Political Posts

[Spekulatius]

16 minutes ago, UK said:

https://www.reuters.com/world/lavrov-warns-us-not-mock-russias-red-lines-2024-09-04/

 

A new day, a new warning on red lines.

Always good to hear that Russia is warning about red lines. It means they are hurting and we are on the right track. Ukraine needs long range missiles to destroy the Russian logistics infrastructure that supports their troops.

[UK]

https://www.bloomberg.com/news/articles/2024-09-04/jpmorgan-abandons-bullish-china-call-as-us-election-stirs-angst?srnd=homepage-europe

 

But:

 

https://www.bloomberg.com/news/articles/2024-09-04/china-stocks-listed-in-us-near-cheapest-ever-versus-nasdaq-peers?srnd=homepage-europe

 

But:

 

https://www.bloomberg.com/news/articles/2024-09-04/china-s-earnings-setback-sows-fresh-doubts-about-stock-rebound?srnd=homepage-europe

 

Edited September 5, 2024 by UK

[UK]

On 8/30/2024 at 5:09 PM, Spekulatius said:

The  banks are taking a bath here with lower interest income, possibly followed by cuts in principal later. I think China going to japanize their financial system.

 

https://www.bloomberg.com/news/features/2024-09-05/china-s-banks-build-100-billion-short-on-us-dollar-to-prop-up-yuan-cny-usd?srnd=homepage-europe

[Luke]

https://www.scmp.com/news/china/science/article/3277436/china-sets-historic-mars-mission-2028-us-plan-remains-limbo?share=CkGpJ5jQeEwhiRT%2FR26%2Fm5aokKeDG6Q5%2F7pctL1xV3gmEznYiPyXF7HerbHsvdeF4TjgwizOuXTHglzSeC1mVE36JpcLpM8XQC%2FkFPn%2FeAoilx6F8H%2BmX0%2Frh%2FxY32a5RDlcR4hP2HdfGZmeVZ%2B5rg%3D%3D&utm_campaign=social_share

 

China sets historic Mars mission for 2028 as US plan remains in limbo

In the race for the red planet, China has taken the lead, with its Tianwen-3 mission launch date brought forward two years

Edited September 6, 2024 by Luke

[Luke]

On 9/4/2024 at 6:20 PM, nsx5200 said:

I have no doubt China has a lot of fine engineers and doctors, and believe their living standards have increased significantly over the decades, albeit a bit more unevenly than even in the US.  There are structural issues in China that are concerning, and are solvable, just like similar issues everywhere else in the world, including the US.  Before Xi, a lot of people in the States went to China for better opportunities, but from what I can tell, that is no longer the case.

There are multiple reasons, crackdown on monopolies, very heightened hostility from US to China and reversed. Their talent pool is big enough for further excellence so I am not concerned here. 

On 9/4/2024 at 6:20 PM, nsx5200 said:

So I will let that evidence speak for itself in terms of why people prefer to continue putting money in S&P500 w/ PE or almost 30 vs single digit in China.

The valuation is not what matters, it's the fact that the Chinese government is willing to regulate companies for the good of the overall economy while the US is stalling and will have increasingly more and more monopolies that will harm overall growth and development. Especially if China products are taken off the table, who is there to compete with them? What will drive innovation and capex? Apple already sends almost all the cash back to shareholders instead of innovating so I guess that's what will happen further, also with historically low taxes for corporations and HUGE infrastructure backlog the US could spend on. 

On 9/4/2024 at 6:20 PM, nsx5200 said:

We can debate all we want (I don't), and just wanted to bring up an article that theorize the underlying mechanisms and causes behind the bundle of issues that China is currently facing.  The purpose is really not to make China look bad, but to see if there are valid criticisms that can poke holes in the theory.

Absolutely. 

On 9/4/2024 at 6:20 PM, nsx5200 said:

At the end of the day, it's irrelevant whether we 'win' debates in forums or not, but whether we're right in our thinking that guides our investment decisions.  I welcome new data and theories that can add to the knowledge pool, but will refrain from participating in debates that are subjective in nature.

