Political Posts

[no_free_lunch]

On 8/20/2022 at 1:22 PM, changegonnacome said:

 

Agree reading some articles one would swear we are not talking about a region thats one of the wealthiest on earth.......I'm not saying there isn't going to problems and some hardship......but European countries (aided by the ECB bond buying program) have the wealth, capability and fiscal/monetary tools to support their at risk citizens through subvention of households energy budgets......that same wealth/purchasing power will see to it that Europe can/will and is 'paying up' to secure alternative energy sources.

 

If at the end of Nord Stream was I dunno a country like an artic El Salvador then the doom porn would be warranted….but it’s like Germany ffs…not easy they could live without the extra strain on fiscal budgets but it’s manageable.

 

It's just not their citizens, how are the business going to continue to function.  Sure some software business will be fine but doesn't germany manufacture a bunch of products and isn't energy a large component.  It seems this is going to ratio their businesses.

Edited August 23, 2022 by no_free_lunch

[changegonnacome]

9 hours ago, no_free_lunch said:

but doesn't germany manufacture a bunch of products and isn't energy a large component.  It seems this is going to ratio their businesses.

 

Same concept......listen lets distinguish between two things (1) Energy costs go through the roof (2) Energy shortage/not available/ rolling blackouts/factories shuttered etc.

 

If its just (1) its a pain but Germany can subsidize both citizens and strategic industries and nurse them through the period........(2) is clearly much more serious but its unclear to me if that scenario is going to come to pass in a meaningful way.....lots of Euros currently buying global gas/diesel and alternative energy from the four corners of the earth and moving it to Europe right now.....as I said, broadly speaking if you have the money (& Europe/Germany has the money) you can pay up to secure substitute energy supply.

 

I am not saying this is nothing burger.....better it wasnt happening......but this is one of the scenarios where being a wealthy trading block that money can solve alot of problems

[Parsad]

Sheesh!  Build'em to house people and then tear them down to keep real estate prices/demand up. 

 

China Finance 101!  Cheers!

 

https://finance.yahoo.com/news/china-tears-down-tower-blocks-122948254.html

[Spekulatius]

36 minutes ago, Parsad said:

Sheesh!  Build'em to house people and then tear them down to keep real estate prices/demand up. 

 

China Finance 101!  Cheers!

 

https://finance.yahoo.com/news/china-tears-down-tower-blocks-122948254.html

That’s essentially the broken window fallacy implemented as a public policy, on a large scale:

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

Edited August 23, 2022 by Spekulatius

[mcliu]

Aren't these Fathom Consulting guys China perma-bears? 

[Spekulatius]

On 8/23/2022 at 3:03 PM, mcliu said:

Aren't these Fathom Consulting guys China perma-bears? 

Probably. You should take what every source states with a huge grain of salt. Xi has a tough decision to make - on the one hand, they want to make owning a home cheaper to help out young families and perhaps the demographics in the long run, on the other hand lower home prices may de-stabilize the financial system and cause unrest with existing home owners.

 

We know there is financial stress in the system, because China lowers its interest rates and seems to do some sort of quantitative easing while the US is tightening. This is interesting because China has their currency pegged to the USD so it generally means that monetary policy in China has to track the US. That means that we will likely see a devaluation of the Yuan relative to the USD.

Edited September 1, 2022 by Spekulatius

[mcliu]

China has numerous problems, but so does every country.

These China analysts keep failing because they only focus on the problems but miss the big picture.

 

If anything, it's the Western governments that are failing its constituents by failing to provide quality education and infrastructure. Luckily, we can rely on the private sector for some of the shortcomings but private sector can't do it all.

 

Education:

 

Infrastructure:

[Spekulatius]

Very significant talk from Olaf Scholz today:

https://www.reuters.com/world/europe/germanys-scholz-we-will-keep-up-support-ukraine-long-it-takes-2022-08-29/

 

Bullet points:

• Scholz vows to keep up economic, political, military support
• Wants expanded EU to include Ukraine, Moldova, Georgia
• Proposes majority EU voting on foreign, tax policy
• Wants Croatia, Romania and Bulgaria to join Schengen area

[Dinar]

The consequences will be very bad when 100+ million of people living in corrupt countries join.  Corruption and the culture of corruption is breathtaking in Ukraine, Moldova, and Georgia.  Oh, and majority voting on tax and foreign policy - that will work out real well.  Be careful what you wish for.  I am sure a 20% excise tax on Germans to fund help for the poor (aka corruption in the EU) will prove popular with Spain, Portugal, Italy, Ukraine, Moldova and Georgia.  Oh, and and majority rules, so you Germans work while we drink wine at your expense.

