Political Posts

[Spekulatius]

4 minutes ago, maplevalue said:

https://www.bridgewater.com/research-and-insights/most-global-economies-remain-in-disequilibrium-requiring-policy-action

Interesting article from Bridgewater; reiterating that China stands out as having capacity to ease policy (i.e. increase asset prices).

Japan is super interesting right now and not just based on this article.

Cheap stocks, weak currency and mildly inflationary  environment after decades of deflation is an interesting potential infliction point for equities.

 

Much more interesting than China, imo.

[sleepydragon]

42 minutes ago, Spekulatius said:

Japan is super interesting right now and not just based on this article.

Cheap stocks, weak currency and mildly inflationary  environment after decades of deflation is an interesting potential infliction point for equities.

 

Much more interesting than China, imo.

except in Japan people “work” late. They actually stopped working at 4pm, and then just stared at the computer screen till 10pm, then the whole team go to drinks till midnight.

in China, people actually do work past 11 and weekends too. The work ethics of Chinese are unbelievable 

[Spekulatius]

1 hour ago, sleepydragon said:

except in Japan people “work” late. They actually stopped working at 4pm, and then just stared at the computer screen till 10pm, then the whole team go to drinks till midnight.

in China, people actually do work past 11 and weekends too. The work ethics of Chinese are unbelievable 

Even if true, how does it matter for investing purposes. If true such a productivity would be priced in. Mostly the rate of change would matter.

 

I don’t even think it’s generally true. I worked in China at a US company manufacturing sub and the engineer and workers would all work 8-5pm to the point, because that’s when the company bus brought them in and out.

Prior to that (pre GFC) I visited a Chinese company the company I worked for had bought and the strange thing there is that they had a junior looking person looking over the shoulder of the person doing the work for pretty much any job. We jokingly called them “shoulder lookers”. Even the manufacturing workers had these shoulder looking a as well as engineering. We asked about them and they were “in training”. I never seen anything like this.

 

Then you read in articles  that the younger generation in China does not like these 9h work days 6 days a week any more. I am pretty sure what you describe does exist, especially in tech , but I don’t think this is the norm. Even Japan is changing with their late note office culture.

 

In any case, I don’t think these anecdotes are of much values as an investment thesis. In my former job I travelled a lot as I was involved in tool run ins / qualifications and the differences from company to company matter much more than the country or location.

Edited June 28, 2023 by Spekulatius

[crs223]

7 hours ago, Spekulatius said:

He is screwing the younger people by scaring away foreign investments from China (the preferred employer for many younger people) and holding back growth in the tech sector in favor of a more government controlled economy. This makes it harder for younger people to get well paying jobs.

 

I can understand how neutering tech would cost people their jobs (and upset investors).  are you saying it’s a young people problem because the tech Industry mostly hires young people?

[Spekulatius]

15 hours ago, crs223 said:

 

I can understand how neutering tech would cost people their jobs (and upset investors).  are you saying it’s a young people problem because the tech Industry mostly hires young people?

I believe there is a bias for tech to employ younger people and new grads, For employment with foreign companies it’s mostly about language (English mostly ) skills which also favors younger people. In any case, a tough labor market always hits new entrants the hardest and those will be younger people and/or new graduates.

 

Just to give you an idea about the reality in some case. My friends from town here working for an US company which used to operate in China but closed shop there and moved to the Philippines told me a sad story about an female employee there who was pregnant and felt she had to get an abortion due to her loss of job.

 

that’s not the saddest part though - she was afraid she would lose her health insurance (through her job) before she even could get her abortion done. I am not exactly sure about there circumstances there but the public health care in China isn’t exactly great unless you have supplemental insurance ((through employers) or you pay extra.

 

Sad story, but you can see how the birth rates won’t recover unless they fix the youth unemployment, because it’s the younger people who have kids and with 20% unemployment and a bleak outlook that’s not likely to happen.