My point is that we buy companies at similar if not higher quality than in the US at half or third of the multiple, better balance sheets and better investments even. China is the most hated market out there for no understandable reason other than ignorance and conspiracy. Taiwan conflict is here since 70 years, Xi is here since more than a decade, him grabbing control already happened a long time ago when multiples were a lot higher. The problem is the US position and media output that makes investors worry. If you have a really long time horizon and can ignore the noise I think this still is a generational opportunity. 

Edited September 6, 2024 by Luke

[Spekulatius]

You can sent cash back to shareholders and innovate at the same time, those two things are not mutually exclusive. Apple always run a tight ship on R&D expenses and in any case, those are already deducted in the income statement.

When PDD supposedly makes huge cash flows while also have a mountain of cash it has nothing to do with innovation either. Quite frankly the only expiation for the cash hording is as an sort of insurance that in case the CCP destroys the business model,  they have cash to lay the fines and also to take a second shot at new business model to resurrect their fortunes.

 

It’s not a very capital efficient model to run the economy, thats  for sure.

 

I talked with a manager who works in robots and he told me that the Chinese are massively pushing into this field with backing from the CCP. The way the CCP does this is that they pay subsidies based on revenues and market share in robotics. This lead to growth at all costs because the more revenue they generate, the more subsidies they get. Profits for these players are nonexistent but at this point, it doesn’t matter because it’s a growth race and the goal is to be the biggest here, since the expansion is pretty much paid by the government subsidies.

 

Clearly, the CCP does not believe in Adam Smith invisible hand, at least not for strategic sectors like Solar, EV’s, semiconductors , rare earth minerals, AI etc.

 

I guess you can say that the Chinese way to boost certain strategic sectors could be more deficient than the US, since thy tend to feed the biggest sharks that have already shown some success.

 

 

 

 

Edited September 7, 2024 by Spekulatius

[Luke]

9 hours ago, Spekulatius said:

You can sent cash back to shareholders and innovate at the same time, those two things are not mutually exclusive. Apple always run a tight ship on R&D expenses and in any case, those are already deducted in the income statement.

When PDD supposedly makes huge cash flows while also have a mountain of cash it has nothing to do with innovation either. Quite frankly the only expiation for the cash hording is as an sort of insurance that in case the CCP destroys the business model,  they have cash to lay the fines and also to take a second shot at new business model to resurrect their fortunes.

China has spawned a tremendous amount of industries in many fields where they got quite competitive or are even ahead. 

Apple has so much money that they don't use to innovate in new fields but rather ship a only slightly revamped version every year and do the bare minimum to sustain the business, shows that they don't have enough competition yet to be allowed to make that much cash without reinvesting...

 

PDD is a completely different business and I don't think I need to tell you that its the Nr.1 downloaded App in the US, do you see the scale they took in this short amount of time? Do you think keeping a cash pile to defend the business against rich competitors is not smart?  

 

Look at Alphabet fines, Meta fines, etc it's in the same size as Chinese businesses and just part of the industry. 

9 hours ago, Spekulatius said:

Its not a very capital efficient model to run the economy, they for sure.

It's a developing market, I frankly don't understand how you can expect them to run everything like the most developed western country. Still, the progress is marvelous. Can you say one positive thing about China? Is there anything good happening? You are posting a constant stream of negative outlook/statements only, same as most western media. Do you really think that's the full picture here? Dont you see how much development is happening there on all fronts and how their businesses are reaching far beyond many developed western countries? Which other country got that competitive in the car industry the last decade? Or smart technology? 

9 hours ago, Spekulatius said:

I talked with a manager who works in robots and he told me that the Chinese are massively pushing into this field with backing from the CCP. The way the CCP does this is that they pay subsidies based on revenues and market share in robotics. This lead to growth at all costs because the more revenue they generate, the more subsidies they get. Profits for these players are nonexistent but at this point, it doesn’t matter because it’s a growth race and the goal is to be the biggest here, since the expansion is pretty much paid by the government subsidies.

