Chinese Checkers: Set the Marbles Up & Play Again?

Chinese Checkers: Set the Marbles Up & Play Again?

Chinese Checkers:

Set the Marbles Up & Play Again?

Checkers Like No Other

The winter months, especially after the holidays, were prime season for the playing of all nature of board games growing up.  One of the craziest was Chinese Checkers: up to 6 players, each with a wedge of 10 marbles on a star-shaped board.  The goal? Be the 1st player to move the marbles, 1 space at a time, across the vast center of the board and re-assemble all 10 on the wedge on the opposite side of the board… all while the other players were aiming to do the same thing across the same center of the board!
In the midst of the game, the board looked like complete chaos, with all of the various colored marbles mixed up together while the players attempted to make progress to the other side.  By game’s end, however, the colors were separating once again into the neatly formed wedges, just as they started.

As 2016 begins, another round of Chinese Checkers appears to be well underway, with the seemingly circular fretting over a slower growth rate in China and lowering oil prices on traders’ minds as many major market indexes moved down some 8% in the first 2 weeks of the new year.7

“This reminds me of August, when people were worried that China would sink the world,” says Robert Doll, chief investment strategist at Nuveen. “Why did the market come back? China stabilized, and the U.S. economy did OK. That’s what we need to happen again.”

Trade in China, Made in China

Of Circuit Breakers and Sell-Offs

The first week of 2016 was the first time many investors in the Chinese stock market could sell after a lockdown period… so they took advantage of it!  Their market was down some 8.1% for the week8, despite the imposition of “circuit breakers” to temporarily halt trading… which the Chinese abandoned by week’s end. Since 80% or so of trading there is carried out by “retail”, smaller investors (as compared to only about 10% retail investors in the U.S.) according to Reuters8, the Chinese market acted quite erratically. A very similar scenario of worries over the Chinese market played out, you may recall, last August!

What’s Happening on China’s Side of the Game Board?

The Chinese economy is widely-regarded as slowing its growth rate of manufacturing.  Yet, China is undergoing a transition from primarily a manufacturing economy to a more balanced, consumer-driven one, similar to Western countries.  For the third quarter of 2015, services accounted for 51.4% of the Chinese GDP as compared to just 40.6% from manufacturing10.  Indeed, the Caixin PMI Services index stood at 50.2 in December, indicating continued expansion.

What’s Happening on the US Side of the Game Board?

Here in the US, all exports represent only 13% of GDP; just 7% of that portion is to China. Overall, then, US exports to China amount to about 1% of GDP.11 Housing, auto sales, job growth, and more recently wage growth all point to an economy continuing to grow.  Understandably, we would like to see greater growth in our economy…but the Fed in December deemed prospects for continued growth here in the States sufficient enough to warrant their first increase in their interest rate in 9 years!  All against the backdrop of oil and gas prices continuing to go lower, which in turn lowers transportation and manufacturing costs.

So Let’s Keep Moving Our Checkers!

As ever and always, let us not confuse VOLATILITY with RISK: Volatility, after going on vacation for much of the past 4 years, appears to most certainly be back in town.  The news of the day, be it “How much will China slow?”, “How low will oil go?”, or “When will the Fed raise rates next?”, will never be completely resolved or entirely go away.  Such is the normal course of things for financial journalism. For us, let us in the new year recommit ourselves to remaining Faithful, Patient, and Disciplined in our mindset and keep ourselves and our money ever aligned with our goals and dreams.

In the meantime, stay tuned!  It’s a new year and they’re setting up the marbles for another game at the Chinese Checker board!

 

1Weekly Market Snapshot, Legg Mason Global Asset Management, January 11, 2016
2Weekly Market Snapshot, Legg Mason Global Asset Management, January 11, 2016
3Weekly Market Snapshot, Legg Mason Global Asset Management, January 11, 2016
4Weekly Market Snapshot, Legg Mason Global Asset Management, January 11, 2016
5Weekly Market Snapshot, Legg Mason Global Asset Management, January 11, 2016
6Weekly Market Snapshot, Legg Mason Global Asset Management, January 11, 2016
7J.P. Morgan Asset Management Weekly Market Recap, January 18, 2016
8Investors Must Watch Out for Self-Fulfilling Prophecies, Martin E. Landry, 1st Global Investment Management Research Group
9U.S. Stocks: Keep Calm and Don’t Sweat the Yuan, Zane Brown, Lord Abbett, January 7, 2016
10U.S. Stocks: Keep Calm and Don’t Sweat the Yuan, Zane Brown, Lord Abbett, January 7, 2016
11U.S. Stocks: Keep Calm and Don’t Sweat the Yuan, Zane Brown, Lord Abbett, January 7, 2016

 

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