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The Week Ahead – 04 Jul 2022: Metals Meltdown

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We’ve all seen many chops in the markets, especially on the energy side, with the fuel and oil shortages. That was a little bit unexpected to people. Equity markets are struggling and there are a lot of talks this week about recession and trying to move the Fed into being more accommodative, which is 180 degrees from where we were two weeks ago.

Copper is hurting and down 28% since March. What is this telling us about metals, generally, and drivers of metals demand? Is this telling us that China – the largest buyer of industrial metals – won’t really bounce back? Does the market doubt China’s stimulus announcements?

We also discussed Europe, its slowing economy, rising unemployment, and gas shortages.

Lastly, is the Fed anchoring inflation?

Key themes:

  1. Metals Meltdown
  2. How badly is Europe hurting?
  3. Fed inflation anchors
  4. What’s ahead for next week?

This is the 24th episode of The Week Ahead, where experts talk about the week that just happened and what will most likely happen in the coming week.

Follow The Week Ahead experts on Twitter:

Tony: https://twitter.com/TonyNashNerd
Sam: https://twitter.com/SamuelRines
Albert: https://twitter.com/amlivemon/

Time Stamps

0:00 Start
1:45 Key themes for this episode
2:23 Metals meltdown – what are they telling us?
3:48 Will there be a comeback of automotive?
5:09 Does the market believe China’s promise of a stimulus?
7:25 How much is China’s manipulation be beneficial for China?
9:26 What about Japan?
12:00 Europe’s economy and inflation
15:21 Europe’s concentration risk on the sale side
19:42 Europe’s problems stem from this
20:32 Fed and anchoring inflation
25:50 What’s for the Week Ahead?

Listen to the podcast version on Spotify here:

Transcript

TN: Hi everybody, and welcome to The Week Ahead. I’m Tony Nash. Today we’re joined by Sam Rines and Albert Marko. Tracy is out for the long holiday weekend. Before we get started, please don’t forget to like and subscribe the video and please comment on the video. We look at them, we engage. We want to hear your feedback. Also, while you’re here, we have a promo for CI Futures. This is our markets forecasting tool. Our promotion is three months free on a twelve-month subscription. That promotion ends on July 7. So please take a look at it now and get our best promo ever.

So, key theme for this week. We’ve all seen the markets a lot of chop as we talked about. We saw a lot, especially on the energy side, kind of negative with the fuel shortages and oil shortages. I think that was probably a little bit unexpected to people. Equity markets are struggling and there’s a lot of talk this week about recession and trying to move the Fed into being more accommodative, which is 180 degrees from where we were two weeks ago. So a few things we’re talking about.

First is the metals meltdown. Second, Albert Marco, although he’s been in an undisclosed location, he has been in Europe. And we’re going to talk a little bit about how badly Europe is hurting right now. And then we’re going to look at inflation and how the Fed is potentially anchoring inflation.

So first, let’s look at the metals meltdown. If we look at copper. Copper has been a lot of buzz around copper over the last few days and copper is down 28% since March. But I think we could speak to metals more broadly. We’ve got the copper chart on the screen right now. So Albert, if you don’t mind, what are metals telling us generally about markets and the drivers of demand?

AM: Well, I mean, it’s pretty clear that the manufacturing sector across multiple industries is hurting at the moment and has taken a toll in the metals market. There just simply isn’t any demand for consumer products. There’s not going to be any demand for metals probably until the Chinese really start to stimulate.

It’s pretty clear. And then on top of that, they have pressure from the dollar that just keep on charging along trajectory to 110. So those things are really weighing on the metal market. I mean, copper specifically, like you mentioned, aluminum taken some hits just across the board.

TN: Right. So if we look at things like automotive, automotive is held up because of semiconductor supply chain issues which are working out, but automotive manufacturing slowed pretty dramatically. If we see, say, the chip issues get worked out for, say, automotive, do you expect to see more like a comeback of automotive, of car manufacturing, which will pull metal prices along?

AM: No, I don’t. And I don’t think that’s even going to be the case for the next 18 to 24 months. I mean, the auto sector is actually in a really bad shape, And it’s not specifically just because of the chips, like everyone assumes, but you have rubber shortages, you have polyurethane shortages, you have shortages across the board for the entire auto sector, for the manufacturing process. So until all of those supply chain issues get settled, there’s just no hope at the moment, which is interesting because there hasn’t been really any layoffs yet.

I know they’re artificially keeping these people on payroll and doing whatever they want to do with the shifts and manipulating that. But at some point and i’ve been arguing about this specifically the auto sector, there will be layoffs because of all this.