Yeah, this is one aspect that needs more fine-tuning. 

9 hours ago, Spekulatius said:

Clearly, the CCP does not believe in Adam Smith invisible hand, at least not for strategic sectors like Solar, EV’s, semiconductors , rare earth minerals, AI etc.

Clearly the US doesn't believe in it either, otherwise, they wouldn't subsidize foreign companies to come and build factories here, etc 

 

The myth of the free market is just that, a myth. You always had governments that worked closely together with capital elites which organized production privately. Stealing trade secrets and having that much state intervention is important if you are behind which the US is starting to get into which is why I expect them to do a lot more trade shenanigans against China in the coming years, EVs are only one example. China is the only emerging market that made it up there precisely because of its disregard for Adam Smith. You need to artificially create demand until it's there if you want to enter a new level of technology. 

9 hours ago, Spekulatius said:

I guess you can say that the Chinese way to boost certain strategic sectors could be more deficient than the US, since thy tend to feed the biggest sharks that have already shown some success.

Well, monopolies are ruining the economy in many ways, anti-union, underpaying workers, underinvesting in their business, and sending too much cash home to shareholders while bribing governments to not regulate them so they can continue making their investors rich. 

Edited September 7, 2024 by Luke

[Luke]

I have posted this before: https://asiatimes.com/2024/04/the-myth-of-chinese-overcapacity/

 

The Global South cannot accumulate capital through imperialism and it should not accumulate capital through the backbreaking East Asian export model. They are in luck because China’s “overcapacity” is exactly how development should work under classical economics.

Excess capital in China should flow to developing economies in the form of loans and investments along with capital goods – 5G base stations, railroad equipment, electrical systems, commercial trucks and, yes, cars. This is the entire theoretical basis of President Xi Jinping’s Belt and Road Initiative (BRI).

Without “overcapacity” in China, the Global South would have access to neither capital nor capital goods. Given its current account deficit and capital account surplus, it is mathematically impossible for the West to provide development assistance to the Global South on an appreciable scale.

Long-forgotten initiatives like Build Back Better World (B3W) and the Blue Dot Network die on the vine because the US does not suffer from “overcapacity.” 

 

Sanctimonious concern over China inundating developing markets with manufactured goods is confused thinking. A development model based on capital inflows requires developing countries to run trade deficits by definition. The inflow will be used to purchase capital goods required for industrialization. This is the Lucas paradox resolved.

The Communist Party of China appears to have embraced its Industrial Party faction. The Industrial Party is an ambitious political identity that dispenses with the hoary left-right divide and believes that industry, science and technology will determine China’s future.

While not necessarily an economic ideology, Industrial Party precepts have an intuitive understanding of the necessity of China’s “overcapacity” and that it is up to China to reverse the Lucas paradox.

Wang Xiaodong, a vocal Industrial Party champion recognized the trends as far back as 2011, exhorting China to globalize its industrialization:    

We must go out to meet the world. Not only do we want our products to “go global,” we also want our industrialization to go global, and our high-quality talent to go global. We can spread industrialization to every corner of the world. Many of our scientists and technicians will travel around the world to work, bringing with them civilization, a dignified existence, and relief from poverty. This is one thing that Westerners have been unwilling or powerless to accomplish.

China’s Commerce Minister Wang Wentao has dismissed Secretary Yellen’s accusations of overcapacity as groundless, insisting that China’s industries are just more competitive. Both the US and EU are likely to erect trade barriers as China appears unlikely to compromise.

When all is said and done, the squabble between China and developed economies is ultimately a sideshow. The real action will be the flow of Chinese capital and goods to the Global South.

[Luke]

And "the global south" will not put up to paying these expensive US margins when Chinese produce is available at much better prices and overall a much better deal. It will only be a matter of time till other countries will take the bullet, as much as the US tries to coerce them into not taking non-US-produce. You cant run an empire when so much manufacturing was outsourced and is a lot cheaper than in your homecountry! 