[Castanza]

I have heard from my collogues in Prague that their personal energy costs have gone up 100%. My company is thinking about relocating their data centers out of EU (Specifically Germany, Czech, and Ukraine) due to high energy costs and no near term solution regarding energy. That's a significant move because datacenters are not easy to relocate and build. Food for thought. 

 

 

[Parsad]

Comments from China's largest developer:

 

https://www.wsj.com/articles/chinas-property-market-has-slid-into-severe-depression-real-estate-giant-says-11661863259?siteid=yhoof2

[Castanza]

The Daily Upside

 

SEMICONDUCTORS

China Claps Back After US Curbs Nvidia’s Exports

All the chips are on the table now.   China’s biggest tech firms face a murky future after the US government on Wednesday told Nvidia to halt all China-bound exports of two computing chips crucial to developing artificial intelligence. Experts say the move is a major escalation in the two nations’ battle for tech supremacy – and could severely limit China from advancing its AI capabilities.

Code of Semi-Conduct

Tensions are mounting between the world’s two most powerful nations as Beijing continues to menace Taiwan, home to much of the world’s semiconductor production. The US’ latest salvo is barring sales to China, Hong Kong, and Russia of Nvidia's high-powered A100 and H100 computer chips, which are often employed in massive data centers to power advanced AI natural language and image recognition tools.   Washington says the action was primarily designed to keep American technology from being used to advance China’s military prowess. But its impact is also expected to strafe China’s biggest tech companies:

•   China’s trio of top cloud computing companies, Tencent, Alibaba, and Baidu, all use the A100 chip for cloud computing and storage services, as well as various AI-powered data analysis tasks. Other top Chinese customers include BYD Auto, IT giant Lenovo, and cloud provider Inspur.

•   In total, China and Hong Kong sales accounted for over 25% of Nvidia’s $27 billion of revenue in fiscal year 2022, and the new rules will cost Nvidia about 10% of long-term future revenue, Truist Securities analysts wrote in a note. Most Chinese firms will now have to patch together multiple, lower-end Nvidia chips in lieu of the high-powered A100 and H100 chips.

China is not happy about any of this. “The U.S. side should immediately stop its erroneous practices, treat companies from all countries equally, including from China, and do more to contribute to world economic stability,” Chinese Commerce Ministry spokesperson Shu Jueting said Thursday in a statement. A New Player: Another rising global power, India, wants in on the lucrative chip game, too. On Thursday, its government announced $10 billion in incentives for manufacturers to establish semiconductor fabrication plants in the country. Already, Singapore-based IGSS Ventures, Israeli group ISMC, and Foxconn have signed letters of intent to develop Indian-based sites. Now, the chips will fall where they may.

[sleepydragon]

1 hour ago, Castanza said:

The Daily Upside

 

SEMICONDUCTORS

China Claps Back After US Curbs Nvidia’s Exports

All the chips are on the table now.   China’s biggest tech firms face a murky future after the US government on Wednesday told Nvidia to halt all China-bound exports of two computing chips crucial to developing artificial intelligence. Experts say the move is a major escalation in the two nations’ battle for tech supremacy – and could severely limit China from advancing its AI capabilities.

Code of Semi-Conduct

Tensions are mounting between the world’s two most powerful nations as Beijing continues to menace Taiwan, home to much of the world’s semiconductor production. The US’ latest salvo is barring sales to China, Hong Kong, and Russia of Nvidia's high-powered A100 and H100 computer chips, which are often employed in massive data centers to power advanced AI natural language and image recognition tools.   Washington says the action was primarily designed to keep American technology from being used to advance China’s military prowess. But its impact is also expected to strafe China’s biggest tech companies:

•   China’s trio of top cloud computing companies, Tencent, Alibaba, and Baidu, all use the A100 chip for cloud computing and storage services, as well as various AI-powered data analysis tasks. Other top Chinese customers include BYD Auto, IT giant Lenovo, and cloud provider Inspur.

•   In total, China and Hong Kong sales accounted for over 25% of Nvidia’s $27 billion of revenue in fiscal year 2022, and the new rules will cost Nvidia about 10% of long-term future revenue, Truist Securities analysts wrote in a note. Most Chinese firms will now have to patch together multiple, lower-end Nvidia chips in lieu of the high-powered A100 and H100 chips.

