Taps Coogan – October 19th, 2022

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Mark Mobius, Mobius Capital Partners founder, legendary emerging markets pioneer, and John Templeton acolyte, recently spoke with Bloomberg to describe what he sees as the next looming crisis: tensions over Taiwan due to China’s worsening economy.

 

Mark Mobius on the next crisis:

“The next crisis will probably be with regards to what China is doing and their intentions towards Taiwan… Given the statements recently made by Xi Jinping… and the fact that Biden has said the US government will support Taiwan, I think that will be the next crisis coming up.”

On the CCP’s Party Congress:

“It’s not only about a slowing Chinese economy but the safety of investments in China… In addition to that, the lockdowns and the rest of it are going to (pose) big, big challenges for China, and unfortunately, when people are against the wall they fight back and that’s probably what we are seeing with the statements made by Xi Jinping. He’s making belligerent statements.”

On a Chinese invasion of Taiwan:

“(It’s) unlikely to happen in the near future because, you must remember, if the US puts trade sanctions on China to any greater degree this could be a big, big problem for the Chinese economy.”

On investing in a factoring global world and ‘sphere’s of influence’:

“Consider the Indian sphere of influence because India is coming up and it’s benefiting from the problems that China is now facing. A lot of the manufacturing that’s now in China will be moving to India and of course you have tremendous advantages in India with an English speaking population and you already have a huge software industry… and a lot of the manufacturing that’s now… growing in Southeast Asia, Vietnam, Thailand, Malaysia, Indonesia, will be gravitating more and more towards India…”

On commodities:

“I’d be careful with commodities… the people who are buying commodities are sitting on weaker and weaker currencies, the emerging markets companies and the Europeans… They will be trying to reduce their commodity purchases. So, you will probably see a downturn in commodity prices but it won’t go too far simply because inflation…”

On where US interest rates are headed:

“I see interest rates in the US going to 9% because the Fed is going to have to keep on raising rates simply because if inflation is 8%, the playbook says you’ve got to raise rates higher than inflation… Of course that theory will go out the window if CPI goes down, but I don’t see that happening anytime soon.”

It’s hard to argue that if inflation stays at 8% in perpetuity, interest rates will have to eventually converge above that. Whether inflation stays that high is another matter entirely. 

There is more to the interview, so enjoy it above.