Luke

+1 well said!

We still invest all over the world, at least many other investors do. Many own businesses in China, Berkshire, Munger, Guy Spier, Pabrai, Li Lu. I think with a very long horizon and a strong stomache, there is a lot of money still to be made in China. Their growth potential is gigantic. India is another one of these markets that have massive growth ahead, where finding a spawner at a fair price might give great returns too.

I am not on anybodys side, i am just trying to look at the situation from a factual point of view. Its not only guantanamo, as @Spekulatius pointed out there is a huge part of the US population that is absolutely wrecked. Black males in Harlem are having the same or worse mortality rates than in Bangladesh. Appalling poverty. This goes on and on with War Crimes in Yugoslavia supported by the US, War crimes against Indonesian population, supporting dictators to prevent reorganization of markets. China has their reeducation camps and its appalling, that does not make them a mafia state though. There is evidence about these technology transfers and thats unfair from the citizens involved. But we also have to differentiated between a stealing private sector and a stealing government (which also does this). But again, look at internal US affairs, what kind of information they control, the CIA etc. All i hear though is that China is this evil devil but nobody looks at the US. Its hypocrisy. Western markets have been largely open because China could not, until very recently, compete. As you are seeing now, when the threat of disruption comes up, the markets are getting closed. With all sort of fear that the government might get data etc...how much data does Meta collect from germany? Why is the US controlling the phone of our chancellor? How much intervention was with Twitter by the state? Again: Hypocrisy India is still much poorer compared to China, and they are very docile till now. Will be interesting to see when India moves closer to China and what the US does then. China is not a ,,good guy,, either, i agree that some SEA countries remilitarise against a growing influence of china. I am not on Chinas Side but the media coverage is biased towards the west.

What has changed? Nothin that wasnt there 4 years ago. Same party, same rules. Xi still there. China has not left the market system, just look at some of the last earnings calls. Tencent still doing very fine, demand is strong.

China in 1949 is worlds apart from China in 2023. If Chinas economy goes to 0 that means 1/5 of the population gone including the second biggest economy on the planet...

Also from his talk in 2015, good reminder: I believe China is at interim stage between Civilization 2.0 and Civilization 3.0. Let’s call it Civilization 2.5. China has come a long way but still has a long road ahead. Therefore, I think there is a high probability that China will continue on the main track of Civilization 3.0, as the cost of deviation is very high. If you have a good understanding of China’s culture, people and history, you will agree that China will forge forward. This is particularly the case now that you have a better understanding of the essence of modern civilization. There is almost no chance of China leaving the common market, and the probability of China changing its market rules is also very small. Thus, it is highly probable that, in the next 2 to 3 decades, China will remain in the global market system, and adhere to free market principles, in addition to promoting science & technology development. There is a high probability that China’s economy will be on the main track of Civilization 3.0. Besides, we know the course of Civilization 3.0 has little to do with political and cultural factors, and a lot to do with science & technology, as well as the free market. This is its true essence. This is also the biggest misunderstanding about China many investors have, particularly those from the West. If China is to stay the course of Civilization 3.0, and adhere to the free market economy + modern science & technology, her returns on main classes of assets (stocks, cash etc.) will track the trends of the mature market economies in the past 300 years. Her economy will continue to grow cumulatively accompanied by inflation. Stocks will continue to outperform other classes of assets. The philosophy of value investing is the right way and main path in China as it is in the US. Value investing will provide sustained, stable, safer and more reliable returns for her investors. This is why I believe value investing can be realized in China.

Li Lu wrote this in 2019 November about China btw, i just read through his website: 家为这一阶段的经济政策，尤其是货币政策留下了丰富的参照经验。只要政策制定者能够 认清目前自身所处的阶段，做出适当的调整，就有可能充分释放黄金发展期巨大的经济增 长潜力。中国未来前途依然可期 Experts have left a wealth of reference experience for economic policy at this stage, especially monetary policy. As long as policymakers can recognize the current stage of the economy and make appropriate adjustments, it is possible to fully release the huge economic growth during the golden development period. China's future is still promising Sad he doesnt publish more!

I agree that these camps in China are absurd.