TN: Just for the people who don’t know. Albert is from Detroit, so he pays attention to the auto sector pretty closely, and he knows he has pretty close relationships there. So we’re talking to a man who really does kind of pay attention to what’s going on. Sam, as we see metals prices fall, we’re also seeing china become more aggressive in making statements about economic stimulus and other things. Are the metals prices right now telling us that the market doesn’t believe that china is going to put in the stimulus that they claim to be?

SR: I would say it’s a show me game with China. There’s been way too many people that have been burned way too badly, listening to the rhetoric and trying to get ahead of things on the ground, and then nothing actually happens, or they do something a little different than what they said they were going to do, and you end up with an investment profile that’s completely different.

I think that’s one of the big things to keep in mind is, yes, China is probably going to have to do something into or around the party congress this fall in terms of stimulus. They have to look at going into it. So there’s going to be some stimulus. The question is, what is it and when does it hit and what does it look like? Is it a tax cut? Because in that case, who cares, right?

It’s not going to be that big of a deal for picking up the manufacturing side in a meaningful manner. Is it going to be reopening? Right. Because if they’re sending out checks but not reopening, that’s not going to allow their manufacturing sector to get back to work, which is going to Albert’s point, going to continue to clog the supply chains for autos and auto manufacturing significantly, whether you’re us. Based manufacturer or your South Korean manufacturer, et cetera.

This is a longer term problem where I think you’re not necessarily going to have the pop and metals until people actually see the real data from either Australia or the us. Or even in Mexico. But that’s a significant amount of the auto sector assembly. You’re going to actually have to see the data before people.

TN: Right. And so what I hear about metals in China and I’ve mentioned this before, but what I’m told by people, especially in the copper sector, is that the warehouses in China are actually full, although we’re told that they’re not. They are. And words that warehouses empty out from time to time is simply to manipulate the market up. But there’s ample, say, copper and other industrial metals in warehouses in China, given the demand that the world has.

AM: Let me ask you both little question here. How much is China’s manipulation of their stimulus on and off due to them trying to force the Fed into lowering the rate hikes or putting them into a position where it’s beneficial for China overall?

TN: Sam, what do you think?

SR: I would say they definitely have a calculus instead of the ECB, instead of a certain extent the BOJ when they.. they all have to take that into account and they all have to either front run or attempt to talk their markets one way or the other. That’s why I’m saying it’s definitely part of the calculus. I don’t know how much of the fiscal side is directly related to counteracting with that and how much is directly related to keeping the people happy. I would say those are the two primary catalysts.

TN: Yeah, I think that’s right. I think any Chinese stimulus that’s going to be effective in the short term has to be cash in, say, local government accounts, people’s accounts, company’s accounts. As Sam said, that tax cuts not going to cut it, indirect payments are not going to cut it. Announcing a new rail stimulus, which they do every other year, is not going to cut it. They actually have to just churn cash out in markets. But with the US dollar and rates, I think they’re really careful right now about how quickly they devalue CNY. And I think that is one of the things that they’re being careful of. They don’t want to devalue it too quickly because Chinese exports have surged over the past six weeks. And so if they can continue to make money at the rate they have, they’ll put off the DeVal as long as they have to. But if the dollar continues to appreciate, they may have to accelerate the evaluation and they’re in a tough spot. China is not the all seeing, all knowing planner that many people think, well.

AM: Part two of that would be what about Japan? Because they devalued the Yen and they’re kind of combating whatever China is trying to try and propose and stimulus. So how does that all come into the equation?

SR: And I’ll just pop out that one of the interesting pieces to kind of throw into the puzzle is not copper sending one signal that China is maybe not going to stimulate, et cetera. But you look at Chinese Equities X, the state owned entities, and guess what? You had a plus almost 7% second quarter for those equities. So the market is sniffing something out there. There might be a little bit of a hedge of, well, if you’re not going to build a bunch of stuff, you might hand out checks, like you said. And if you hand out check, it’s going to benefit the Internet and Chinese tech companies more than it’s going to benefit the metals industry.

TN: Right. And if they want to stimulate the top echelon of Chinese society, they could just goose equities and focus on a trickle down theory, which is very anticommunist, but it’s something that they can do pretty quickly. They did it in 2015, they’ve done it at other times, and they can do that. But going back to your Japan question, Albert, it’s an interesting one because China is such a supply chain risk going forward, the uncertainty there, that Japan is selling itself as a secure alternative to China. And that’s why one of the reasons why they’re devaluing so strongly is so that it’s just a no brainer to get stuff done in Japan. Right?

AM: Yeah, of course. That’s a great explanation. It’s very concise and simplistic, and I had known this, but I wanted you guys to explain this to the viewers because it’s a critical thing that most people don’t really take into account. They always see China. China. And they ignore Japan and South Korea.