[Luke]

Whats more realistic is that Trump withdrawals from the geopolitical scene and focusses on America first, getting the country in order, getting manufacturing back on track etc. But I really worry that the US would prefer to go into a war with China to destroy their manufacturing base and window of opportunity to emerge on the worlds stage than fix their own economical issues. Current developments show that they'd rather go into war than accept the problematic situation of winding influence...

 

But then, we are in a new world with new weapons. Trump said that WW3 is more and more likely and I agree, though I think that when that happens humanity will not emerge out of that again and it could be peak homo sapiens this decade. That's why IMO, the US is the most dangerous country in the world. 

Edited September 7, 2024 by Luke

[Blake Hampton]

China needs us just as much as we need them. A war would be disastrous for us both, as well as for the rest of the world.

 

I kinda agree with Xi on some of his thinking. He thinks that an economy driven on consumption is frivolous, and drives China towards a position of manufacturing and production. Ironically, the problem with this is still consumption. If your own people won’t buy the goods, you must then export them, which China does to a HUGE extent. Any impact on their consumers could have a similar ripple effect on their own economy.

[Luke]

5 hours ago, Blake Hampton said:

China needs us just as much as we need them. A war would be disastrous for us both, as well as for the rest of the world.

 

5 hours ago, Blake Hampton said:

I kinda agree with Xi on some of his thinking. He thinks that an economy driven on consumption is frivolous, and drives China towards a position of manufacturing and production.

I don't think that they think that. There should be a healthy balance. 

 

But also important top remember, China is pretty evil too regarding inner political control, stepping out of line, detainment camps of minorities and regarding taiwan. I do understand some positions especially inner stability but it also comes with problems, wonder how the trajectory over the longterm will be in this regard, if they open up a bit again after some time. Remains to be seen. Fundamentally at current prices China is bullish. 

Edited September 7, 2024 by Luke

[Luke]

 

[John Hjorth]

Today, I received a letter and a brochure in my digital inbox from the Danish State, the Danish Emergency Management Agency, containing advice about how to prep, for the purpose of staying self served for three days and nights.

 

I do not recall ever in my life before to have received something similar from the public here in nice and cosy Denmark. It says a lot about the general sentiment here and it is certainly related to the geopolitical sentiment in society here.

Beredskabsstyrelsen - Letter - 20240909.pdf Beredsskabsstyrelsen - Prep Brochure - 20240909.pdf -forberedt-pa-kriser_en-.pdf

[UK]

4 hours ago, John Hjorth said:

Today, I received a letter and a brochure in my digital inbox from the Danish State, the Danish Emergency Management Agency, containing advice about how to prep, for the purpose of staying self served for three days and nights.

 

I do not recall ever in my life before to have received something similar from the public here in nice and cosy Denmark. It says a lot about the general sentiment here and it is certainly related to the geopolitical sentiment in society here.

Beredskabsstyrelsen - Letter - 20240909.pdf 37.99 kB · 2 downloads Beredsskabsstyrelsen - Prep Brochure - 20240909.pdf 6.01 MB · 2 downloads -forberedt-pa-kriser_en-.pdf 114.36 kB · 2 downloads

 

https://www.reuters.com/world/europe/romania-searching-possible-drone-fragments-after-russian-attack-ukraine-2024-09-08/

https://www.reuters.com/business/aerospace-defense/drone-sightings-prompt-temporary-air-traffic-halt-stockholm-arlanda-airport-2024-09-09/

https://www.reuters.com/world/middle-east/iran-denies-reports-missile-transfer-russia-2024-09-09/

 

Same direction.

 

 

 

 

Edited September 9, 2024 by UK

[John Hjorth]

Thank you for sharing, @UK,

 

Deeply worrying.

 

Today I have pressed 'Follow' on Reuters at the subsection 'World' <dropdown> -> 'Ukraine and Russia at War', by the use of my free Reuters account.

 

On 9/4/2024 at 12:39 PM, UK said:

 

No problem John and btw: https://en.wikipedia.org/wiki/Denmark–Lithuania_relations#Modern_relations

 

Since Lithuanian independence, Denmark has taken a leading role in supporting Lithuania with international recognition and military and internal reforms. Denmark also played a significant role in Lithuania's accession to the EU and maintains a military presence in the country.

