Political Posts

[james22]

Many of the countries now proposing the bric have common interests, not least a dislike of U.S. hegemony. But while the enemy of my enemy may be my friend, a successful BRICS needs more than that. It needs genuine aims, rules and commitment. No amount of backslapping and fist-pumping will change that.

 

India sees China as a strategic rival. It is aggressively positioning itself as a palatable alternative to China for manufacturing. Meanwhile, the skirmishes between India and China on the Tibetan plateau have turned more deadly. If China is promoting a BRICS concept as cover for Chinese hegemony, India is determined to use that same organization to block Chinese influence. Saudi Arabia and Iran feel the same way about each other.

 

South Africa is rapidly becoming a failed state. Its power crisis threatens value-added exports. How can the country possibly lead any alliance? Mexico? Every Mexican company I talk to tells me how it is expanding in the United States.

 

Brazil’s President, Luiz Inacio Lula da Silva, recently lamented, “Every night, I ask myself why all countries have to base their trade on the dollar.”

 

Simple answer: Brazilian mining giant Vale SA can sell iron ore to China in Chinese yuan, or renminbi (RMB), all it wants, but what would it do with those RMB afterwards? Vale’s debts are all in U.S. dollars. The heavy construction equipment the company uses is often built by Caterpillar Inc. or Japan’s Komatsu Ltd., so Vale needs dollars and yen to buy it. RMB is valueless for Vale’s operations in Sudbury or Sulawesi (part of Indonesia).

 

Meanwhile, China has bought considerable influence outside of BRICS via its “One Belt, One Road” initiative, which invests in more than 150 countries. Why would China give that influence away to others via BRICS?

 

https://www.theglobeandmail.com/business/commentary/article-russia-china-brics-west/

[Luke]

15 minutes ago, james22 said:

Many of the countries now proposing the bric have common interests, not least a dislike of U.S. hegemony. But while the enemy of my enemy may be my friend, a successful BRICS needs more than that. It needs genuine aims, rules and commitment. No amount of backslapping and fist-pumping will change that.

 

India sees China as a strategic rival. It is aggressively positioning itself as a palatable alternative to China for manufacturing. Meanwhile, the skirmishes between India and China on the Tibetan plateau have turned more deadly. If China is promoting a BRICS concept as cover for Chinese hegemony, India is determined to use that same organization to block Chinese influence. Saudi Arabia and Iran feel the same way about each other.

 

South Africa is rapidly becoming a failed state. Its power crisis threatens value-added exports. How can the country possibly lead any alliance? Mexico? Every Mexican company I talk to tells me how it is expanding in the United States.

 

Brazil’s President, Luiz Inacio Lula da Silva, recently lamented, “Every night, I ask myself why all countries have to base their trade on the dollar.”

 

Simple answer: Brazilian mining giant Vale SA can sell iron ore to China in Chinese yuan, or renminbi (RMB), all it wants, but what would it do with those RMB afterwards? Vale’s debts are all in U.S. dollars. The heavy construction equipment the company uses is often built by Caterpillar Inc. or Japan’s Komatsu Ltd., so Vale needs dollars and yen to buy it. RMB is valueless for Vale’s operations in Sudbury or Sulawesi (part of Indonesia).

 

Meanwhile, China has bought considerable influence outside of BRICS via its “One Belt, One Road” initiative, which invests in more than 150 countries. Why would China give that influence away to others via BRICS?

 

https://www.theglobeandmail.com/business/commentary/article-russia-china-brics-west/

It wont be an immediate game changer and those countries have their own problems as does the US, France etc. But its one hell of a signal to build this alliance in the first place and to say this will "fail" without the alliance having even started is more than funny! 

[Xerxes]

As the saying goes … if you come at the king, you best not miss.

 

Though personally I don’t think he was gunning at the king (rather gunning at MoD), not many people in Putin inner circle have the “minerals” or intellectual IQ in them to try to topple him. Those who had it were sidelined years ago. Putin is the Godfather, plain and simple, surrounded by lesser men. 
 

His mistake though has been to apply the peace-time strategy of creating competition in his inner circle in war-time, which has boiled over between MoD and Wagner. Instead of not procrastinating and being decisive. 
 

At the end of the day, the aborted coup caused a reputationnal damage. I admit I thought that his African connections would have save him. 

[Castanza]

Crashing planes is becoming a Russian pastime. 