TN: Yeah, Japan and South Korea have been devaluing. It’s more depreciating than devaluing. I know there’s a nerdy difference between those two, but they’ve been pushing depreciation because they wanted to be seen as a safe alternative to China. But then you also look at Southeast Asia, places like Vietnam, other places, things in Vietnam, all those exports are done in dollars, not in dong, so they can’t really play the currency card to do values.

SR: It’s also worth remembering that Japan exports a lot of machinery to China, and so if they don’t, if they strengthen their currency while China is devaluing, that puts them in there.

TN: That’s right. Great questions, Albert. Thank you for that. Okay, let’s move on to Europe. Albert, so you’ve been there. Let’s start by looking at inflation. So we’ve got on the screen right now a comparison of inflation rates in, say, the US. Europe and China. And PPI, especially in Europe, is blistering hot. It’s 40%. And CPI, of course, is accelerated as well. It’s ten plus percent, if you believe that. I think it’s higher than that. But as you’ve been there, can you walk through some of your observations of what’s happening in Europe right now and how it’s affecting companies and the way people spend and so on?

AM: Well, from the bottom up, for the general public, that’s just pure desperation. The media just doesn’t want to cover it because it’s just bad news for every single political party out there. Inflation is running rampant. Food, it’s running rampant. And every single product they have, they’re used to high gas prices to begin with, but like the United States, there’s a certain amount where the strain is just too much for families.

I believe the UK. One out of four people were skipping meals because of food inflation prices. One out of four? That’s stunning. And that will have long term health effects down the road. But we’re talking about the year now. Europe’s manufacturing sector is an absolute shambles. Their export engine into China is just nonexistent. They haven’t built out any overseas networks into Africa or other emerging markets to be able to compete. They have no military to sit there and actually push the trade issues their way. They’re secondary. Not secondary. They’re behind Russia and China in that aspect, not to Mention The United States. So, I mean, I complain about the auto sector in the United States. The manufacturing and the auto sector in Germany is absolutely dead.

TN: Okay, I want to pull that Apart a little bit. Okay, so the manufacturing in Germany is dead or dying, largely because of concentration risk in Russian gas as a feed fuel, right, for electricity.

AM: The energy prices have skyrocketed. Corporations And Private businesses are struggling to keep up with margins to cover their costs. And the governments are just like. They’re just making things worse in Germany, I believe they’re handing out money to every single person, refugee or youth person, that think that will vote for them in the future. That makes inflation worse. I can go down the list of different things that they’re doing an error, but I don’t see how Europe pulls out of this specifically in the fall and going into 2023. I mean, their gas shortages are such a problem here right now that I can’t even fathom what the problems are going to be in Germany and Italy and France going forward.

Actually, in Germany and Austria, they’re running out of wood to heat their homes because people are stockpiling that already, and this is July. So I mean, there’s going to be some serious repercussions of Europe. And this is why I targeted Europe to be a problem, possibly for financial crisis and contagion leading back into the United States. It’s just a big problem across the board.

TN: That PPI chart is just so stunning. Now we talk about concentration risk on the supply side. Let’s look at concentration risk on the sales side. Right. Europe has really over concentrated a lot of its sales requirements in China. China has been the market for a lot of European companies. Right. And outsource manufacturing. So they’re as concentrated in China or more concentrated in China than many US companies are, first of all.

AM: By far.

TN: And they’re more dependent on China as a sales market in many cases, than many US companies are, right?

AM: Yeah. This is the problem that I’ve had with Germany specifically. I want to pick on Germany because they are economic. That’s just the fact of the matter. But the Germans, they go out and they see China as a huge market, and they start pushing out their high tech trains and their windmill technology and so on and so forth. Well, the Chinese, all they did was order that stuff, buy it, piece it apart, copy it, and then they sell that to the Africans for one fourth of the cost of the Germans could possibly sell it to the Africans.

So not only is Germany losing out long term with Chinese trade in the market, because that’s stagnating, but now they have no chance to go into the African market because it’s flooded with Chinese parts.

TN: Sure.

AM: They made such critical errors for the years, and they were just so drunk on cheap money out of China that now for the next decade or two, they’re going to have problems.

TN: Yeah, but my overarching points are that Europe is over concentrated on the energy side with Russia, and they’re over concentrated on the manufacturing and then market side with China. And aside from that, they’re kind of out of bullets. They don’t have a lot. And I think that is a lot of the basis for the reason we’re seeing PPI just explode in Europe.

AM: Yes, of course. The only country that even has the only country… The French are smart. I don’t want to hear anything from the Americans be like, Oh, the French are weak and put up the white flag on the Eiffel Tower, whatever these jokes are. But the French have nuclear power and they have food security for their entire nation.

