Luke

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!

Yes, we are extremely adaptable because of our intelligence and technology. But we are not as difficult to be wiped out like a virus or some insects. So i get your point

I often get the feeling that the ,,sustainability,, slogans of business are often to the disadvantage of the consumer. You can now RENT your shoes: https://www.on-running.com/en-de/stories/cyclon-or-how-our-subscription-service-works Instead of buying good year welted shoes that can be repaired and worn for 20 years, you pay 30€ a month to get multiple shoes a year...but its sustainable!! Its just a pro business move disguised as sustainable. What would be really sustainable are easy to repair products, high quality long lasting products. Some kitchen tools of my grandparents still do it after 60 years. I wonder how the average amazon kitchen item does here... It for sure creates a lot of tension potential Chomsky began with an anecdote about a debate years ago between two colossal figures in their respective fields — astrophysicist Carl Sagan and biologist Ernst Mayr — about the likelihood of finding extraterrestrial intelligence anywhere else in the universe. Sagan concluded it was highly probable intelligent life should exist elsewhere, given the number of planets in the cosmos similar to Earth. Mayr, however, said that by looking at Earth as an example, he had concluded it’s unlikely humans would find other intelligent species elsewhere. Species that are successful over a long time, he said, are those that mutate very quickly, like bacteria, or those that keep to a fixed ecological niche, like beetles. As you move up the scale of intelligence, success is less likely. The history of life on Earth, Mayr essentially concluded, refutes the claim that it’s better to be smart than stupid. It looks like that further ghettoization is the trend...

What stands out to me that the more a society becomes industrial and highly technologized, birth rates take a deep dive down below replacement levels. I wrote in the birth rate thread as well that i think that specialization of Jobs and more and more investments necessary for children to be successful create this trend and that is very interesting to me. The mega city economies are not an environment for small scale families/communities. What also surprises me is that there is just no interest in kids for some women. A trend towards individual unfolding, more freedom, time for oneself, more consumption, traveling etc.

The hardest task will be to raise the birth rate. Making China “a fertility-friendly society,” as the state-run Global Times puts it, would be a long-term solution. Local governments have been pushing new incentives for the three-child policy: tax cuts, housing subsidies, longer maternity leave, expanded childcare services, even, in some provinces, cash bonuses. So far, none of it seems to have worked. The birth rate fell further last year as the pandemic and economic downturn made planning for the future more fraught. Conditioned by the one-child policy—and confronted by ever rising costs—families seem unwilling to have more than one child, if they want any at all. “The financial pressure is too big,” says Dong, the retiree taking care of her granddaughter. “To raise one child well is enough.” Absolutely brutal treatment of Ding and Shasha...: When they met, Ding—normally shy and taciturn—found himself conversing easily. His date was open and kind, he says, and she seemed honest. It didn’t take him long to ask her to “settle down.” “I made up my mind that this was going to be my last blind date,” he says. “If it didn’t work out this time, I’d drop the marriage issue.” The woman felt rushed, but her family figured it would be hard for a divorced mother to find a reliable man. And besides, Ding’s family had gone into debt to pay the full bride-price. When the couple got married last year, Ding says he couldn’t stop thinking, I finally have this big life thing figured out! The introvert made a long speech at the reception, and his parents, he says, “cried their eyes out.” Since then, Ding’s life has been transformed. He has gained weight, and he has started attending family gatherings again, now accompanied by his wife and stepdaughter. And he is proud he will no longer be a bare branch subject to gossip and ridicule: Ding and his wife are preparing to have a child of their own—a tiny heartbeat of hope in a land of missing children.