 

 

Better be prepared than sorry. Our Minister of Foreign Affairs Lars Løkke Rasmussen has been in the political game for several decades and he is an experienced, driven and astute politician, not naive. I have seen him interviewed on TV where he openly and honestly admitted that some time now years back he made the serious mistake to trust Vladimir Putin on any matter, remembering being in Restaurant 'Grøften' [<- translates to 'The ditch' [mind the symbolic]] in Tivoli in Copenhagen, getting a beer [likely Carlsberg] with Putin, thinking he [Putin] was an OK guy :

 

[Obviously Putin liked the beer, and has now taken the Russian Carlsberg subsidiary. Carlsberg booked a loss of DKK 48 B [~ USD 7 B] in 2023 related to this 'transaction'.] I thank God that I did not own Carlsberg shares when that story broke, it would certainly not have been good for my blood pressure!

Edited September 9, 2024 by John Hjorth

[UK]

6 minutes ago, John Hjorth said:

Thank you for sharing, @UK,

 

Deeply worrying.

 

Today I have pressed 'Follow' on Reuters at the subsection 'World' <dropdown> -> 'Ukraine and Russia at War', by the use of my free Reuters account.

 

 

Better be prepared than sorry. Our Minister of Foreign Affairs Lars Løkke Rasmussen has been in the political game for several decades and he is an experienced, driven and astute politician, not naive. I have seen him interviewed on TV where he openly and honestly admitted that some time now years back he made the serious mistake to trust Vladimir Putin on any matter, remembering being in Restaurant 'Grøften' [<- translates to 'The ditch' [mind the symbolic]] in Tivoli in Copenhagen, getting a beer [likely Carlsberg] with Putin, thinking he [Putin] was an OK guy :

 

[Obviously Putin liked the beer, and has now taken the Russian Carlsberg subsidiary. Carlsberg booked a loss of DKK 48 B [~ USD 7 B] in 2023 related to this 'trans-action'.]

 

Calsberg's Baltika (Russian subsidiary) was once one of their best and most profitable division accounting for some 40 percent of total EBIT (>10 years ago). And now it is zero, but this was already of lesser importance for them lately. IIRC they still own Slavutych, their Ukrainian subsidiary, though.

 

Btw today this preparedness material was also announced here. At first I thought this maybe happened because of the upcoming elections:), but it seems this is some kind of EU wide mater:)

 

 

[Dinar]

@John Hjorth, anyone who thinks that a KGB operative is an ok guy is a fool.  Normal/moral people did NOT join the KGB.  An organization that murdered more Soviet citizens than Hitler's Germany.

[UK]

https://www.bloomberg.com/news/articles/2024-09-09/china-s-deflationary-spiral-is-now-entering-dangerous-new-stage?srnd=homepage-europe

[John Hjorth]

20 minutes ago, Dinar said:

@John Hjorth, anyone who thinks that a KGB operative is an ok guy is a fool.  Normal/moral people did NOT join the KGB.  An organization that murdered more Soviet citizens than Hitler's Germany.

 

Point taken, @Dinar ,

 

Where would you propose to read about that?

[UK]

10 minutes ago, John Hjorth said:

 

Point taken, @Dinar ,

 

Where would you propose to read about that?

 

I am sure Dinar has his own ideas, but: 

 

https://www.amazon.com/Putins-People-Took-Back-Russia/dp/0374238715

 

https://www.economist.com/books-and-arts/2020/12/03/our-books-of-the-year

 

Many books have tried to explain the rise and ruthlessness of Vladimir Putin; this one is the closest yet to a definitive account. It draws on extensive interviews and archival sleuthing to tell a vivid story of cynicism and violence. On this view, a massive concentration of wealth and power in the hands of a few is used to quash dissent and project force abroad.

