Political Posts

[formthirteen]

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U.S. to Announce New Tariffs on Chinese Electric Vehicles

 

The administration could raise tariffs on electric vehicles from China to 100 percent in an attempt to protect American auto manufacturers.

 

 

https://www.nytimes.com/2024/05/10/us/politics/us-biden-china-tariffs-electric-vehicles.html

 

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I was embarrassed. Here I was in China, trying to empathize with Western brands, thinking they were being pushed out of China due to politics and things that were no fault of their own.

 

In reality, it felt like it was the late 1980s again, when American manufacturers felt like they could sell whatever underdeveloped models its accounting department had cooked up to the public, and we’d just have to deal with it.

Now that I’ve seen a glimpse of what’s going on in China, the Western manufacturers, particularly the American ones, don’t seem like they’re trying at all.

 

 

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So, when automakers, tech companies and regulators push back on China, the sentiments that they’re just protecting our market from unsafe or security-challenged products feel hollow. Instead, it feels like grandstanding, and a tacit admission that they have no intention of trying to do better.
 

Instead of competing, they’d rather just shut out competition entirely. The concerns about cybersecurity don’t address the elephant in the room here: Your product sucks, compared to what China is putting out now. It doesn’t go as far. It’s not as well-made. It’s not as nice. It’s not as connected.

 

 

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If the U.S. and Europe get what they want—a crackdown on Chinese imports—it doesn’t feel like it would result in better cars. It feels like it would keep buyers of those markets locked to cars that aren’t executed as well. It’s nakedly protectionist because deep down, all of the Western auto executives and some hawkish China pundits understand that Chinese EV and PHEV models are more compelling than what European, other Asian, and American brands have come up with.

I’ve seen it with my own two eyes. We’re cooked.

 

 

https://insideevs.com/features/719015/china-is-ahead-of-west/

 

I'm long PAH3.DE. Sold 1211.HK some time ago, a bit too early.

Edited May 12, 2024 by formthirteen

[Parsad]

On 5/10/2024 at 1:48 AM, mattee2264 said:

 

There is your argument right there. 

 

USA has a CAPE of 34x and China has a CAPE of 10x. 

 

In China you are getting about a 700bps equity risk premium. In USA you aren't getting any kind of equity risk premium (expect implicitly through future growth prospects).

 

Of course China is a basket case and no one is suggesting you should put 100% of your portfolio in China. But with that valuation gap there is probably a decent case for a 10-20% allocation via a MSCI China index (diversification is the way to go for a know nothing investor without local market knowledge or political knowledge). Naturally things could get a lot worse but over a 10 year period you can expect a decent return from such depressed valuations. 

 

I don't really invest in the broad market except for VOO which I own in my corporate account, as I don't want to generate much in realized capital gains.  I look for individual stocks in the rest of my portfolio and mostly even in the corporate account...so I can always find a couple of good ideas a year in the U.S. regardless of the market's overall valuation and I incur no political/property rights risk.  Cheers!

[ValueArb]

On 5/8/2024 at 8:37 AM, Xerxes said:

Even then I think Shoigu is a useful idiot that helps insulate Putin. More like Pauli !!

 

Below are the five marshals of the Soviet Union before the Great Purge. Three of the five that were most capable didn’t make it through 1937-38. 
 

The other two sailed harmlessly through WW2 even as they were incompetent. And were outshone by Zhukov and the rising stars of the new Red Army, but never lost their network and close association with Stalin. 
 

The two of them that survived the Great Purge were yes-men, personal friend and lackies. There is a premium for that. 

 

 

looks like the other shoe dropped. Either this is just to placate public opinion, or we might see one of these guys mount his own desperate insurrection to save his neck.

 

https://www.politico.eu/article/vladimir-putin-fires-russia-defense-intelligence-chiefs-sergei-shoigu-nikolai-patrushev/w

[Xerxes]

14 minutes ago, ValueArb said:

 

looks like the other shoe dropped. Either this is just to placate public opinion, or we might see one of these guys mount his own desperate insurrection to save his neck.

 

https://www.politico.eu/article/vladimir-putin-fires-russia-defense-intelligence-chiefs-sergei-shoigu-nikolai-patrushev/w

yeah. I just saw that. 
 

a civilian will be heading be the defense ministry now. Apparently. 
 

That said I think Patrushev’ fall is more intriguing as he was an all powerful figure. Shoigu was not. 

[SharperDingaan]

It is only a matter of time until NATO starts doing troop relieving 'training' exercises in the Ukraine, bringing their ammunition/gear with them, and parking it in airfields and warehouses across the Ukraine. 'Lighting up' all planes/drones/transportation in Ukrainian airspace, for potential missile lock.

 

Might even conduct training exercises accompanying grain ships through disputed areas, much as ships are currently accompanied in both the Persian Gulf and the Red Sea today. You get 'X' number of months to get your hot pursuit/invasion done/dusted, after which the rest of the world steps in? 

 

SD

 

 

[Xerxes]

2 hours ago, Xerxes said:

yeah. I just saw that. 
 

a civilian will be heading be the defense ministry now. Apparently. 
 