https://www.nationalgeographic.co.uk/history-and-civilisation/2023/03/chinas-population-is-shrinking-it-faces-a-perilous-future And how will Beijing encourage births after suppressing them for more than three and a half decades? “This is an unprecedented, historical decline,” says Wang Feng, a sociologist at the University of California, Irvine. “By the end of the century, China will be quite unrecognisable in terms of what we know about China’s history and position in the world.” This time, the drop has been triggered not by famine, war, or catastrophe but by rapid social and economic changes, the rising costs of getting married and raising children, and the restrictive one-child policy. As if to mark the moment, China’s centuries-long reign as the world’s most populous nation will come to an end this year, with India surging past it into the top position. The brutal mathematics threatened to squeeze Ding out of the marriage market. When he proposed to his first girlfriend, her parents balked because he couldn’t afford a new house. Ding’s parents scrounged for loans to buy a car and renovate an apartment in a nearby city—for the sole purpose of attracting a wife. The bride-price, a dowry paid to the wife’s family, would cost roughly $29,000 (£23,000). Even meeting a prospect’s parents can run $2,500 (£2,033). Over the years, a matchmaker was able to coax only a handful of women to go on blind dates with Ding. Humiliated by his failure, Ding began avoiding family gatherings. “They were unbearable,” he says. His relatives fixated on one topic: his lamentable status as a “bare branch,” the Chinese expression for a man who adds no fruit to the family tree. Xi Jinping, has vowed to “improve the population development strategy” and “establish a policy system to boost birth rates.” Dealing with a demographic implosion will require more than another bout of social engineering. In China it could even force a reckoning on such thorny issues as gender equality, immigration, eldercare, and the limits of high technology. “No country has ever solved this problem,” says Yong Cai, a demographer at the University of North Carolina at Chapel Hill. “This is a new chapter yet to be written for the human race.” Shasha Yu’s parents, both farmers, cursed her for being a girl. “I never should have given birth to you,” she says her mother told her. Yu’s only happy memory from growing up in rural Shandong Province was the time she fell off a horse cart and woke up in the hospital to find her mother gently fanning her. So rare was that moment of tenderness, she says, “I was reluctant to open my eyes.” Moving to Shanghai, she joined one of the fastest urbanisations in human history. (Sixty-five percent of Chinese now live in cities, up from 20 percent in 1980.) She split up with her boyfriend, rented and renovated an apartment, and began living on her own. The idea of marriage and children no longer seemed inevitable but rather a potential barrier to freedom and success. “I look at my parents’ and friends’ marriages,” Yu says dryly, “and I see nothing to envy.” Shasha Yu and Ding Qingzi are on opposite ends of China’s socioeconomic spectrum. Together, though, they help reveal why China’s marriage and birth rates have tumbled to their lowest levels in decades. In 2021 China registered 7.6 million marriages, a 43 percent drop from its 2013 peak—and the eighth consecutive year of decline. The change is driven partly by the gender imbalance and soaring marriage costs that thwarted Ding. But social scientists say it also reflects China’s fast-rising levels of education, wealth, and urbanisation—along with, as in Yu’s case, the assertion of women’s rights and autonomy. In late 2021 China’s Communist Youth League conducted a survey of 18- to 26-year-olds and found that 44 percent of women and 25 percent of men were unsure if they would marry. The percentages were highest for young women who, like Yu, live in China’s most modern cities. So disconcerting were the numbers to China’s leaders that the youth league has taken on the role of Cupid, staging ice-breakers and “love train” journeys to help single comrades find a spouse. In 2021, just weeks after new census figures revealed another steep drop in the birth rate, Beijing unveiled a new approach. “The Three-Child Policy Is Here!” trumpeted a state-media headline. “Would You Like to Give Birth?” An online poll conducted by the state-run Xinhua news service did not bode well. Of the first 30,500 respondents, 28,000 reportedly said they would “never consider” having three children. The poll quickly disappeared from the website, but the scepticism that greeted the patriotic campaign could no longer be hidden. “If people can’t afford one or two children,” asks demographer Xiujian Peng of Australia’s Victoria University, “how could they afford to have three?” Still, the couple have weighed the pros and cons. Spiralling costs are one obstacle in a competitive environment where parents feel pressure to spend lavishly on their children. An estimate from 2019 put the average price tag for raising a child at £61,000, seven times China’s GDP per capita. In Shanghai the cost was twice that. The expense doesn’t trouble Cai as much as the investment of time and energy—and the invasion of privacy. “I can’t adapt to a living space with an extra person,” she says.

I have been thinking of this today, there is a trend from quantity to quality in getting kids. As you said, if you live on a farm, having 4 Kids is no problem and rather necessary. If your child needs to have a PHD in computer science to have a nice life, people wont get 4 kids but bet more on a single horse. University is very expensive and in an economy where the jobs become more and more specialized the length of education will go up further. The picture further out looks difficult, higher life expectancy is to be expected but also more automatization. How much this will affect the declining birthrates effect on the economy remains to be seen, maybe even a net 0 in total. Having kids is not an 18 year project anymore, at least not in higher education. They need 23-25 year support at least when finished with masters, maybe longer depending on speed in the programs or eventual gap years. Very expensive and time intensive. Then also cultural trends are a problem as some pointed out here.

He said seismic risks are something he was not worried after some thinking but geopolitical risk bothered him. Munger said in the annual meeting Buffett should feel comfortable if he wants to feel comfortable. Its the same with the Alibaba and Tencent Position for DJCO. If you dont want any geopolitical risk stay out of china and just go for Japan (which buffett did as we know), probably just prefers these businesses that are very well managed but dont have a location next to a superpower that despises them. I also think taiwan invasion is off the table for a long time but hey, one does not sleep peacefully when rockets are directed to you

He bought this position in Q3, 2022. So between the 01. June and 01.September. Likely he sold directly after the party congress where i think (if i remember correctly) was some talk about invasion of taiwan by at least 2047 or something. Certainly he must have not liked what he saw so he immediately pushed a full sell of the position.

Added to FFH, bit more than 20% of my portfolio now.

Well said and reasonable

What moved you to pull the sell trigger on TSM? I dont really sleep well with it either

Very good points

Thanks a lot for sharing @TwoCitiesCapital @mjm

Any opinions how extreme weather events will impact fairfax in the future considering climate change (depending on believes if there is an impact by humans or if there is a climate change at all)? What will be the effect on premiums and is fairfax considering an increase? Less competition because of anxiety about more and more natural disasters-->impact on long term trend in that specific insurance area?

So they diversify away from China because of which reasons? Possible tensions/regulations? @Castanza

Absolutely fascinating.

Okay, i am giving this thread a read now!

One of the best motives...just great. There is this super funny reaction video where he listens the first time to it, his reaction says it all