Two of the biggest problems right now in Europe, France has a grasp on. The rest of Europe is total chaos. But those two issues in France are absolutely secure, and the French are smart and they’re looking for long term gains to push the Germans out of the way and take over the EU, and that will actually end up happening. But in the near term, inflation is almost worse there than it is here. Their housing market is mainly cash based, so it’s not as bad of a bubble, but everything else.

TN: So you don’t see much let up in Europe for the rest of 22. You think it continues to be pretty dire in Europe for the rest of 22?

AM: Oh, absolutely. I think the only reason that it’s even somewhat stable at the moment is the tour season has kicked up, and then that’s created other problems where you’re going to cancel flights and overbooked hotels.

TN: Right. Sam, do you have a similar view on Europe at least for the remainder of the year? It continues to be really difficult for the remainder of the year.

SR: Oh, yeah. And the only other place that I would point out is Italy. I mean, Italy is in a pretty rough spot here too. Even with Mario Draghi at the helm, they’re still in a pretty tight spot, and part of it is natural gas and pretty tight there. But the other part is that when it took Legarde about 35 seconds of saying, we’re going to tighten up a little bit here, from negative rates to maybe zero to almost blow up the bond market in the BBB market, it was insane what was going on, and it was a very small move, and you still had yields blow out across the Italian government deck. It’s one of those situations where things move very quickly, things break very quickly, and it doesn’t have a whole lot of bullets in the site.

TN: It’s not like they can go to their version of the permian and drill again. Just to bring this back to something really basic. A lot of Europe’s problem stems from the fact that it has a very old population. So they don’t have young, productive people to keep up with the commitments to very old people in very simple sense. Does that make sense? Is that right?

AM: Oh, absolutely. Looking at just the Italian demographic, all those young Italian guys have bolted for the UK, London, and New York and Miami. They’re gone.

TN: So until they either have a lot of babies, automate, or have a lot of new immigrants, Europe continues to have the same issue?

AM: 100%.

TN: Okay, good.

SR: Demographics don’t change quickly.

TN: No, they don’t.

SR: It’s about 18 years.

TN: That’s right. Okay, so let’s move on to the Fed and inflation anchoring. Sam, you had a great piece in your newsletter, which I’ve referenced many times, and people always ask me how they get their hands on it. So it’s one of the most exclusive newsletters you can get in America. But you had a great piece on Fed Anchoring. Now, I put a chart up on five year inflation expectations. The only reason I put this up is because they really peaked back in late February. Okay? And after that, the five year inflation has really broken down a lot, almost to normal ranges. Okay. So I know you’re looking shorter term, but can you walk us through a little bit about the Fed Anchoring inflation and what you expect? Kind of the near term impact?

SR: Sure. So kind of the point of what I was trying to get across. There’s really two things that you needed anchored for markets to begin to find some footing in the US. At least. And that was you needed to have inflation expectations begin to become anchored. And I think we’ve seen that. Right. You see that chart and it peaked in March, give or take, and has fallen back towards call it normal ranges, if not slightly below what you would expect in this type of environment. That makes sense, right?

In five years, we’re not going to have this type of solution. I’ll be willing to accept that no problem unless we have another flare up somewhere. But I think that’s a fairly reasonable thing to do. But also you have to have the expectations for the Fed anchored as well, because you had two unanchorings that were really happening side by side that was highly problematic for markets.

One, you had inflation unanchoring very quickly, and that’s problematic for markets generally. But you also have the Fed expectations becoming unanchored, and the market was pushing, pushing, pushing for whatever it could get in terms of hikes. Right. It was 75-75-50-50-50. Adding an item to somewhere around four and a quarter percent at the peak. And as of today, you’re back to having the terminal rates or where the Fed raises interest rates to happen by December of this year, and it’s 3.25% 3.5%, and then it cuts next year, is the expectation.

So you’ve begun to have, call it a pricing that’s similar to 1994 hike and then cut style of Fed. That is pretty interesting. That’s a pretty anchored expectation for the Fed. It’s a reasonable expectation of the towards neutral. You’re probably somewhat towards real rates at that point being somewhat positive just because you have inflation of about 3.2 and you have a Fed funds rate a little bit above that. nThat’s why I think that’s a fairly reasonable place for it on the inflation expectations front, that’s largely specifically going to call it close in inflation expectations under a year.

Those are largely call it oil and gasolated and groceries.

TN: Very much energy.

SR: Yeah, this is US. This is not Europe. But as long as in the US, you don’t continue to have those rise in a dramatic fashion, people tend to stop extrapolating. Those forward in their inflation expectations either stabilized or declined back to what they call it normality. And that normality would be somewhere between two and a half and two so that we could spot.