One example is Adel Noori, a Chinese Uyghur and dissident who had been sold to the US by Pakistani bounty hunters.[146] Top DoD officials often referred to these prisoners as the "worst of the worst", but a 2003 memo by then-Secretary of Defense Donald Rumsfeld said "We need to stop populating Guantanamo Bay (GTMO) with low-level enemy combatants... GTMO needs to serve as an [redacted] not a prison for Afghanistan."[147] The Center for Policy and Research's 2006 report, based on DoD released data, found that most detainees were low-level offenders who were not affiliated with organizations on U.S. terrorist lists. Also questionable how much national security was behind this. Many have been tortured. In 2010, Colonel Lawrence Wilkerson, a former aide to Secretary of State Colin Powell, stated in an affidavit that top U.S. officials, including President George W. Bush, Vice President Dick Cheney and Secretary of Defense Donald Rumsfeld, had known that the majority of the detainees initially sent to Guantánamo were innocent, but that the detainees had been kept there for reasons of political expedience.

New York Subway:

Shenzen:

Also, to say China is this parasite Mafia state is just unjust to how much the brought prosperity to chinese citizens. They are traveling the world, have high living standards in the coastal cities. Just to show the US trophy city NY subway vs Shenzen metro:

China missed the Industrial Revolution completely and would have been behind FOREVER (as are african countries) without adopting the closed off state directed market system. It would NEVER have been possible to get where they are without an authoritarian regime that can lead long term. In the early industrial revolution it was clear that those who control the markets have immense power and the US came out on top after WW2 because Europe was heavily impacted by Hitler. China is basically doing now what the US did, funding infrastructure in poor eastern countries, trying to build factories there, implement them in THEIR market system etc. US hates it because thats what they used to do.

I am not sure that the US is completely unguilty here. Julian Assange and Snowden come to mind. We had Guantanamo Bay Detention Camps in the US where the exact Uyghurs that are in education camps in China today were tortured in US prisons. Not in the same size as in China but we could find problems in both countries. Does not make them mafia states IMO. The West wanted to make business in china and access to their markets, China did its own economic policies to their own benefit. States funding businesses is not something bad per se, as i said TSMC was statebacked, Airbus i believe was also statebacked. You cant just spawn some businesses without governments and the only way to bring up ones own local industries is to close it off to some degree. Otherwise we would have US multinationals in China and no Baba, Tencent, Baidu etc. Again, the US is only the leading power of the world because of these exact practices. Stealing textile manufacturing technology from Britain where the industrial revolution started. Even worse, to quote: ,,The US would never have had a steel industry. Again same reason. British steel was way superior. One of the reasons is because they were stealing Indian techniques. British engineers were going to India to learn about steel-making well into the 19th century. Britain ran the country by force, so they could take what they knew. And they develop a steel industry. And the US imposed extremely high tariffs, also massive government involvement, through the military system as usual. And the US developed a steel industry. And so it continues. Right up to the present. Furthermore that’s true of every single developed society. That’s one of the best known truths of economic history. The only countries that developed are the ones that pursued these techniques. The ones that weren’t able… There were countries that were forced to adopt “free trade” and “liberalization”: the colonies, and they got destroyed. And the divide between the first and the third world is really since the 18th century. It wasn’t very much in the 18th century, and it’s very sharply along these lines. Well, that’s what the intellectual property rights are for. In fact there’s a name for it in economic history. Friedrich List, famous German political economist in the 19th century, who was actually borrowing from Andrew Hamilton, called it “kicking away the ladder”. First you use state power and violence to develop, then you kick away those procedures so that other people can’t do it. Regarding Russia and China @Spekulatius Ill quote something from Rob Vinalls Half year letters with which i agreed: What has changed is that today, there are only two superpowers – the US and China. Such a tectonic shift happens perhaps just once a century. Barring radical regime change in Moscow, Russia is likely to be closed off from the Western economy for at least a generation. This leaves China as the only game left in town for Russia and relegates Russia to little more than a vassal state. The clear winner is China. It will gain privileged access to Russia’s raw materials and will be the sole source for essential manufactures such as high-end electronics – almost becoming a monopolist and a monopsonist vis-à-vis Russia. From a geopolitical standpoint, it is a disaster for Russia and a boon for China. Some of you have voiced concern that China will enter the Ukraine conflict by providing military support to Russia. I doubt this will happen. China already has Russia where it wants it and has little to gain by deepening the relationship further. Moreover, China will be keen not to unnecessarily antagonise the West given the importance of Western export markets to its economy. At a high level, I doubt very much that China was informed of Putin’s intention to invade Ukraine or that it would have approved the invasion had it been. Sovereignty is a core value in China given that its borders were constantly encroached upon over the centuries, the motivating factor behind the country’s most famous landmark: The Great Wall of China.

