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Bienville Capital Management’s Cullen Thompson argues that China’s economy is at a critical inflection point.
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Right now let's head back to -- investors keeping their eyes on new manufacturing data out of China joining us to talk about this and a person who's taking contrarian view on China.
Colin Thompson co-founder and managing partner of the end they'll capital management -- good morning to you sir thank you for joining us early let's -- jump right into it.
Chinese PMI survey just out increased in April better than market still showing contraction and we've brought suing to talk about this because.
I think -- Forbes about six months ago highlighted you guys as.
Being short on China what should investors now.
-- -- in terms of Chinese growth we think -- at a critical inflection point when you look at the math.
When you look destruction of economy it's pretty clear that the ability to continue to grow very rapid rates directs forces slowing the ability today to grow through.
Very high aggressive investment rates particularly investment in infrastructure and real estate is also slowing.
So we believe -- economies are very critical juncture.
When leaving policy makers -- -- really difficult decisions and -- one.
I think being a senior policymakers and in China today is very difficult it's it's sort of similar to that.
Childhood game of of whack a mole once you squash one problem another one pops up in this case it was inflation in the fall.
Today it's very slow growth in terms of manufacturing output.
And then you've just got back recently -- last month -- from a trip to China one of the things we don't talk about a lot in the United States is the empty malls the empty apartment blocks the huge investment.
That the government there the regional governments and made to stimulate their economy we've building and buildings how big an impact is that gonna -- -- invest from the United States as to who as far as my looking forward and -- put my money.
Sure and I think it's pretty clear at this point they're clear excesses in terms of some infrastructure particularly in the tier two and tier three cities but.
Most conspicuous in terms of residential real estate so.
From an investor standpoint we've got to think about what's actually transpired over the last -- so when you've had about a ten fold increase in.
Fixed asset investments that's really benefited commodity prices -- benefited commodity oriented country such as Australia Brazil Canada to an extent.
-- we think people should be very mindful about what has driven returns in this particular areas.
And probably -- backwards.
In terms of of prospects for going forward.
The structure of China's economy needs to needs to rebalance -- deeply deeply imbalanced economy at the standpoint and these are really.
Push for -- in terms of driving consumption rather than relying on this kind of credit driven investment growth.
And you're rare voice in this how do you feel sometimes about kind of putting -- -- out on the edge because a lot of people are following the line you're saying.
How much more comfortable today about two to -- years ago when we are suggesting that these problems would.
Eventually manifest it was -- somewhat heretical but I think a lot of the -- the data these days is certainly justifying their position and there are some very respected voices that are.
Sharing similar concerns and will we respect your voice and -- -- case in point I think it since April 13 when we first saw more data about the contraction in China commodity prices started to come down.
If I've got six when he five grand in the United States what I do -- that money how can I put into play what we're discussing that we think China is slowing down dramatically.
Sure well we think there a couple of different ways to go about it and me for one I think for most investors it should be you should just be aware that again the structure and probably the pace of of economic growth is going to change.
So in that -- is is probably an avoidance of certain things.
What comes to mind would be commodity prices and emerging markets in general.
It as a firm we -- able to implement some very opportunistic hedges where there's a very low.
Cost to capital involved but obviously some some potential -- metric returns.
But unless you're willing to go out in short some things.
Australia the currency for instance looks vulnerable Brazil looks vulnerable it's really kind of dependent on your own risk appetite there.
Colin Thompson we appreciate you joining us live on the Fox Business Network from the end -- capital keep an eye on these guys because they were the first among the first to -- -- where China.
So we'll talk again.