TN: So if gas prices, gasoline prices in the US stopped at, say, 490 or whatever they’re selling at now as a national average, let’s say we plateaued there for three or four months, people would adjust and it would be livable?

SR: It would be livable, yeah, it would be livable. So long as the not accelerating higher.

TN: As long as what, sorry?

SR: As long as they’re not accelerating higher.

AM: Yeah, Sam is right. The risk is as long as they stabilize, I completely agree with Sam. We have one hurricane in the Gulf of Mexico. We have a problem, like a real problem, looking at like $5.50 to $6 gas, and then inflation becomes absolutely just insane.

Going back to the inflation number that they printed out last time, they’re using this ridiculous 5% for housing and shelter and the CPI equation. It’s a little bit hard for me to swallow, but if they can do some kind of magic and keep inflation somewhat steady over the next few months I agree with Sam.

TN: It’s kind of a short at that point.

SR: The interesting part about that is you create an interesting duality in calling risk markets, where the US risk market looks very attractive. If you’ve peaked on Fed pricing, if you peaked on the PE killing. PEs are down 35% year over year. That’s a bigger drop than we’ve seen for several corrections.

You can have a really interesting US risk market going into the back half of the year across markets. The curve, on the other hand, that could be two spends to get very interested very quickly.

TN: Very good. Okay, good guys. What are we looking for for the week ahead? We’ve got a holiday here on Monday. We’ve started to see, say, gasoline prices perk back up in markets on Friday. Are we going to start to see potentially in the near term gas prices rise post July 4?

AM: I think so. One of the things that’s not being said, I don’t think we touched upon, I think last time we did, but the Saudis come in with lower than expected barrels per day, lower capacity, and this must have been stemmed from McCrone and Biden trying to price cap them. Come on, you do that to us, we’re going to do this to you. It’s a game at this point. And the Russians are certainly pulling strings of the Saudis and the Iranians to make this a little bit more chaotic for the US. So I think gas does go does start to trend a little bit higher over the next two weeks.

You’re certainly going to hear noise from people with July 4 prices for barbecues coming up. So that’s going to be all over the news.

TN: Okay, interesting. Sam, what are you looking for during the week ahead?

SR: To build on what Albert was talking about? I think it’s really interesting that spare capacity from OPEC just doesn’t appear to be there whatsoever. But at the same time, you’re also probably going to have at least somewhat of a call, a permanent impairment of Russian oil fields if you continue to have sanctions, that puts a floor long term in global energy prices, period. And if you don’t have US service firms keeping those fields going, we’ve seen what happens when you send Chinese and Russian oil services firms to Venezuela just before you destroy the oil industry.

So look forward to that. On the other side, I’m really looking forward to the conversations that a bunch of millennials have to have with their parents, the crypto markets this July 4.

TN: You are a millennial.

SR: But I am looking forward to some glorious Twitter cons that Tuesday.

TN: Fantastic. Okay, guys, thanks very much. Have a great holiday weekend and have a great weekend.

AM: Thanks, Tony.

SR: Thanks, Tony.

Categories
Week Ahead

The Week Ahead – 16 May 2022

The number one issue for Americans is inflation. As long as this is a top consideration, the pressure will be on the Fed to bring it down. Sam has been pretty consistent with 3 x 50 rate hikes in May, June, and July. What changed in trading today? Is everyone still bearish? Samuel Rines explains.

Also, what’s next for crypto? Luna fell from $90 last Thursday to $0.00005952 on Friday. Their circulation went from 4 billion yesterday to 6.5 trillion today. Watching the crypto fallout is terrible – lots of people have lost lots of money in this supposedly immutable “currency”. Albert Marko explains what happens next.

Lastly, is China really falling apart? We’ve seen some unsettling posts over the past several weeks out of China. From lockdowns to port closures to gossip that Xi Jinping has been sidelined.

Key themes:

  1. Is everyone a bear now?
  2. What’s next for crypto?
  3. Is China really falling apart?

This is the 18th episode of The Week Ahead, where experts talk about the week that just happened and what will most likely happen in the coming week.

Follow The Week Ahead experts on Twitter:

Tony: https://twitter.com/TonyNashNerd
Sam: https://twitter.com/SamuelRines
Albert: https://twitter.com/amlivemon

Listen to this episode on Spotify:

Transcript

TN: Hi and welcome to the Week Ahead. I’m Tony Nash, and as usual, we have our team, Sam Rines and Albert Marko. Tracy, who’s not with us today.

Before we get started, I’d like to ask you to subscribe to our YouTube channel. It helps us a lot get visibility, and it really helps you get reminded when a new episode is out so you don’t miss anything.