 

These are all anecdotes, but may give me an idea what’s happening at the micro level and how one things (youth unemployment) ties into another. ( birth rate). FWIW, the birth rate in China has dropped like a stone since COVID-19 and the longer this situation persists, the harder it’s going to reverse, since birth rate trends are very persistent.

.

Edited June 29, 2023 by Spekulatius

[james22]

 

[tnp20]

They have some levers to fight the demographic collapse in the short term - but not long term - its part of the broader structural reforms needed.

 

(i) Remove registration system for big cities - so people can move freely anywhere - this will attract many from the rural farming area to where the jobs are.

 

(ii) Enable older people past retirement age to be able to come back , no forced retirement as is the current system, especially if they are mentally and physically capable to do the job still

        - people can still be productive past 65, move the retirement age up

 

(iii) Automation through AI - many of the factory and even some service jobs can be automated by AI driven robots - China is pushing big into both AI and robotics

 

(iv) Control Social safety net for the elderly so the burden of young supporting old is not too large - China already his pretty miserly pension/social benefits but as the averge middle class income rises, they can control how much of that extra income is transferred to supporting the elderly. - for a while but not long term.

 

My investment case is not China - my investment cases is specific monopoly companies with tremendous moat and great balance sheet with large international exposure - they should so well despite the perhaps long term deteriorating macro/demographic picture long term. I think geopolitics will quite down short term so a 2-5 year horizon is reasonable. Beyond that it remains to be seen but would re-evaluate every year what steps they are taking...I think there will be a sugar rush...and valuation will normalize but the long term gravitational effects will impact valuations longer term and it remains to be seen how they cope with these multiple factors...if Xi continues to make stupid policy decisions ...its game over for China.

 

 

Edited June 29, 2023 by tnp20

[Luke]

 

 

 

Who can blame the chinese government for trying to regulate this space. In many ways similar regulations will come in europe for multinationals and its only a good thing. Blaming the CCP for regulating this sector and that that is the reason young people do not have jobs is too simple. 

[Xerxes]

https://apple.news/Aq5sSRBBETOeo7LmXfVc1fQ

 

RUSSIA HAS REACHED A DEAD END

An indifferent response to a warlord’s march on Moscow heralds the dawning realization that Russia has no good way out in Ukraine.

JUNE 29, 2023

Edited June 29, 2023 by Xerxes

[Xerxes]

From the book, The World for Sale. 
By Javier Blas & Jack Farchy
 

I vividly recall the Qatari-Glencore investment into Rosneft whenever that was in the mid-2010s. 
 

Glencore is currently engaged into take over attempt of the Canadian coal producer Teck Resources. 
 

Perhaps in this new fragmented world, the commodity traders, have a stronger role to play than the last ten years that was underpinned by stability and globalization. 

 

 

[John Hjorth]

@Xerxes,

 

I curse you [J/K], now I need to buy that book, too! 

 

- - - o 0 o - - -

 

Since the war started last year I have been wondering what has happened to that enormous combination of a gas station and construction work in progress called Gazprom and its financing, because there is a lot [many billions of USD] of western financing on the ongoing pipeline constructions. Are these debt obligations being served or what?

[UK]

https://www.bloomberg.com/news/features/2023-06-29/china-economic-rebound-falters-weighed-by-debt-property-slump-little-stimulus?srnd=premium-europe#xj4y7vzkg

https://www.bloomberg.com/news/articles/2023-06-29/inventor-of-balance-sheet-recession-says-china-is-now-in-one

[formthirteen]

There's a new war, and I'm afraid the Western public support for Ukraine will diminish if Elon and Zuck fight at the Colosseum

 

 

[Spekulatius]

5 hours ago, John Hjorth said:

@Xerxes,

 

I curse you [J/K], now I need to buy that book, too! 

 

- - - o 0 o - - -

 

Since the war started last year I have been wondering what has happened to that enormous combination of a gas station and construction work in progress called Gazprom and its financing, because there is a lot [many billions of USD] of western financing on the ongoing pipeline constructions. Are these debt obligations being served or what?

