Consider two recent comments on the Chinese economy
“A hard landing is practically unavoidable…” – George Soros
“We are going to see an evolution, not a hard landing and a move towards a sustainable growth” – Christine Lagarde
A legendary investor and the highly regarded head of IMF have polar opposite views. And there is no dearth of views in between.
An investor can quite easily be drawn into these discussions about the outlook for the Chinese economy, the perils of hard landing & how it may impact the world. The debates on chinese debt burden, capital flight, currency fluctuations, stock market volatility, etc. can be quite seductive. The more uncertain the economy, more common are such discussions in daily life – at coffee shops, bars, parties, office lunches, and so on.
But do they matter? Not at all, especially for the long term investor interested in high quality businesses. For two key reasons. One, the economy (chinese or global) is a complex system influenced by many factors and any forecasting is a futile exercise. Second, the chances of a high quality business with sound fundamentals surviving a downturn is high.
Watching the economy is a useful habit, as uncertainty and volatility can throw up good investing ideas.
But the investor is better off spending most of his time studying quality businesses.