 

This one I think also is good: https://www.amazon.com/Man-Without-Face-Unlikely-Vladimir/dp/1594486514/

 

Edited September 9, 2024 by UK

[John Hjorth]

Thank you, @UK !,

 

Added to wish list. [For once, a book where I share interest with the Lady of the House, I think!]

 

- - - o 0 o - - -

 

Edit :

 

I saw your edit now, expanding proposed readings or where to look from one to three. Thank you again!

Edited September 9, 2024 by John Hjorth

[nsx5200]

I think I ran across that The myth of Chinese overcapacity article, but didn't quite grasp the Lucas paradox, so I dug into it a bit more, and these are my criticisms:

- The author of the article has a heavy anti-American, pro-mainland China slant as seen in another one of his article, China’s rise and the Great American Novel:

"Chinese Americans understand best how post-9/11 America’s zeitgeist has moved from heartbreak to anxiety to anger to manically unhinged".  [Not just any "Chinese", but Mainland Chinese, in particular]: "The interpretive powers of Taiwanese, Hong Kongers, ABCs or some other extraction of the diaspora in America will be refracted at less consequential angles. Only mainlanders can hold a looking glass above America, backlit by the white-hot ambition of 1.4 billion people on the make."

- The Lucas paradox is very interesting, but I'm not sure if its validity has withstood the test of time yet, as seen in a more seemingly unbiased analysis of the theory by the IMF, The Paradox of Capital: "Perhaps the Lucas paradox isn't such a paradox if one digs deeper. After all, many developing countries are beset by a variety of problems—inadequate infrastructure, a poorly educated labor force, corruption, and a tendency to default on debt from abroad, among other factors—that reduce the risk-adjusted returns to investment."

"An implication of our analysis is that the seemingly perverse flows of capital from poor to rich countries today are not necessarily a sign of inefficiencies in global financial markets. Rather, they may indicate financial and other structural impediments that limit a poor country's ability to absorb foreign capital."

 

Nevertheless, it is an interesting take on the very pro-Mainland China viewpoints that are commonly seen in the reddit forums: https://www.reddit.com/r/Sino/.

[Dalal.Holdings]

3 hours ago, UK said:

https://www.bloomberg.com/news/articles/2024-09-09/china-s-deflationary-spiral-is-now-entering-dangerous-new-stage?srnd=homepage-europe

 

Witnessing Marxism-Leninism reach its natural conclusion

[Luke]

1 hour ago, nsx5200 said:

I think I ran across that The myth of Chinese overcapacity article, but didn't quite grasp the Lucas paradox, so I dug into it a bit more, and these are my criticisms:

- The author of the article has a heavy anti-American, pro-mainland China slant as seen in another one of his article, China’s rise and the Great American Novel:

"Chinese Americans understand best how post-9/11 America’s zeitgeist has moved from heartbreak to anxiety to anger to manically unhinged".  [Not just any "Chinese", but Mainland Chinese, in particular]: "The interpretive powers of Taiwanese, Hong Kongers, ABCs or some other extraction of the diaspora in America will be refracted at less consequential angles. Only mainlanders can hold a looking glass above America, backlit by the white-hot ambition of 1.4 billion people on the make."

- The Lucas paradox is very interesting, but I'm not sure if its validity has withstood the test of time yet, as seen in a more seemingly unbiased analysis of the theory by the IMF, The Paradox of Capital: "Perhaps the Lucas paradox isn't such a paradox if one digs deeper. After all, many developing countries are beset by a variety of problems—inadequate infrastructure, a poorly educated labor force, corruption, and a tendency to default on debt from abroad, among other factors—that reduce the risk-adjusted returns to investment."

"An implication of our analysis is that the seemingly perverse flows of capital from poor to rich countries today are not necessarily a sign of inefficiencies in global financial markets. Rather, they may indicate financial and other structural impediments that limit a poor country's ability to absorb foreign capital."

 

Nevertheless, it is an interesting take on the very pro-Mainland China viewpoints that are commonly seen in the reddit forums: https://www.reddit.com/r/Sino/.

Thanks for sharing, China IMO most interesting Country to follow right now