@DinarI am also trying to take a contrarian perspective here. I am a concerned citizen from germany trying to look a bit deeper behind geopolitics than the normal rethoric I also really appreciate any pushback, i am just trying to stimulate the discussion with throwing in some different perspectives.

Never said it was not from China. But saying they unleashed it is also not proven completely. How in your opinion is China supporting Russia in their War in Ukraine?

As of now attacking Taiwan will kill the global economy and will cause a depression and havoc for probably 10years+. It will also kill chinas own economy since they depend on TSMC a lot. If China gets cut off this will kill the global market even more, plenty of reason more to avoid the SP 500 if you think thats realistic. Agree with apple, their earnings will be affected for many many years to rebuild and reorganize the supply chains. The Cayman holdings have been around for 20 years+, its really the last thing i worry about to be honest.

The reason why the west now sees this increased incompatibility is because they are losing the positions they previously had, china is not a country where one can install factories or products, they are increasing their footprint everywhere, industries are competitive and even better than western peers (electric vehicles). They innovate way faster than europe for the most part, industries are close to each other. What the US calls economic War is just a China that can compete and even outcompete western peers. Goodbye Germany with their car dominance, Chinas EVs are top notch (Buffett and Berkshire know it). The export bans of equipment is just to prevent china developing to hope the current world order can be hold up. Imagine a China that is let free and can actually develop their presence over asia... In China the CCP controls everything, in the US its Capital. To say there is no rule of law is a stretch IMO. You do have individual rights but in some areas they are heavily restricted. China is not a mafia state that just throws citizens into prison without any reason. Businesses exist to serve the CCPs goals (which benefit citizens in china) which have been laid out pretty clearly at the 20th congress. Its a one party state so obviously foreign interests are CCP interests. As US foreign interests are there to serve the US parties. Yep, thats a problem! Thanks a lot for sharing viking and pushing back in discussion, video is on my watchlist!

Ill try to take chinas viewpoint from here: That's not proven and speculation to be fair. They did not ,,unleashed,, it, at least there is no 100% hard evidence for it. I posted in the china thread that the US would never be in the position it is now without intellectual property theft. It is very true that Chinese try to get access to industries and try to copy existing technology to increase their own exports and wealth. On the other hand one can have a debate about IP and how legitimate current IP legislation is. This could perhaps explain the view of china: ,,The World Trade Organization proposed new, enhanced intellectual property rights, patent rights, which means monopoly pricing rights, far beyond anything that existed in the past. In fact they are not only designed to maximize monopoly pricing, and profit, but also to prevent development. That’s rather crucial. WTO rules introduced product patents. Used to be you could patent a process, but not the product. Which means if some smart guy could figure out a better way of doing it, he could do it. They want to block that. It’s important to block development and progress, in order to ensure monopoly rights. So they now have product patents,, It was the only way for china to get where they are now with state directed economic policies that actively interfere in industry, cut off foreign markets, support local industry etc. Otherwise they would still just be a US manufacturing Hub of above described militarized monopolies. Also: Some industries just cant be spawned by itself, TSMC was state backed, Airplane production was partly state backed. Also not fair to say. So you suggest to completely cut contact with 1.5b people and the second biggest economy in the world?

Reduced my TSMC position significantly. Still meaningful, but i was pretty overweight before, bought some Exor and BN with it.

+1

Pressuring China, putting tariffs on china, not allowing advanced tools essential for economic development all helps western multinationals immensely. How would a world in the semiconductor industry look like if chinese business has access to EUV tools? Goodbye NVIDIA, AMD, Intel, Micron. It would mix up profit margins and growth significantly as have lower cost items from china. Western production is not as viable as chinese production, that is pure economics. State intervention with tariffs is against free market logic, the cheapest producer with the cheapest price will attract independent consumers looking for products. Worked well for apple that had massive price advantages due to chinese production. Its a problem if US or western multinationals lose jobs to chinese busines but not a problem vice versa. We can have factories in china but chinese factories in the west? Thats not nice.