That said I think Patrushev’ fall is more intriguing as he was an all powerful figure. Shoigu was not. 

Having read more, it escaped my attention that Shoigu’ new job is actually Patrushev’ old job as the chief of security council. 
 

So is this more about the fall of the powerful Patrushev (or his reappointment ?!) than fall of Shoigu that media is spinning. 
 

Meanwhile ministry of defense will be headed by a civilian. Would that be an actual effective Albert Speer like figure or another lacky like Shoigu. If the latter, this was clearly about removing Patrushev. 

[Luke]

 

[Luke]

It's interesting to see how some European countries decide to turn so positively to China while others don't. This shows again, that the development and foreign politics goals and rewards of one EU country are different for another (unlike the pro EU parties often suggest). They are getting the choice: Move under the protectionist, war and austerity umbrella of the US, Germany and Co. Or move away from it and towards the Chinese-dominated, Eurasian hemisphere. The Chinese come with a lot of money, willing to build out local infrastructure, business, educational and cultural exchanges, increasing tourism from China and vice versa. So much potential in all of these left-alone countries to grow and develop, Hungary, Serbia, Montenegro, etc. China building out trains, streets, ports...lots of cheap goods from china and cheap too unlike the US belt countries which get more and more expensive services and products+deficits, austerity and inflation, their local populations will be happy. From what I see, China is doing foreign and developmental politics at its finest. 

 

Edited May 13, 2024 by Luca

[Luke]

 

[Luke]

8 minutes ago, Luca said:

 

The video mentioned in this clip: 

 

 

[Luke]

 

[Hektor]

https://www.nytimes.com/2024/05/13/business/china-bullet-trains-ticket-prices.html

 

China Is Raising Bullet Train Fares as Debts and Costs Balloon

 

China is taking the rare step of sharply increasing fares for riders on four major bullet train lines, in its broadest move to address rising costs and heavy debts since construction of the system began nearly two decades ago.

 

The higher prices for train tickets are part of a push to raise prices for public services. Earlier this year, water and natural gas bills started going up in some cities.

 

Increasing prices can stem losses at some giant state-owned enterprises that provide these services. And making consumers pay more helps offset the falling prices that are widespread in China’s economy as growth slows.

[Pelagic]

An interesting article on the development of Ukraine's long range drone program. Looks like they've settled in on a standardized design even though there are a handful of other options out there and can start mass producing it now that they know it works.

 

https://www.pravda.com.ua/articles/2024/05/13/7455462/

[Luke]

Pretty clear statement on whats happening in geopolitics:

 

 

[Gamecock-YT]

Needs those autoworker votes in swing states

[Hektor]

8 minutes ago, Gamecock-YT said:

eeds those autoworker votes in swing states

[crs223]

This is what Biden is afraid of:

 

 

[Hektor]

https://www.nytimes.com/2024/05/17/business/china-property-mortgages.html

 

China Says It Will Start Buying Apartments as Housing Slump Worsens

Signaling growing alarm, policymakers ramped up efforts to stem a continued decline in real estate values.

 

Chinese officials on Friday took their boldest step yet, unveiling a nationwide plan to buy up some of the vast housing stock languishing on the market. They also loosened rules for mortgages.

 

The flurry of activity came just hours after new economic data revealed a hard truth: No one wants to buy houses right now.

[Luke]

https://asiatimes.com/2024/04/the-myth-of-chinese-overcapacity/

 

Interesting read: 

 

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While some may marvel at how Japan, South Korea, Taiwan and, of course, China exported their way to riches, it was, in reality, an arduous, grueling and brutal process that has left lasting scars. Economic development really is not supposed to happen this way.

The East Asian export model is swimming upriver, playing the video game on hard mode, running up the down escalator. What kind of development strategy requires poor countries to scrimp and save only to lend that money to rich customers to purchase one’s manufactures?

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East Asia had to do battle with the Lucas paradox. East Asia won not because the export model is so effective; it won because East Asia is East Asia. The Lucas paradox is the observation that capital does not flow from rich country to poor as predicted by classical economics. In theory, as capital experiences diminishing returns in rich economies, it will flow to poorer economies which still have low-hanging fruit. In practice, however, rich countries have hoovered up capital from developing economies, leaving much of the world starved for investment. East Asia, starting with Japan, was able to develop despite the Lucas paradox. After WWII, Japan’s Ministry of International Trade and Industry (MITI) husbanded the nation’s meager resources to invest in strategic industries – steel, autos, electronics, semiconductors etc. The country bought treasuries with export revenues and slowly accumulated capital through reinvestment of retained earnings – bit by excruciating bit. This didn’t reveal the efficacy of the export-driven development model as much as it demonstrated the diligence and self-sacrifice of the Japanese people as well as the managerial expertise of MITI.

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The Asian Tigers followed suit, achieving even more spectacular results and also accumulating similar costs. Ultimately, the biggest player came on the scene running a version of the model that, because of China’s size, is causing Western politicians to mash panic buttons.