Well, for once, Gazprom has been "investing" in it's own mercenary forces amongst other things.

https://time.com/6254708/gazprom-private-military-wagner-group-russia/

 

I guess Wagner is dead, long live Wagner two. I am sure some Wagner old timers find they way there - after all they are mercenaries.

[Xerxes]

11 hours ago, John Hjorth said:

@Xerxes,

 

I curse you [J/K], now I need to buy that book, too! 

 

- - - o 0 o - - -

 

Since the war started last year I have been wondering what has happened to that enormous combination of a gas station and construction work in progress called Gazprom and its financing, because there is a lot [many billions of USD] of western financing on the ongoing pipeline constructions. Are these debt obligations being served or what?

my pleasure. 
I finished reading the book. It was an incredible read. 
 

I think all of us read The Prize (most of us) this book weaves into the world of traders and who kept adapting as macro picture changed. 
 

I have heard a lot of Glendora, Marc Rich, Glasenberg, the commodity trader Andrew Hall at Citigroup and his oil trades, the rivalry between Xtransa and Glencore on the sought after coal assets, this brings all together. 
 

makes me wanted to listen Glencore’ investor day for fiscal 2020, when the virus start the spread 

[tnp20]

The risk of balance sheet recession is real and their lack of serious action to date is puzzling given the rapid deceleration in economy. Not sure what they are waiting on....

 

They have acknowledge the issue and the remedy at the highest level....

 

 

Folks point out the high level of local government debt. Central government debt isnt too bad and its all denominated in their own currency with low inflation and $6T foreign currency reserve (mostly dollar), they have both the fiscal space (to print and spend) and monetary space (low inflation) to stimulate the economy.

 

The issue is timing....analysts have been screening immediate action needed but so far crickets.....other than small interest rate reduction earlier last week.

[zippy1]

Latest book list of bestsellers in China (for first half of June):
In the top 20 bestsellers:
1) there are 7 books written by XJP about XJP's thoughts. They are ranked at 1, 2, 5, 6, 8, 9, 13. These are selected articles by the great leader.
2) there are 5 books about CCP and its 20th party congress. They are ranked at 3, 4, 11, 12, 20 
3) there are 2 books for the preparaton of the political exams in graduate school entrance exam: they are ranked at 10 and 16.
If the bestseller list reflects what the party and populatoin care about, the focus appears not on the economy.

[backtothebeach]

2 hours ago, zippy1 said:

Latest book list of bestsellers in China (for first half of June):
In the top 20 bestsellers:
1) there are 7 books written by XJP about XJP's thoughts. They are ranked at 1, 2, 5, 6, 8, 9, 13. These are selected articles by the great leader.

 

What a genius author he must be! Somehow reminds me of Kim Jong-Il’s amazing golf skills:

 

Associated PressKim Jong-Il never needed a swing coach to master the sport of golf.

Kim shot 38 under, including 11 holes-in-one, at the 7,700-yard championship course at Pyongyang in the VERY FIRST golf round of his life, according to North Korean state media.

 

I would guess that buying XJP’s books is almost mandatory if you are in any kind of oficial position in China. Gives you social credit points.

[Luke]

https://www.bloomberg.com/news/articles/2023-06-29/chinese-chipmaker-asks-suppliers-to-buy-back-banned-gear

 

“Machine suppliers should buy back the equipment and components we have purchased legally if we can’t use them,” Yangtze Memory chairman and acting Chief Executive Officer Chen Nanxiang said in a defiant speech at an industry event in Shanghai on Thursday.

 

Tough times ahead!