 

https://observer.com/2018/05/evidence-shows-russia-had-role-in-smolensk-crash-killed-kaczynski/

[backtothebeach]

It's like bunch of thugs banding together to rob a bank, and secretly each of them is planning to kill all the others and keep the booty for themselves.
 

Edited August 24, 2023 by backtothebeach

[Intelligent_Investor]

Pentagon saying they don't believe the plane was shot down...looks like initial reports of a missile may be inaccurate/misinformation

[Spekulatius]

11 hours ago, Luca said:

The thought of flying around with an airplane and then getting shot down is scary  But yeah, could have predicted that.

It was predicted here on this board. However, even things that can be predicated can be scary.

[Spekulatius]

1 hour ago, Intelligent_Investor said:

Pentagon saying they don't believe the plane was shot down...looks like initial reports of a missile may be inaccurate/misinformation

It’s a hypothesis at this point that the plane was shot down, but the video shown shows a vapor trail concstent with a missile. Also it appears like the plain had lost one wing which is a pretty rare occurance. So, I think the hypothesis has decent support.

 

We probably will never know for sure until much later after Putin is gone. I think it is in Putins interest that this remains shrouded in mystery.

Edited August 24, 2023 by Spekulatius

[UK]

4 hours ago, Haryana said:

 

 

 

 

https://www.bloomberg.com/news/articles/2023-08-24/modi-xi-speak-ask-officials-to-resolve-border-dispute-quickly

 

India has discouraged its companies from trading with — and investing in — China, banned some mobile phone applications developed by its neighbor and cut back on the issuing of visas to Chinese nationals. The border dispute has eroded India’s trust in China and undermined public and political will to maintain relations, India’s National Security Adviser Ajit Doval told his Chinese counterpart and Foreign Minister Wang Yi on the sidelines of a BRICS meeting in July, according to a Ministry of External Affairs statement.

[Haryana]

7 minutes ago, UK said:

 

https://www.bloomberg.com/news/articles/2023-08-24/modi-xi-speak-ask-officials-to-resolve-border-dispute-quickly

 

India has discouraged its companies from trading with — and investing in — China, banned some mobile phone applications developed by its neighbor and cut back on the issuing of visas to Chinese nationals. The border dispute has eroded India’s trust in China and undermined public and political will to maintain relations, India’s National Security Adviser Ajit Doval told his Chinese counterpart and Foreign Minister Wang Yi on the sidelines of a BRICS meeting in July, according to a Ministry of External Affairs statement.

 

Conflicts and cooperation will continue in cycles. Even the most cuddly neighbours of the world, Canada and USA have had recent moments of intensity during the lumber dispute and the rewrite of NAFTA by Trump. Not to mention the glorification of the War of 1812 by the Harper government when the great Canadian warriors burnt down the White House to black soot.

https://ncph.org/history-at-work/remanufacturing-1812/

[UK]

5 minutes ago, Haryana said:

 

Conflicts and cooperation will continue in cycles. Even the most cuddly neighbours of the world, Canada and USA have had recent moments of intensity during the lumber dispute and the rewrite of NAFTA by Trump. Not to mention the glorification of the War of 1812 by the Harper government when the great Canadian warriors burnt down the White House to black soot.

https://ncph.org/history-at-work/remanufacturing-1812/

 

Sure, but this happened more than 200 years ago, I agree, that things could change with India and China too, but I do not have such a long horizon:). 

[UK]

33 minutes ago, Haryana said:

 

The glorification of the War of 1812 happened just 10 years ago and a resurgent Trump could retrample NAFTA and NATO.

 

 

I agree, the thing with NATO could be really scary, especially for me:). But how it would improve relations between India and China? Really I do not have any idea how to foresee such things and more importantly how to profit from them, even if forecast is right. All I see is really attractive opportunity on a micro level with Tencent via Prosus, but just think (or am afraid) at this time it is to difficult to make such investment, especially in larger size, due too all this geopolitical/political issues, which are still not going to the right direction, to say the least. I hope this will change. 

 

Edited August 25, 2023 by UK

[Viking]

On 8/23/2023 at 11:23 AM, Spekulatius said:

Why do think birth rates will accelerate? Making this happen is not small feat and the youth unemployment suggests it will get worse near term.

 

Anyways, here is a good podcast on that matter:

https://www.bloomberg.com/news/articles/2023-08-21/the-deep-problems-underlying-china-s-economy?srnd=oddlots#xj4y7vzkg

 

The follow mentions 4 d's that impact the Chinese economy - demand, debt, demographics and decoupling.