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Through methods fair and foul, the US had long since dismantled Japan’s export growth model and is now desperately targeting China. The acid-tongued venture capitalist Eric Li recently quipped that China’s biggest economic problem is that it can’t go out and get itself a bunch of colonies. Imperialism is the other development model that has worked spectacularly well. But like the East Asian export model, it too has left lasting scars. On balance, overworked salarymen is probably less objectionable than colonial ills. Economists twist themselves into pretzels trying to figure out the cause of the Lucas paradox. But is it all that mysterious?

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US Treasury Secretary Janet Yellen’s recent trip through China kicked off a round of hand-wringing in the Anglo press over industrial overcapacity in China. Without a single Chinese electric vehicle (EV) sold in the US, Senator Sherrod Brown has already called for their ban, declaring, “Chinese electric vehicles are an existential threat to the American auto industry.” Western progressives are mired in cognitive dissonance over long-trumpeted climate commitments when the solution presented to them is low-cost, made-in-China solar panels. This entire overcapacity issue is another tiresome demonstration of Western solipsism. As Asia Times’ David Goldman likes to say, “China’s just not that into you.”

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When the US imposed “voluntary” export quotas on Japan in the 1990s, it constituted 40% of the world’s car market. That has fallen to 13% in 2023. China does not export cars to the US and, given geopolitical realities, will likely tip-toe around the US by building factories in Mexico for regional markets. Around 35 million cars were sold in developed markets (North America, EU, Japan, South Korea, Australia) in 2023, unchanged since 1990.

 

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.”

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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.

 

Regarding the EV bans its also interesting to look at Teslas subsidies and compare that to the likes of BYD. This is not because of chinas subsidies, their EV market is margin to the bone super hard competition and the west has subsidies themselves. The problem is that these companies are more efficient in every way and provide more value per dollar. GM does tens of billions of buybacks, no innovation, little investment...we cant have Chinese EVs! 

[Luke]

8 hours ago, Hektor said:

https://www.nytimes.com/2024/05/17/business/china-property-mortgages.html

 

China Says It Will Start Buying Apartments as Housing Slump Worsens

Signaling growing alarm, policymakers ramped up efforts to stem a continued decline in real estate values.

 

Chinese officials on Friday took their boldest step yet, unveiling a nationwide plan to buy up some of the vast housing stock languishing on the market. They also loosened rules for mortgages.

 

The flurry of activity came just hours after new economic data revealed a hard truth: No one wants to buy houses right now.

Interesting move, still need to read up on this.

[Luke]

On 5/14/2024 at 9:46 PM, crs223 said:

This is what Biden is afraid of:

 

 

Yeah, it's crazy. The same costs 2-3x in the West and you have to pay 200 USD extra for every coup holder or whatever...but people won't be allowed to have it because it's unacceptable to Western government to have their protected car players lose margins and get all this competition...does it matter for the worker if they work at BYD factory or Tesla factory? Primarily the very big family shareholders are protected meanwhile US investors who bought Nio shares have to suffer the competition  

Edited May 17, 2024 by Luca

[formthirteen]

10 hours ago, Luca said:

 

China Says It Will Start Buying Apartments as Housing Slump Worsens

 

Weird, I thought the agenda was common prosperity not unequal distribution of wealth or common misery.

[Luke]

31 minutes ago, formthirteen said:

 

Weird, I thought the agenda was common prosperity not unequal distribution of wealth or common misery.

How do you infer unequal distribution of wealth? Looks like they are gonna make social housing out of it but financing and further detail not revealed yet. This sounds good to me so far and sensible. 

[formthirteen]

10 hours ago, Luca said:

How do you infer unequal distribution of wealth? Looks like they are gonna make social housing out of it but financing and further detail not revealed yet. This sounds good to me so far and sensible. 

 

I would assume good money (tax payer money) is used to pay for bad investments made by companies (state/city officials?). Seems they have that in common with every country in the world. I don't think this will make their economy more effective, but it might make officials and even some citizens happy. Anyways, the Chinese should decide what they do with the money. I don't really care as long as they don't become as aggressive as the Russians. Oh wait, they (Xi and Putin) already seem to be (literally) on the same road hugging each other:

 

 

[Luke]

22 minutes ago, formthirteen said:

 

I would assume good money (tax payer money) is used to pay for bad investments made by companies (state/city officials?). Seems they have that in common with every country in the world. I don't think this will make their economy more effective, but it might make officials and even some citizens happy. Anyways, the Chinese should decide what they do with the money. I don't really care as long as they don't become as aggressive as the Russians. Oh wait, they (Xi and Putin) already seem to be (literally) on the same road hugging each other:

 

 

Well, I think they see what a mistake it was to give real estate developers that much market freedom, and future regulation will prevent this situation from occurring again. For now, something has to be done and I agree that the government can use the situation and make the best out of it. 

 

Russia has deep cultural ties with China, they share a huge border and there are countries in China with many Russian-speaking people that have close ties to Russia. It is not in China's Interest to join Washington's sanction games and hostility towards Russia so IMO they are doing just what's fine for China. 

Edited May 18, 2024 by Luca