China is not happy about any of this. “The U.S. side should immediately stop its erroneous practices, treat companies from all countries equally, including from China, and do more to contribute to world economic stability,” Chinese Commerce Ministry spokesperson Shu Jueting said Thursday in a statement. A New Player: Another rising global power, India, wants in on the lucrative chip game, too. On Thursday, its government announced $10 billion in incentives for manufacturers to establish semiconductor fabrication plants in the country. Already, Singapore-based IGSS Ventures, Israeli group ISMC, and Foxconn have signed letters of intent to develop Indian-based sites. Now, the chips will fall where they may.

For baba it may not be that bad. Cloud is capx intensive and they can spend less money. Also, cloud servers with this fast chip are extremely costly, most people who need it use their own machines.

 

but it’s not good in the big picture. It’s not good for companies in US or China if both sides keep escalating trade wars. I voted for Biden because he was for globalization, now everything he’s doing is against business. I guess it’s better to vote for a idiot than a dr. Evil. Not much choice was given.

 

[Spekulatius]

1 hour ago, sleepydragon said:

For baba it may not be that bad. Cloud is capx intensive and they can spend less money. Also, cloud servers with this fast chip are extremely costly, most people who need it use their own machines.

 

but it’s not good in the big picture. It’s not good for companies in US or China if both sides keep escalating trade wars. I voted for Biden because he was for globalization, now everything he’s doing is against business. I guess it’s better to vote for a idiot than a dr. Evil. Not much choice was given.

 

AI chips are dual use tech, just like high tech laser components. The latter had export controls for a long time.

 

I think semis are very vulnerable to an escalation of Chinese- US trade war. The exposure of semi equipment companies like AMAT and LCRX is huge. Then there are those with indirect exposure like AAPL.

Edited September 2, 2022 by Spekulatius

[Castanza]

2 hours ago, Spekulatius said:

AI chips are dual use tech, just like high tech laser components. The latter had export controls for a long time.

 

I think semis are very vulnerable to an escalation of Chinese- US trade war. The exposure of semi equipment companies like AMAT and LCRX is huge. Then there are those with indirect exposure like AAPL.

 

Unless China somehow defies typical tech advancement and brings competitive chips to market I don't see how there won't be some type of conflict in the future. Whether that's 10,20, or 50 years (or never) from now who knows. But we've had the Oil wars already and silicon is the next most important thing to secure global dominance (imo). Either way, not something I spend a lot of time thinking about. Plenty of ways to make money in any environment. 

3 hours ago, sleepydragon said:

For baba it may not be that bad. Cloud is capx intensive and they can spend less money. Also, cloud servers with this fast chip are extremely costly, most people who need it use their own machines.

 

but it’s not good in the big picture. It’s not good for companies in US or China if both sides keep escalating trade wars. I voted for Biden because he was for globalization, now everything he’s doing is against business. I guess it’s better to vote for a idiot than a dr. Evil. Not much choice was given.

 

 

I think Free Trade is much different than Globalism. The later is a pipe dream imo. But also not really sure what you consider or lump into Globalism. Either way not important lol. As far as BABA and Chinese tech companies go, it could be a big deal if China can not figure out their own tech to keep them competitive. That being said Intel has the freedom/ability here but seems to be squandering it with poor business decisions haha 

[mcliu]

Insane escalate. Why antagonize 1.5 billion Chinese people.. Feeds right into Chinese propaganda that the West is trying to hold it back like during the Opium wars.

[Castanza]

15 minutes ago, mcliu said:

Feeds right into Chinese propaganda that the West is trying to hold it back like during the Opium wars.

 Are we not trying to do exactly that? 

[Viking]

China is a wolf in sheep's clothing (politically and economically). It is run by a communist government and its core values are diametrically opposed to those of Western nations. This was ignored for decades… China’s political and economic clout was small so who cared? That is no longer the case today: China is a political and economic gorilla. And for some strange reason it has also decided to shed the sheep’s clothing. The wolf is now in plain sight for all to see.
 

Western governments and companies are slowly and finally starting to  understand the reality of China. It is a formidable adversary who plays by very different rules (THERE ARE NO RULES in a communist system… think about that). Liberal democracies are at a big disadvantage (in terms of playbook).

 

Over time, political and economic relations between the West and China will continue to get worse. For 2 reasons:

1.) the West has woken from its stupor and recognizes China for the threat that it is

2.) China has decided it will kowtow to the West no more - in economic, political and military terms it has reached ‘critical mass’
So that means game on.

 

With chips, the US is not poking China in the eye. Rather, the US is simply recognizing the current reality and acting accordingly (better late than never). We now have Cold War Book 2. The West vs the authoritarian block (lead by China). 
 