Gosh. Big week for everyone. I wish I had fallen asleep a week ago and just woken up now after Friday’s trading. But it’s been a big week all around for everyone.

Guys, we really have a lot to talk about this week. We’re covering the markets. Is everyone a bear now? That’s one of our big topics that we’ll have Sam lean on. Next is what’s next for crypto? A lot of action on crypto, a lot of scary things happening with crypto and then some news out of China or speculation out of China. We’re asking, is China falling apart?

So Sam, let’s start with you first. I guess one of the most relevant items I’ve seen circulating and it was in your newsletter today is the top issues for Americans on the screen right now.

It’s clearly inflation. As long as that’s a top consideration. The pressure on the Fed to bring inflation down is huge. So you’ve been pretty consistent with three times 50 basis point hikes for May, June and July. What’s really changed in trading today? And is everyone still bearish?

SR: Yeah. I mean, everyone still seems to kind of be floating a little bearish, but I kind of like to go back to the number one concern is inflation. We shot ourselves in the foot and then the second one is getting shot in the head, right. It’s violent crime and crime. You add those two together and it’s even larger portion of inflation. So it’s safety and food. Right.

People like to eat and they want to be able to eat and they want to feel safe. I think it’s that simple. Those should be the top two concerns in this type of environment when you have the data pointing towards continuing higher inflation numbers and continuing crime.

On the is everyone a bear front? I think it’s a little complicated, right.

Because if you look at the flows into and out of indices and into and out of fixed income, and when you look at the flows, it’s easy to kind of say everyone’s a bear. Right. Pouring money into Treasuries, taking money out of indices. But at the same time, underneath the surface, you really want to be careful on what you’re a bear on and what you’re not.

There’s a lot of things that can still make money in this environment, oil, food, etc. can still make money. And there’s a lot of things that are probably still going to get torched. Anything that’s a little high beta is probably not the place you want to be for the whole time. Tradable but unlikely to be a long-term type trade.

TN: Like, I noticed some of the techs coming back today, and that’s great. And I hope people don’t lose more there. But is that something that you would consider kind of be careful if you’re going back in type of trade?

SR: Some of it. Not all of it. There’s a lot of tech that actually looks fairly attractive here, whether it’s from a valuation perspective or whether it’s from a very long term perspective.

A lot of stuff re-rated, re-rated fast, and it looks attractive. And there’s a lot of stuff that looks like it’s probably going bankrupt. Right. I wouldn’t be trying to bottom tick Carvana.

AM: Actually to expand on that, Sam, about who’s a bear and bears or Bulls or whatnot. I kind of think that we have to separate the higher great institutions versus the retail dip buyers that are just looking for that get rich, quick return. Many of the institutions, the ones I’ve talked to, are absolutely still bearish. They don’t see real value in this economy until the market until 3700.

Coincidentally, one of the hedge fund guys told me at 3500, you have an actual financial crisis in the United States just because everything’s leveraged up. So I don’t think that the Fed was even going to want to afford or going down past the 38, 3700, in my opinion.

SR: In 100% of that, Albert. Right. You have to separate those two teams of people. Right. The dip buyers are going to try every single time to get rich quick. Real long term allocators are going to take their time here. They’re not going to rush and, those are very large positions they have to take. And they don’t get to move in and call it for two or three weeks. They have to move in for very long periods of time.

So it’s Albert’s point. I don’t think that should be underrated, period.

AM: You can just look at the valuations of some of these companies that are still out in the stratosphere, like one of the ones I’ve recommended, Mosaic, Tight and Tire. They’re just ten fold of what they were in 2020. How do you buy these things? You can’t buy these things.

TN: Right. We’ve seen a lot of chatter about margin calls over the past week and a half. Obviously, that’s been scary for the first wave of kind of people going in. But when that second wave hits, when does that start to hit that second wave? Once we go 3800 or lower? So is that when things get really scary?

AM: Actually, I think part of the margin calls happened this week, today, actually Friday. I think a lot of guys had a liquidate positions and cover shorts and whatnot. And we got a little bit of a squeeze of a rally. I didn’t really feel like a Fed was pumping just thought like people short covers and people trying to get stuff off the board.

TN: Right.

SR: 100%. That’s where I think. I don’t think you want to be in front of a wave of liquidation for let’s call it sun and Ark, right? You do not want to be in front of either one of those two right now, period.

TN: Yeah, it was nice to have a Green Day, but it didn’t necessarily feel like a strong Green Day.

Okay, guys, let’s move on to crypto. Albert, I think you’re the man here. You’ve talked about crypto for a long time. It’s bad. This week is bad. And we’ve got a chart for Luna.