 

 

 

Edited July 1, 2023 by Luca

[sleepydragon]

9 hours ago, zippy1 said:

Latest book list of bestsellers in China (for first half of June):
In the top 20 bestsellers:
1) there are 7 books written by XJP about XJP's thoughts. They are ranked at 1, 2, 5, 6, 8, 9, 13. These are selected articles by the great leader.
2) there are 5 books about CCP and its 20th party congress. They are ranked at 3, 4, 11, 12, 20 
3) there are 2 books for the preparaton of the political exams in graduate school entrance exam: they are ranked at 10 and 16.
If the bestseller list reflects what the party and populatoin care about, the focus appears not on the economy.

 

At least number 15 is a history novel, about how people got rid of the previous ruler who ruled Chinese people with iron fists

[sleepydragon]

6 hours ago, backtothebeach said:

What a genius author he must be! Somehow reminds me of Kim Jong-Il’s amazing golf skills:

 

Associated PressKim Jong-Il never needed a swing coach to master the sport of golf.

Kim shot 38 under, including 11 holes-in-one, at the 7,700-yard championship course at Pyongyang in the VERY FIRST golf round of his life, according to North Korean state media.

 

I would guess that buying XJP’s books is almost mandatory if you are in any kind of oficial position in China. Gives you social credit points.

the book rank appears to be genuine. Xi’s book sold a lot people all SOEs, govt, schools are requested to buy them.
one of the book ranked high (#15) is a history book — not a business book but a book of changing dynasty, reflecting people’s thoughts. Xi is in a very dangerous position

[Spekulatius]

7 hours ago, Luca said:

https://www.bloomberg.com/news/articles/2023-06-29/chinese-chipmaker-asks-suppliers-to-buy-back-banned-gear

 

“Machine suppliers should buy back the equipment and components we have purchased legally if we can’t use them,” Yangtze Memory chairman and acting Chief Executive Officer Chen Nanxiang said in a defiant speech at an industry event in Shanghai on Thursday.

 

Tough times ahead!

 

 

 

Asking for your money and getting it are two different things. Why would the tool makers oblige to this request? They are done in China anyways.

Edited July 1, 2023 by Spekulatius

[Spekulatius]

Pretty good podcast on XJP and Putins motivation , similarities and differences:

https://www.foreignaffairs.com/podcasts/what-drives-putin-xi-mao-stalin-kotkin-schell
 

some of the recent podcasts also seem interesting (I only listed to the one above).

[SharperDingaan]

On 6/28/2023 at 7:29 AM, Spekulatius said:

Fixing the birth rates problem in China is very hard and with the economy in the doldrums and youth unemployment exceeding 20% is not going to happen in the near future either.

 

The young generation is screwed by XI Jinping policies (suppressing and controlling tech industry, high housing costs, public school system requiring expensive tutoring to get a good education etc). Not all of it can be blamed on Ci Jinping, but his policies certainly have not been helping.

 

Japan has a better chance at fixing their demographics than China, because they can boost emigration (which is slowly happening already). China is too large and not many want to move there anyways and more people are going to move out of China than emigrate.

 

Those in their fertile years are too exhausted after their regular day, and the families cannot afford to not have both of them working at the same time. Ain't going to be no babies amongst the most educated without some kind of a major structural change; and without change, the future and smaller population rapidly gets progressively 'dumber'. 

 

The obvious solution is to pay for babies; via mortgage payment forgiveness, and a monthly stipend for the first X years of a kids life; have 3 kids with 3 year spacing, and this could go on for X+6 years; not practical in the western world, but well within the capabilities of the current China 'state'.

 

Japan also burned its population pyramid to achieve its miracle, and like China; there were no babies 'cause everyone was both exhausted and expenses were extreme. Today, robots take care of the aged as the young have moved elsewhere, and arguably the culture itself is in danger of extinction. Lesson for China.

 

SD

 

 

[Spekulatius]

Inside Prighozin Wagner

Tells the story about how Wagner group evolved in the Ukraine conflict in 2014, their success in Syria, which they are now duplicating in Central African Republic and other states like Mali, Mozambique, Venezuela .

 

I Syria they get 25% of the revenues from any oil field they captures from rebels. It’s industrialized  

Edited July 1, 2023 by Spekulatius