Political Posts

[Joseywales]

2 hours ago, hillfronter83 said:

Just came back from my two-week trip to China. It's the first time seeing my family and friends in more than four years. Stayed in a small city near Shanghai and travel around in the region. Here are some observations:

 

• Overall economy is very challenging, although some high end restaurants seem to be doing fine.
• real estate will be doomed for years to come according to a real estate company executive friend. Even rural areas have a lot of high rise apartments (around 30 stories). I suspect these will be very costly to maintain and most Chinese are known for their frugalness. Don't feel good about the value of these building in 20 years. and most people i know already have multiple apartments.
• world class infrastructure everywhere, ie high speed rail, subway, etc. some of those projects were built to increase land value. While they look great, I'm not sure about the economic soundness. They are also very costly to maintain.
• e-commerce is very active, many people do grocery online nowadays.
• It's hard to increase consumption. most wealth is concentrated in people born in 60s, 70s. They grew up frugal and most people don't feel the desire to consume. The biggest spending is on food, but you can only eat 3 meals a day. secondly, the income decease is very real. a few years ago, local government employees were making over RMB300k, now it's about half, sometime lower.
• most people are stressed except the retirees. rich people (some centimillionaires) are worried about their shrinking net worth. and poor people are working 10-hour days to make their mortgage payment.
• although national birth rate are low. people i know are still having kids. but it could be they are local in a small city that is more affordable.
• most of the wealthy people's kids are living/studying in US or Europe.
• some of my friends, who used to drive BMW, Audi, are now driving Chinese made EVs. 

 

Thank you for your insight! Much appreciated  

[changegonnacome]

19 minutes ago, Dinar said:

Muslims have killed 3,000 Americans on 9/11, what % of world's GDP was Afghanistan at that point?  Yet it mattered because Muslims based in Afghanistan hatched a plot that killed 3,000 Americans.

 

Exactly right @Dinar excellent post - foreign policy & security, like investing, is never really a quantitative game (GDP/no. of nukes/population)....there is no wisdom or edge in just the numbers...everybody has the numbers....its a qualitative exercise of threat assessment and preemptive strategy planning based on risk/reward considerations for each action....keeping on eye on the tails always!...trying to assess the best path forward as a sovereign in a sea of other sovereigns & non-state actors...reacting and acting......it's a deep deep challenge....its a nonlinear dynamic system.....in some ways worse than trying to predict the weather a month in the future. Human beings are unpredictable creatures.

 

Its system where exactly like you said - you can myopically focus on the Chinese or the Russian threat......but find out later that a small group of religious zealots in shawls in the caves of Afghanistan actually posed a far greater threat to American lives.

 

So when I see somebody say - why should we care what XYZ group thinks they're a bunch of third worlders....I would say to them that the CIA/NSA & 3000 Americans learned the foolishness of that approach post-9/11. Thankfully the 9/11 commision addressed those types of failings heads on.

 

As regards Ukraine-Russia to bring things back on topic - I clearly consider the situation in Ukraine to be an example where due to liberal democratic idealism & blatant disregard for Russia security concerns....we in the West badly miscalculated the risk/reward of the approach we were taking there....the West but mainly the USA/Germany & France myopically slept walked Ukraine and itself into a conflict that may not have ever needed to happen.......an alternative reality existed that required perhaps only minor concessions to Russian security concerns in the region while still optimizing for Ukraine's own sovereignty and democratic aspirations.....we in the West would be $122bn richer as a result.....and perhaps as many as 500,000 dead and injured in Ukraine & Russia would be better off too. Sweating the details matters in international relations & security.

 

That's all i've ever really tried to convey in this thread - a sense that the history of the conflict is much more complex and nuanced than a CNN/Fox/NYT byline that reads "Russia's unprovoked invasion of Ukraine -  a Putin plot to recreate the USSR?" 

[ValueArb]

1 hour ago, John Hjorth said:

 

Reuters [27 November 2023] : Putin approves big military spending hikes for Russia's budget.

 

 

So a budget shock, and balance based on expections of continued high oil prices. [Not mentioned, but plan B : To tax the hell out of the businesses owned by the oligarchs ! [because there are no money other places] ... wonderful - just wonderfull!]]

 

You can't spend what you don't have and you can't build what you can't make. Where are they going to get all the washing machines they need to strip for military CPUs?

 

Secondly, how long can Russia devote such a huge amount of their GDP to military spending without shrinking the economy and triggering internal unrest?

[james22]

4 hours ago, hillfronter83 said:

 

although national birth rate are low. people i know are still having kids. but it could be they are local in a small city that is more affordable.

 

According to official figures released on Wednesday, Chinese women had fewer than half the births in 2023 than they did in 2016 — the year Beijing finally repealed that slow-rolling disaster known as the One-Child Policy.