Another interesting quote - The Chinese party thinks they are in charge of capital allocation for the Chinese economy.

 

So, no stimy checks, we build more infrastructure because they serve as monuments for the CCP as well.

@Spekulatius that is a great podcast on the current state of China. It was a very sober discussion - the CCP certainly looks like it has its hands full. I love the historical perspective the guest offers (so important when trying to understand China). i also found this comment at the end quite illuminating:

 

“The fundamental tension… for years the CCP justified its control (of society) by promising economic growth so you have that social contract. But I think the difficulty is what if that control is coming now at the expense of economic growth. If a lot of the currently difficulties are in fact, a political economy problem then I think it raises that question and becomes extremely tricky for the CCP to actually navigate.”

 

The discussion around the massive sovereign wealth funds (China, Saudi Arabia etc) was also very interesting. They limit the autocratic regimes from doing anything crazy… because the significant assets they own in the West will simply get seized by Western governments. This would be another check on China potentially invading Taiwan.

Edited August 25, 2023 by Viking

[UK]

https://www.bloomberg.com/news/articles/2023-08-25/china-regulator-to-meet-global-investors-in-bid-to-halt-outflows#xj4y7vzkg

 

A top Chinese hedge fund has blamed foreign investors for sinking the stock market. Li Bei, founder of Shanghai Banxia Investment Management Center, said in an article posted on social media platform WeChat that overseas investors have stirred up market volatility and, “taken together, they are a bunch of aimless flies.”

 

[Spekulatius]

@UK Investors are supposed to act like aimless flies and not like a beehive where a queen controls everything. I guess Li Bei does not believe in Adam Smith.

 

 

On another note, do people here look at other stocks than Big tech (Tencent, Alibaba, Bilibili)? The only other stock discussed seems to be Postal Bank.

I have a hard time believing that these super large tech and/or regulated business are the most attractive opportunities in the Chinese stock market, if you think the Chinese stock market represents a secular opportunity? Anything else out there that is smaller and under the radar , pays massive dividends and is cheap and underfollowed? Those would be more interesting for me.

[UK]

8 minutes ago, Spekulatius said:

@UK Investors are supposed to act like aimless flies and not like a beehive where a queen controls everything. I guess Li Bei does not believe in Adam Smith.

 

I agree and I took no offence after reading this:)

[Luke]

39 minutes ago, Spekulatius said:

@UK Investors are supposed to act like aimless flies and not like a beehive where a queen controls everything. I guess Li Bei does not believe in Adam Smith.

 

 

On another note, do people here look at other stocks than Big tech (Tencent, Alibaba, Bilibili)? The only other stock discussed seems to be Postal Bank.

I have a hard time believing that these super large tech and/or regulated business are the most attractive opportunities in the Chinese stock market, if you think the Chinese stock market represents a secular opportunity? Anything else out there that is smaller and under the radar , pays massive dividends and is cheap and underfollowed? Those would be more interesting for me.

Yes, I started research into Lufax (a thread exists) and Ping An Insurance, the first is more interesting. I'll open a starter into Lufax when HK stock market opens in around 12 hours. And i fully agree with your statement, Big Tech is cheap but there are even better bargains. 

[james22]

 

Executive Summary: 

 

G7 nations are fully developed nations with greater cumulative GDP. All G7 nations have representative governments. BRICS span the range from outright autocracy to flawed republics. Only India has decades of stable representative governance. G7 citizens have a much better standard of living. Their nations are attracting people and talent. They are less corrupt and have more equitable income distribution.

 

BRIC nations are significantly poorer, but their economies have upside potential more than the already fully developed G7 nations. They have over five times the population of the G7, but in addition to being poorer, they live in a less stable civil societies more likely to be prone to internal disruption.

 

The BRIC nations are not really the largest threat to the G7 nations. All G7 nations need to do is improve and have good stewardship of their positions generations worked to build, not import problems or sabotage the economic systems that produced a standard of living and civil society of such grandeur as never seen in human history.

 

https://cdrsalamander.substack.com/p/whos-afraid-of-the-big-bad-brics?

[tnp20]

10 hours ago, Viking said:

“The fundamental tension… for years the CCP justified its control (of society) by promising economic growth so you have that social contract. But I think the difficulty is what if that control is coming now at the expense of economic growth. If a lot of the currently difficulties are in fact, a political economy problem then I think it raises that question and becomes extremely tricky for the CCP to actually navigate.”