Why is China pressured this much? Foreign trade minister Liesje Schreinemacher from the netherlands: “Given the technological developments and the geopolitical context, the government has come to the conclusion that the existing export control framework for specific equipment used for the manufacture of semiconductors needs to be expanded, in the interests of national and international security,” Interests of national and international security sounds pretty vague to me...is china not allowed to develop its military the same way the US military is allowed? Where has the chinese government made threats to international security? To throw in a perspective by Noam Chomsky: There’s a kind of a–when we look at national power, what people look at typically is GDP, gross domestic product. And you look at U.S. share of GDP–it’s declined. It was maybe 40% in 1945, then maybe 25% by 1970, maybe 17% today. It looks like a decline. But take another measure. Take a look at the–here I’m quoting very interesting work by a young political economist, Ken Starrs. Suppose you look at the dominance of the economy by U.S.-based multinationals. It’s spectacular. U.S. multinationals control about 50% of the global economy, own–own 50% of it. In just about every area–manufacturing, retail– It prevented other countries from moving toward independent development, and therefore led to a situation in which U.S. multinationals dominate the world. If they had moved to independent development, we’d see exactly what we’re seeing with China today. It’s moving toward independent development; U.S. is trying to prevent it. The policies, shared bipartisan policies, are to try to prevent Chinese [independent] development. So if China, for example–you know, the mantra is “China’s stealing our jobs.” Is China stealing our jobs? They don’t have a gun to the head of Tim Cook, saying invest here. The U.S. multinationals are losing our jobs. But we don’t want China to develop as an economy. That’s why the bipartisan programs are to prevent China from doing the things that make the economy successful–like industrial policy, to have a state industrial policy. We see that that’s successful; we want them to stop it. Kind of interesting, because that’s–economists and others, if they believe a word they’re saying, ought to be cheering. According to their theories, if the state intervenes in the economy, it’s going to harm the economy. But everyone knows the opposite is true. In fact, we ourselves have a massive state industrial policy. That’s why you have things like computers and the internet and so on, it’s mainly public funding. But we don’t want China to have that, because they’ll be successful, they’ll be out of our control; that we don’t want. That’s what the kind of concern was in the fifties. So I think the imperial model has been very successful. It’s led to a situation in which it’s primarily designed for the benefit of U.S. capital, which has succeeded beyond belief. As soon as it’s beginning to get out of control, there’s a bipartisan agreement, backed by capital, to try to prevent their development. Now on a much smaller scale that happened in Vietnam, happened in Chile. It’s happened over and over again, even happened with Grenada if you want to look at it. And that’s a standard imperial model that goes back way before we picked it up. And overall, it’s been pretty successful. There were things that didn’t work out. But for the main drivers of American policy, which is concentrated capital, it’s been a pretty successful system.

Since the tone against China is becoming harsher and harsher and vice versa, increasing import/export bans from both sides, i think this deserves its own thread. As of tuesday the 23th of May: https://www.scmp.com/tech/tech-war/article/3221582/tech-war-china-slams-japans-semiconductor-technology-export-controls Tokyo on Tuesday unveiled details of its updated list of regulated exports, which include 23 types of chip-making equipment. Beijing said it “firmly opposes” Japan’s latest chip-making equipment export restrictions, which have dealt a fresh blow to China’s semiconductor industry that is already grappling with growing US trade curbs amid an intensifying tech war. Japan’s action respresents “an abuse” of export control measures and “a serious deviation” from free trade and international rules, an unnamed spokesman of the Chinese Ministry of Commerce said in a statement on Tuesday. The curbs are set to take effect on July 23. Beijing has called on the World Trade Organization to review restrictions on chip-related exports to China because they may have “violated” the group’s principles, according to a report by state broadcaster China Central Television in April.

As of today, Nvidia has a marketcap of 760b, trades at somewhat 160x earnings if we deduct SBC, 28x revenue. In order to make a 10% CAGR it has to be at a 2 T marketcap in a decade. Lets look at growth assumptions, current earnings are at 7b. In order to be valued at 2T in 10 years, i would expect at least 100b in Cashflows in 2033. If Nvidia grows earnings at 30% annualized for 10 years, we will be at 96b in earnings in a decade. So right around that 2T Marketcap at 20x earnings, excluding SBC and excluding possible buybacks or dividends. So we buy into 30% of annualized growth for a decade for a 10-15% CAGR. And the downside? Approximately -65% for a decade of 15% earnings growth. Approximately -80% growth for a decade of 10% earnings growth. I think from current valuations we will get a -30% to -50% in 10 years No thank you!