Luna fell from $90 last Thursday to 5, 10 thousand of a cent today, I think. Their circulation went from 4 billion yesterday to 6.5 trillion today. So it doesn’t sound very immutable to me. So the watching crypto fallout, it’s been pretty terrible. Lots of people have lost lots of money and people are questioning and cynical about words like immutable now.

This is something that I think experienced people have expected. But what happens next? Do we have a clearing out of some of these currencies? Do people just hold at 5, 10 thousand of a cents? Do we see some of these actually become currencies or is it all just going to get regulated and kind of thrown out the window?

AM: Well, are they going to be currencies? No, they’ll never be currencies. The dollar is going to be the currency of the world status for trade for the remainder of our lifetimes, whoever is alive today. That’s just the basic fundamental fact that you have to come to grips with.

This is like part one of the closing call for cryptos in my opinion. They got a good dose of the reality that when things need to get liquidated, you’re not liquidating residential towers in Miami on your portfolio. You’re liquidating some Ponzi scheme cryptos that are in your pocket that your clients really made you get into to begin with.

From the retail side, as much as I want to gloat, because I’ve been saying that this was going to happen for years, it’s really not that funny because you had guys out there pushing these crypto things and saying the dollar is dying, gold is dying, digital future, blah, blah, blah. Look at this chart, look at that chart. But the reality is there are nothing but pump and dump schemes. And people lost a lot of money.

I had a friend that goes to school, his daughter goes to school with my daughter. And he told me months ago I put everything to Litecoin for the College fund. I tried to reason with this guy.

TN: Please don’t do that.

AM: Yeah, well, community college for that kid.

TN: Albert, they’re following the lead of some, analysts are credible. They have a credible history and they’ve really started pushing this stuff. Now they’ve dialed it back. But some people who had previously been credible analysts were pushing this stuff.

AM: They’re liars. They’re all liars.

SR: Had been.

AM: They’re trying to get services sold and people to watch their YouTube channels and get subscriptions up. So of course you’re going to go and sit there and try to pump crypto to the retail crowd because they don’t know any better, right?

SR: And anyone who looked if you really dug into the Luna situation, you could understand very quickly how that could unwind in a way that was dramatic. This wasn’t even constructed as well as a pre 2008 money market fund. At least you knew what the money market fund held behind it and how it was going to actually return money to you.

With Tether, it’s supposed to be a crypto ish money market fund. We still don’t know what that actually holds. The whole thing to me is regrettable to Albert’s point, right. The two of us kind of got picked on when we giggled off paying for oil in crypto earlier this year. But the two of us have been kind of like, “no, not so much.” So while it’s tempting to kind of have that little bit of a cocky grin.

It’s a really sad situation and there’s a lot of money that got shredded very quickly there.

TN: Very quickly in less than a week. It’s insane how much money. If anybody who follows me on Twitter knows that I invest in some Doge last year, stuck with it for a few months, got out I did it because it was a joke of a coin. Everyone knew it was a joke of a coin. I wanted to be on part of the joke, and I made some money at it. And that’s it, right? That’s it. You can’t necessarily think of this stuff as a serious investment because it’s so highly unregulated and people engage in this pump and dump stuff.

AM: Yeah. We can have a conversation on this for hours. This is actually at the heart of the problem of the US economy at the moment. All these gig employee, all these gig employees service industry and jobs and whatnot, they left work got into crypto. Got stimulus checks, sat at home, kept getting unemployment, not going to work, and now we’re stuck with the labor shortage in reality. I don’t care what the Fed says and what Yellen says about the market. The labor market is good. The labor market is absolute trash right now. We have no workers anywhere right now. And because. Yeah, this is part of it.

TN: So that’s a good question. With crypto, kind of at least temporarily, maybe permanently dying, does that help the employment picture? Does that help people come back to market even a little bit?

AM: People had tens of thousands of dollars in a Coinbase account that are now $500. They’re going to have to go back to their jobs. And that’s just the reality of it. If you want me to go even a step further, this is probably the intent of the Fed and the treasury is to start eliminating this excess money, forcing people back to work.

SR: Yeah. Oh, 100%. In one of my notes this week that Tony, I think you saw, I sent out the video from SNL of Jimmy Carter saying, hey, get 8% of your money out of your account and light on fire. Guess what? The Fed just did that for millennials.

TN: Yeah.

SR: It’s that simple. The Fed just lit at least 8% of millennial money on fire, generally. Right. And it’s unlikely to come back that quickly. And I think if it wasn’t a direct policy, it was a side effect that the Fed sitting there going, oh, well, that works.

AM: I guarantee I talk to a lot of people. It was a direct policy. I don’t care. I’ll throw the Fed under the bus. They deserve to be thrown under the bus anyways.

