The 4th Superbubble.

Trump leads Biden, 46-40.

1. Chinese authorities are considering a proposal to dismantle China Evergrande Group by selling the bulk of its assets, according to people familiar with the matter. The restructuring proposal, submitted to Beijing by officials in Evergrande’s home province of Guangdong, calls for the developer to sell most assets except for its separately listed property management and electric vehicle units, the people said, asking not to be identified discussing a private matter. A group led by China Cinda Asset Management, a state-owned bad debt manager and major Evergrande creditor, would take over any unsold property assets, the people said. If approved by senior officials in Beijing, the plan would mark the biggest step yet by Xi Jinping’s government to prevent a disorderly collapse of the world’s most indebted developer from roiling China’s financial markets and economy before a closely watched Communist Party leadership transition later this year. Source: bloomberg.com)

2. China Minsheng Banking Corp., the country’s largest privately owned bank by assets, is likely going through its coldest winter ever. The Shanghai- and Hong Kong-listed lender is a major casualty of China’s property downturn. Minsheng is one of the largest creditors of debt-ridden China Evergrande Group, and it also lent tens of billions of yuan to other risky developers, sources with knowledge of the issue told Caixin. Some industry insiders say the bank will likely struggle to collect these debts, some of which could soon turn irreparably sour. (Source: caixinglobal.com)

3. The Federal Reserve signaled it would begin steadily raising interest rates in mid-March, its latest step toward removing stimulus to bring down inflation. Fed Chairman Jerome Powell said Wednesday that the central bank was ready to raise rates at its March 15-16 meeting and could continue to lift them faster than it did during the past decade. “This is going to be a year in which we move steadily away from the very highly accommodative monetary policy that we put in place to deal with the economic effects of the pandemic,” he said. (Source: wsj.com)

4. Jeremy Grantham: All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average. Today in the U.S. we are in the fourth superbubble of the last hundred years. Previous equity superbubbles had a series of distinct features that individually are rare and collectively are unique to these events. In each case, these shared characteristics have already occurred in this cycle. The penultimate feature of these superbubbles was an acceleration in the rate of price advance to two or three times the average speed of the full bull market. In this cycle, the acceleration occurred in 2020 and ended in February 2021, during which time the NASDAQ rose 58% measured from the end of 2019 (and an astonishing 105% from the Covid-19 low!). The final feature of the great superbubbles has been a sustained narrowing of the market and unique underperformance of speculative stocks, many of which fall as the blue chip market rises. This occurred in 1929, in 2000, and it is occurring now. A plausible reason for this effect would be that experienced professionals who know that the market is dangerously overpriced yet feel for commercial reasons they must keep dancing prefer at least to dance off the cliff with safer stocks. This is why at the end of the great bubbles it seems as if the confidence termites attack the most speculative and vulnerable first and work their way up, sometimes quite slowly, to the blue chips. The most important and hardest to define quality of a late-stage bubble is in the touchy-feely characteristic of crazy investor behavior. But in the last two and a half years there can surely be no doubt that we have seen crazy investor behavior in spades – more even than in 2000 – especially in meme stocks and in EV-related stocks, in cryptocurrencies, and in NFTs. This checklist for a superbubble running through its phases is now complete and the wild rumpus can begin at any time.” (Source: gmo.com)