 

https://pjmedia.com/vodkapundit/2024/01/17/chinese-women-are-voting-against-communism-with-their-uteri-n4925570

[John Hjorth]

42 minutes ago, ValueArb said:

 

You can't spend what you don't have and you can't build what you can't make. Where are they going to get all the washing machines they need to strip for military CPUs?

 

Secondly, how long can Russia devote such a huge amount of their GDP to military spending without shrinking the economy and triggering internal unrest?

 

Denmark, Sunday : "Connected, commited, for the Kingdom of Denmark!",

Russia, Sunday :"Connected, commited, for Putin!".

 

The man does not give a damn about the people of Russia, his people.

[Ulti]

2 hours ago, Joseywales said:

most people are stressed

Thank you for your personal insight..

I am curious; you did not touch base on local feeling on politics social media heavy handed government officials in the people’s business,etc…. What’s contributing to the stress besides the economy…And I’m curious as to how they feel about the west and US in particular….( regular folks are great gov and gov officials suck.. haha)

[VersaillesinNY]

 

[cubsfan]

^^^ Nice video. Howard frames it well. In regards to the US involvement - it's simple - seal the southern border & the military aid package to Ukraine will happen.  Both need to happen.

 

 

[Thrifty3000]

Regarding the China real estate crisis I’ve recently read/heard fun facts along the lines of:

 

- China has approximately 80 million vacant homes, which is MASSIVE relative to the country’s 450 million households.

- building 80 million excess homes is by far the biggest overallocation of resources in modern history.
- Over 90% of the Chinese population already owns one or more homes.

- Only 7% of the population has investments in securities/financial assets.

- 30% of China’s economy has been tied to real estate.

- The vast majority of household wealth is tied up in real estate.

- Due to fear of the consequences of housing price declines, the CCP has instituted price controls on vacant houses.

- Because prices aren’t allowed to decline, retirees and others are unable to sell the properties to fund their retirements, etc.

- When the prices eventually adjust, homes in key areas of China could be worth 70% less. (By comparison the GFC was a nothing burger). 

- Also, because prices are artificially high, hundreds of millions of people don't know how much life savings they have left.

- And, the major state-run banks are loaded up with real estate loans.
- Because of price controls and an imploding economy, a large and growing percentage of the population is increasingly disgruntled.

 

So, that sucks.

 

Edited January 18, 2024 by Thrifty3000

[brobro777]

Nikkei makes decades new highs while Hang Seng makes decades new lows

 

I never imagined this but here we are

[Gamecock-YT]

noted eastern european expert Howard Buffett

[Xerxes]

Much like investment track record which is meaningless over a year or two, and that it needs to be shown consistent on a very long term, I would say when it comes to geopolitics, right/wrong compass and morality as expressed by individuals also needs to be consistent over the long term. 
 

It cannot be that sometimes, it is very black-and-white Tolkienish talking up the moral compass angle, and sometimes it is realpolitik donning the Kissingerian hat and sometimes it is just total ignore because we cannot be bothered, because it is not exciting enough or the victims look different. 

Then again we are all imperfect humans. So we cannot expect to have perfect points of views. 

 

 

[james22]

 

[ValueArb]

Quote

Russia’s Cash Inflow Plummeted During Second Year of War

• 2023 current account surplus down from previous year’s record
• Bank of Russia has forecast end-of-year balance of $75 billion

By Bloomberg News

January 19, 2024 at 7:31 AM MST

 

Russia’s current account surplus slumped in 2023, the first full year under sweeping sanctions imposed by the US and its allies over the invasion of Ukraine that have curbed the country’s export revenues. 

 

The current account balance — the difference between cash flowing into the country and outflows — amounted to just $50.2 billion last year, dropping from a record $238 billion at the end of 2022, according to preliminary central bank data published on Friday. The decrease was even more than officials expected, and brought the annual surplus to its lowest level since the pandemic that started in 2020. 

 

Exports dropped by $169 billion to $423 billion, which is “mainly due to less favorable prices for key Russian export goods,” the Bank of Russia said in its statement. At the same time, imports recovered to $304 billion. 

The central bank may revise its current account estimates as additional data becomes available after a delay. Data for October and November was revised on Friday, while data for the July-October period was revised last month. 

Russia’s revenues from energy exports plummeted after an oil price cap imposed by the Group of Seven nations in response to Russia’s war on Ukraine took full effect last year. Gas flows to Europe have been capped all year. 

The average price of Urals, Russia’s main crude-export blend, dropped more than 17% last year to $62.99 a barrel, according to the Finance Ministry. That’s still above the $60-a-barrel cap, but the current discounts are significantly above the historic average of some $2-to-$3 a barrel. The gap reached nearly $14 a barrel in December, according to the data. 

 

Proceeds from oil and gas are still a key source of funding for the war, accounting for almost a third of total budget revenue. 