 

This is a brilliant comment indeed. Many long time China commentators such as Michael Pettis, Eswar Prasad, George Magnus, Stephen Roach are saying the same thing...China has some really tough decisions on the economy and these are political decisions. They have already started back tracking on a lot of Xi nonsense....but it remains to be seen if they can go the whole hog. XI above all craves stability and control so they can not afford sustained poor economy as that would lead to delegitimizing CCP and riots in the streets.

 

Examples of back tracking...

 

(i) Houses are for living versus now loosening policy to stabilize housing

(ii) Punishing Private business/Entreprenuers that drive most of the innovation and jobs growth and favouring SOE versus now saying Private enterprises are equal to SOE and are vital to China's future.

(iii) Common prosperity crap versus now saying getting rich by being entrepreneur is to be encouraged as that drives growth and employment which benefits society.

(iv) Punishing capital markets versus now encouraging capital markets

 

SO far they are holding firm on major fiscal boost to kick start the consumption part of the economy but that may be coming and they may even mix old unproductive infrastructure spend just to meet the GDP target and a restless population.

 

To me questions and answers are obvious:-

 

(i) What do they need to do and why ?   Avoid instability via economic crisis and malaise (unemployment) to keep CCP in power.

 

(ii) How can they do it ? Various new methods (new tech innovation & Consumption), new methods may take time and be slow but old methods (infrastrcuture ) are effective at boosting GDP and are fast acting but extremely wasteful  - who cares about debt at this point, there is sufficient fiscal space for them to take on more debt (according to all the China followers )- forget local government debt, LGFV debt - central government has space - so just a left pocket, right pocket  thing)

 

(iii) What if economy goes off rails ? Debt is not a problem - its all internal - they can keep pumping money in different areas until it turns ...

 

(iv) What is the right way to do it ?  slow growth, transition, coordination, flexibility and vision

 

(v) What is the best way to play slow growth ?  Be in fast growing sectors within the slow growth economy

 

(vi) Why invest in China at all when you can grow in fast growing sectors in US/West ? Yes by all means its not an either or, its an "and" story....China fast growers are at incredible valuation if you can get past geopolitics.

 

(v) What do I expect out of this ? At a minimum sugar high in about 12-24 months....and may be some long term wins because they are in the right space at the right time....

Edited August 25, 2023 by tnp20

[tnp20]

4 hours ago, Spekulatius said:

Anything else out there that is smaller and under the radar , pays massive dividends and is cheap and underfollowed? Those would be more interesting for me.

 

There are lots of these ....but I believe this is the wrong strategy...why opt for the Graham appraoch versus the Munger approach. Remember WB started with Ben Graham approach, met Charlie Munger and adopted the CHarlie Munger approach as that was superior. Monopolies with big moats and long runways. Visa and Mastercard of China and the likes.

 

My view is if you go for China, go for the best positioned companies with reasonable valuation. What if China geopolitics settles down, worse fears of CCP does not pass and China is able to escape the midddle income trap and become a wealthy country by 2035. (Many commentators have said the demographics issues can be countered  for many decades to come).

 

If it all goes wrong - may be a more global issues including USA based companies with heavy China exposure and at minimum global growth would take a big hit.

 

More likely scenario is muddling through with 3-4% slow growth. Its only slow in comparisson to their past but not slow relative to many western countries and by picking fast growing sectors - should be ok.

 

Edited August 25, 2023 by tnp20

[Spekulatius]

the world economy is not a zero sum game and i don't think the G7's are afraid of the BRICS.

4 hours ago, Luca said:

Yes, I started research into Lufax (a thread exists) and Ping An Insurance, the first is more interesting. I'll open a starter into Lufax when HK stock market opens in around 12 hours. And i fully agree with your statement, Big Tech is cheap but there are even better bargains. 

I am leery of financials, especially in the top down economy like China. The large Chinese banks are all state controlled for example. I believe the place to look is at stuff like industrials and perhaps service cos that operate in sectors that are under the radar of both the Chinese regulators as well as Western governments. Stuff like car dealers, industrials, service business and similar business.

 

I was looking at consumer good companies by they seem very expensive in most cases, but there are probably bargains to be found as well.

 

perhaps something that benefits from a secular shift from a capital investment to a consumer oriented economy would be great.

