History repeats. No wonder last week's events are being referred as "The Fall of Kabul" (similar to The Fall of Saigon in 1975). 100 years back British learned their lessons giving Afghans independence in 1919. Russians learned their lessons in 80's and now it was turn of another superpower to learn same lesson - 20 years, $2 trillion and thousands of American and Afghan lives lost. And it feels like back to square one. Taliban controls more territory and is more powerful than ever thanks to all the military gear Americans are leaving behind. It was a mistake by all 4 presidents to stay beyond initial few years. So I do agree with President Biden that another 10-20 years would not have changed anything so let's get out. Biden did not change Trump deal with Taliban (even though he did reverse almost all other Trump policies). The issue was execution of exit despite planning for last few years. Biden had 8 months to plan this properly and have well executed exit for Americans and Afghans who helped Americans. But this administration botched the exit similar to what Trump botched handling of COVID. I really feel for Afghans who lost thousands of lives and had to go thru this chaos and don't know what's in future for them....it feels that even in 21st century, Taliban wants to rule like it's 12th century (despite their promises).
Lot has happened on economic front also. But let's focus on what's happening in China..especially when it comes to Chinese tech companies. "A Bull in China Shop" is what comes to mind looking at trillion $ of market cap destruction in last few months. While American FANG companies are all time highs, their counterparts in China have lost close to 50% of their valuation just in few months. It all started with in-famous speech by Jack Ma criticizing regulators in Oct culminating with DIDI IPO 6 weeks back despite dis-approval by regulators. Party and government want to show who is boss in China and don't mind destruction by regulation. In July they almost wiped out private tutoring industry. To some extent regulation was behind in China compared to European GDPR and equivalent American laws. So to that extent, Chinese regulators are taking right steps towards privacy, data collection, anti-competitive laws (even of they are applicable to only private sector)...these were overdue. It's just that policy and regulation changes were sudden and without any communications...No wonder everyone from companies to investors to VC world was caught by surprise and now no one wants to touch these companies. So what's next? Last week some official policies were announced. That means now companies can start following well established rules (as long as they don't change). In short term there would still be some pain for investors but looking forward in 2022, the companies would learn to deal with regulations and establish working relationship with government and party. That should help bring some calm to the situation. So as investor if you are willing to deal with lots of churn during 2021, there could be opportunities. Look at DIDI ($7), BABA ($150), JD ($60), TIGR ($10), PDD ($70), BIDU ($125) for potential investment. One way to reduce risk would be to sell covered puts for the prices you want to buy and let it play out.
Coming to America: Market is looking at what Powell will say at Jackson Hole. Fall season is coming...so after Markets' "Summer Rip" would there be "Fall Dip"? Well we don't need to wait too long...But given the fastest recovery for economy and markets, I won't be surprised if S&P closes around 4500 by year end.
Happy Raksha-bhandhan to all brothers and sisters!
/Shyam
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