, Stephen Roach warns (

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