[tnp20]

https://archive.ph/7u13B

 

China’s Consumer Sentiment Starts to Improve, Surveys Show

 

This is with sniper shots. They are st

[sleepydragon]

2 hours ago, tnp20 said:

 

There are lots of these ....but I believe this is the wrong strategy...why opt for the Graham appraoch versus the Munger approach. Remember WB started with Ben Graham approach, met Charlie Munger and adopted the CHarlie Munger approach as that was superior. Monopolies with big moats and long runways. Visa and Mastercard of China and the likes.

 

My view is if you go for China, go for the best positioned companies with reasonable valuation. What if China geopolitics settles down, worse fears of CCP does not pass and China is able to escape the midddle income trap and become a wealthy country by 2035. (Many commentators have said the demographics issues can be countered  for many decades to come).

 

If it all goes wrong - may be a more global issues including USA based companies with heavy China exposure and at minimum global growth would take a big hit.

 

More likely scenario is muddling through with 3-4% slow growth. Its only slow in comparisson to their past but not slow relative to many western countries and by picking fast growing sectors - should be ok.

 

yeah, better go with the bigger company, which you know the cash they generate is real. There was an article about a number of Chinese firms bought billions of Nvidia ‘s chips fearing the sanctions. Those imo are the firms to invest in because they got the money and are investing.

 

[Viking]

7 hours ago, tnp20 said:

 

This is a brilliant comment indeed. Many long time China commentators such as Michael Pettis, Eswar Prasad, George Magnus, Stephen Roach are saying the same thing...China has some really tough decisions on the economy and these are political decisions. They have already started back tracking on a lot of Xi nonsense....but it remains to be seen if they can go the whole hog. XI above all craves stability and control so they can not afford sustained poor economy as that would lead to delegitimizing CCP and riots in the streets.

 

Examples of back tracking...

 

(i) Houses are for living versus now loosening policy to stabilize housing

(ii) Punishing Private business/Entreprenuers that drive most of the innovation and jobs growth and favouring SOE versus now saying Private enterprises are equal to SOE and are vital to China's future.

(iii) Common prosperity crap versus now saying getting rich by being entrepreneur is to be encouraged as that drives growth and employment which benefits society.

(iv) Punishing capital markets versus now encouraging capital markets

 

SO far they are holding firm on major fiscal boost to kick start the consumption part of the economy but that may be coming and they may even mix old unproductive infrastructure spend just to meet the GDP target and a restless population.

 

To me questions and answers are obvious:-

 

(i) What do they need to do and why ?   Avoid instability via economic crisis and malaise (unemployment) to keep CCP in power.

 

(ii) How can they do it ? Various new methods (new tech innovation & Consumption), new methods may take time and be slow but old methods (infrastrcuture ) are effective at boosting GDP and are fast acting but extremely wasteful  - who cares about debt at this point, there is sufficient fiscal space for them to take on more debt (according to all the China followers )- forget local government debt, LGFV debt - central government has space - so just a left pocket, right pocket  thing)

 

(iii) What if economy goes off rails ? Debt is not a problem - its all internal - they can keep pumping money in different areas until it turns ...

 

(iv) What is the right way to do it ?  slow growth, transition, coordination, flexibility and vision

 

(v) What is the best way to play slow growth ?  Be in fast growing sectors within the slow growth economy

 

(vi) Why invest in China at all when you can grow in fast growing sectors in US/West ? Yes by all means its not an either or, its an "and" story....China fast growers are at incredible valuation if you can get past geopolitics.

 

(v) What do I expect out of this ? At a minimum sugar high in about 12-24 months....and may be some long term wins because they are in the right space at the right time....

@tnp20 I think the guest in the podcast nailed it: Xi has destroyed the confidence of foreign investors. He gave the world a glimpse into what the  CCP’s end game is (and it doesn’t include foreigners). He was too early. And now he has lost the ability to take advantage of stupid foreigners (well some of them anyways - Macron still seems keen).

Edited August 26, 2023 by Viking

[Spekulatius]

WSJ article of a pretty comprehensive overview or the economic situation in China:

 

https://www.wsj.com/world/china/china-economy-debt-slowdown-recession-622a3be4?page=1

 

 

 

Another small nail in the coffin - the company I work for has announced this week that a manufacturing site in China is going to be shuttered and the operations are moved to other SE Asian country sites. One more site left to go…

 

Peak China:

Edited August 26, 2023 by Spekulatius