Western companies operating in China better get their heads out of their ass. Nvidea is just another example of what is coming for companies who refuse to deal with reality. 

Edited September 2, 2022 by Viking

[Spekulatius]

Russia has a LT problem that their economy is going to hell:

https://finance.yahoo.com/news/russia-risks-bigger-longer-sanctions-135601014.html
 

Now they stopped selling NG to Europe and then what? It’s not literally a gas station that stopped selling their gas (they do continue to sell crude oil of course).

[Castanza]

1 hour ago, Spekulatius said:

Russia has a LT problem that their economy is going to hell:

https://finance.yahoo.com/news/russia-risks-bigger-longer-sanctions-135601014.html
 

Now they stopped selling NG to Europe and then what? It’s not literally a gas station that stopped selling their gas (they do continue to sell crude oil of course).

 

Don't know. but you have to admire? respect? the commitment to scorched earth policy. UK is the second worst economy next to Russia with a projected 22% inflation and energy bills that are now 3x what they were ($3549 now). 8 out of 10 factories is in danger of going bankrupt and corporate bankruptcies were up 80% across the board last month. 

Edited September 6, 2022 by Castanza

[Spekulatius]

13 minutes ago, Castanza said:

 

Don't know. but you have to admire? respect? the commitment to scorched earth policy. UK is the second worst economy next to Russia with a projected 22% inflation and energy bills that are now 3x what they were ($3549 now). 8 out of 10 factories is in danger of going bankrupt and corporate bankruptcies were up 80% across the board last month. 

The UK economy seems to be in worse shape than the rest of Europe, but where did you get 22% inflation? They are at ~10% right now and I don't think it's going much higher.

 

Europe has issues with energy supply right now, but I think in 2023, the worst will be behind them. Russia, on the other hand is likely to go into a an extended decline that is going to last years.

[Castanza]

13 minutes ago, Spekulatius said:

The UK economy seems to be in worse shape than the rest of Europe, but where did you get 22% inflation? They are at ~10% right now and I don't think it's going much higher.

 

Europe has issues with energy supply right now, but I think in 2023, the worst will be behind them. Russia, on the other hand is likely to go into a an extended decline that is going to last years.

Bank of England is projecting 13% and Goldman projected up to 22%

Edited September 6, 2022 by Castanza

[Spekulatius]

8 minutes ago, Castanza said:

Bank of England is projecting 13% and Goldman projected up to 22%

I am guessing that GS talks their own book here.

 

One way that 22% inflation could happen is if the GBP collapses relative to the Euro. Since the UK pretty much imports everything (they have financialized their economy), this would lead to rapidly rising prices.

 

My guess is that the UK would protect their currency with significant rate increases but I am no expert on this.

[Castanza]

4 minutes ago, Spekulatius said:

I am guessing that GS talks their own book here.

 

One way that 22% inflation could happen is if the GBP collapses relative to the Euro. Since the UK pretty much imports everything (they have financialized their economy), this would lead to rapidly rising prices.

 

Probably right to a degree on GS. B of E might be a better number to look at. But that's still trending in the wrong direction if correct.

 

10 minutes ago, Spekulatius said:

My guess is that the UK would protect their currency with significant rate increases but I am no expert on this.

 

Does anyone truly understand any of this? 

[Xerxes]

4 hours ago, Spekulatius said:

Russia has a LT problem that their economy is going to hell:

https://finance.yahoo.com/news/russia-risks-bigger-longer-sanctions-135601014.html
 

Now they stopped selling NG to Europe and then what? It’s not literally a gas station that stopped selling their gas (they do continue to sell crude oil of course).

 

Natural gas is a smaller component of Russia's federal budget and exports when compared to sales of crude oil. The natural gas exports to Europe were always a tool of leverage ... and getting paid for having a leverage over Europe.

 

When compared to overall export in 2021, less than 14% of it was from natural gas + liquidifed natrual gas vs. +36% for crude and refined oil. I could not find a good source on Russia' federal budget itself, to put those export dollar sales against it, but putting them against export sales provides a good proxy. The Economist also had a good article few weeks ago about Rosneft and its importance given the outsize role crude/refined oil sales play vs. natural gas for Kremlin.

 

From Jan 2022 (pre-invasion)

Factbox: Russia's oil and gas revenue windfall | Reuters 

- According to the central bank, Russia's total exports reached $489.8 billion in 2021. Of that, crude oil accounted for $110.2 billion, oil products for $68.7 billion, pipeline natural gas for $54.2 billion and liquefied natural gas $7.6 billion.