China

Submitted by Paul Brodsky via Macro-Allocation.com,

In Contrarianism in 2017 we cited the following macro dynamics that keep us cautious on equities, bullish on Treasuries and gold, and negative on credit:

China has reportedly tested a new version of a long range missile capable of carrying ten nuclear warheads, amid growing tensions with the United States. The DF-5C missile was flown in January using 10 multiple independently-targetable reentry vehicles (MIRVs). The test represents a shift in China’s nuclear policy according to defense officials. It suggests that the China is increasing the number of warheads in its military. Experts say China has around 250 nuclear warheads.

European stocks rise the first day in four, with Asian stocks, S&P futures and the Dollar all gaining following strong Apple earnings ahead of today's Fed decision and the U.K. parliament's first vote on the Article 50 bill.

The Pentagon is reassessing the country’s military capabilities in the event of a nuclear attack against Russia and China.  US intelligence agencies working under the Pentagon’s Strategic Command are studying whether the Russian and Chinese governments could survive a nuclear strike. Presstv.ir reports: Championed by Republican Representative Michael Turner, the study drew bipartisan support in Congress and was passed before the inauguration of US President Donald Trump, who has expressed willingness to reshape ties with both China and Russia.

China has been on a skyscraper-building boom for years, but, we suspect, 2016 may have seen the mal-investment boom jump the shark.

As Goldman Sachs illustrates in the following chart, China was head, shoulders, knees, and toes above the aggregate of the rest of the world in terms of skyscraper completions in 2016...

Could record-setting skyscrapers signal economic over-expansion and a misallocation of capital?