 

Read more: Russia Fiscal Gap Widens Amid Slump in Oil and Gas Revenues

The current account surplus shrank to less than $1 billion in December from $4.7 billion in November, the central bank said. According to its data, the surplus amounted to $10.7 billion in the fourth quarter, down by about a third from the previous period and falling short of the expectations of economists surveyed by Bloomberg. 

 

The Bank of Russia forecast that the balance may slightly increase to $75 billion this year, assuming that average global crude prices remain at current levels.

 

[Parsad]

https://finance.yahoo.com/news/china-stock-selloff-worsens-hong-050429499.html

 

Cheers!

[Luke]

[Parsad]

12 minutes ago, Luca said:

 

Opportunity or deflationary/stagnant market?!  Cheers!

 

[Luke]

19 minutes ago, Parsad said:

 

Opportunity or deflationary/stagnant market?!  Cheers!

 

 

Do you need growth for below 10x earnings? 

[forest81]

Thinking of buying a china basket. What do you think??

 

 

Baidu x 9 pe

Baba x 7

JD.Com x 7

Tencent x 15

PDD x 26

 

 

There are some seriously good companies there. Thinking of holding for 10+ years. Only danger for me is political risk/ war risk. 

 

 

[Luke]

56 minutes ago, forest81 said:

Thinking of buying a china basket. What do you think??

 

 

Baidu x 9 pe

Baba x 7

JD.Com x 7

Tencent x 15

PDD x 26

 

 

There are some seriously good companies there. Thinking of holding for 10+ years. Only danger for me is political risk/ war risk. 

 

 

 

I bought at higher prices and still think these companies are very very cheap. BUT uncertainty is as high as it gets with China/West relations, sanctions, possible war, crazy government/shady leadership etc. 

 

IF China makes the recovery and government stays solid+relations with west dont go worst case, these stocks should do super well from here IMO.

Edited January 22, 2024 by Luca

[Joseywales]

3 hours ago, forest81 said:

Thinking of buying a china basket. What do you think??

 

 

Baidu x 9 pe

Baba x 7

JD.Com x 7

Tencent x 15

PDD x 26

 

 

There are some seriously good companies there. Thinking of holding for 10+ years. Only danger for me is political risk/ war risk. 

 

 

I think position sizing is key. There is a very real chance it could blow up or stagnate 10+years and you have to remember opportunity cost. I'm choosing to keep my Chinese equities 3%-5% of my total portfolio. 

[Luke]

2 minutes ago, Joseywales said:

I think position sizing is key. There is a very real chance it could blow up or stagnate 10+years and you have to remember opportunity cost. I'm choosing to keep my Chinese equities 3%-5% of my total portfolio. 

Stagnate meaning they blow the 10% of their marketcap in earnings that are coming in every year away with 0 return or let the cash accumulate on the balance sheet and the market starts discounting the cash while they do 0 buybacks or dividends? Wdym with stagnate? 

 

 

Edited January 22, 2024 by Luca

[Luke]

Tencent as an example earns 25b every year, in 10 years they will have 350b+ in cash on the balance sheet without doing anything but getting some interest. Current marketcap is 330bish. Historically they earn some 30% CAGR a year on investment cash and 60%+ on cash invested into the core business. EVEN if they can not find ANYTHING, they will do buybacks+dividends as they are doing right now. 

 

The cash they earn every year compared to the marketcap is way more than what nvidia or any other big tech will ever earn over the next 10 years. 

 

Now will they find opportunities for the cash? Will the US block every tech investment globally? Will nobody want to do anything with china and the investment power of the second largest economy? Honestly i don't care if they invest in hippie dippie europe/us or with the saudis and africa as long as these businesses grow. 

 

There is very very very low risk except some imaginary boom world war case that for the sake of humanity hopefully wont happen.

 

Everybody takes their odds but fundamentals have to matter at some point and the market can only stay as delusional as when these high quality business chugg along and the classical conditioning subsides ;D

[Joseywales]

10 minutes ago, Luca said:

Stagnate meaning they blow the 10% of their marketcap in earnings that are coming in every year away with 0 return or let the cash accumulate on the balance sheet and the market starts discounting the cash while they do 0 buybacks or dividends? Wdym with stagnate? 

 

 

I was leaning towards the return on your investment. It's very clear the message set by the CCP and these powerhouse Chinese companies that they do not care about their international shareholders. While I do think that Tencent's management is a step above the rest and these companies will weather the upcoming storm of headwinds it's very much apparent that institutional investors do not want to touch Chinese equities with a 10 foot pole and there's a chance these equities can stay very cheap and undervalued for a very long time. FYI - I own a decent amount of Baba and JD and a few microcaps as far as Chinese equities. 

[Luke]

I would continuing loading the boat here, Xi is not anti investment and anti money, he doesn't like to see low quality real estate speculators that fill their pockets while common man and society suffers. The health of the society and flourishing matters more than IRR of private equity, doesnt mean they will stop developing and going back to an agrarian society. Chose your fighter!