TN: Well, yeah, it is where it is. And I would assume more regulations coming at some point because people will scream, especially with Coinbase.

I think it’s Coinbase or one of the exchanges saying that they’re going to undo a lot of the trades over the last two or three days.

AM: Okay.

TN: There are no regulations at all.

SR: Just call them the LME.

TN: Yeah, exactly. So crypto is the LME now, and it’s insane. So a lot of consumer protections are going to be talked about. A lot of regulations going to come in. I think that party is pretty much over.

AM: Yeah. Once the regulations started coming in from Congress and different governments in the world, they’re going to see how false their idea of decentralization really was.

TN: Yeah. Okay, guys, let’s move on to China. We’ve seen a lot over the past few weeks and really gossipy stuff about China. But today I saw a note from Mike Green on Twitter, which is on screen talking about Xi Jinping and Li Kaqiang, and Xi basically being sidelined on May 4.

I also saw another tweet yesterday, a guy going through Shanghai during the lockdown. If you haven’t seen it, the first of the thread is on the screen now. Check it out. It’s really interesting.

China is empty and it’s really sad.

So we’ve seen these really unsettling posts over the past several weeks out of China, from lockdowns to port closures to gossiping Xi as sidelined. So to you guys, what does that all mean? Is it something you’re taking seriously? Do you think it’s something that will have immediate effects? What does that look like to you?

AM: China. China is a big quagmire in itself. It’s such a large country. You’re going to have all sorts of rumors of Xi being sidelined and unrest in different cities like Shanghai and whatnot. But the Chinese are pretty pragmatic. They know that things are not going really well. So they’re going to have to lift off they’re going to have to lift off some of these just draconian policies with locking down people because it’s going to really hurt their economy. And part of it’s probably because they’re fighting inflation, too. They’re trying to cut down demand until supplies catch up. I mean, they got problems over there with inflationary issues.

TN: Also with the deval, with the port closures, with a lot of other stuff that’s happening there, their economy is already host. Right. They’re definitely not hitting 5.5, which is their target this year. And I think they’ll be lucky to have a zero growth year.

But I think Albert, on the political side, a lot of this kind of theater that we’re seeing play out on Weibo and Twitter and other things. Do you think this is plausible?

AM: Of course it’s plausible. I mean, you have the vultures circuit around Xi right now. They want him out. You have one elite group keeping him in power. But most likely have three or four other elite groups within the CCP that want him out. There’s no question about that. He can’t even go out in public.

TN: That’s an important thing that many people don’t think about is there are parties within the party. The CCP is not a unified party. There are factions within the party. Many Westerners don’t understand that. There are definitely factions within the party, and they’ll stab each other in the back in a second.

AM: There’s factions everywhere you go. People try to, China as a one rule or one party, one system, but even the United States, you have the Tea Party, the Freedom Caucus, the Progressive, so on and so forth. I mean, it’s all fragmented no matter what you do.

TN: Yeah, Sam. So China is second largest economy, ports closed, people in their houses, all of that stuff. So how long can they do this before it affects everybody or has it already started doing?

SR: Oh, it’s already affecting everything. The supply chains are already completely ruined because of it. There’s no question about that. I think the real question is what happens when they reopen, right?

We’ve got oil sitting at $109 and half a China is shut down. That is something that doesn’t, I mean, it’s kind of scary, right? You have a bunch of people that aren’t using as much as they should be right now. You begin to spin that back up. That could be a really interesting scenario overall. I don’t know.

AM: You know, Sam, that actually loops back to what you were talking about the Fed trying to fight inflation. No matter what policy they come up with, there’s still supply chain shortages and labor and everything that no matter what they do, they can’t fix.

SR: Their host. It’s an amazing world where you have half the Chinese, let’s just click through. Half the Chinese economy is shut down. You have the US dollar sitting at 105, 106 somewhere in there, and you have oil sitting at 110. Anybody who’s saying oil prices look a little toppy here might want to look at what happens when the dollar falls and China’s going.

AM: That’s what we’re going to have inflation in the five to 7% range for the next 18 months. I can’t say lower than that.

TN: 18 months, you say?

AM: 18 months. How are they going to get it lowered? China opens and then what? You know what I mean? And then you still have shortages everywhere. I mean, go to some of the stores. They have baby formula shortages.

On any given day, you have small materials you need from the home short. Everywhere. That’s going to create artificial inflation. On top of that, you have wage inflation. How do you get that down?

SR: The only way you get it down is having less employees. Look at Silicon Valley. Silicon Valley has started laying people off, and that’s not getting enough. It’s more than just Carvana.

AM: And then that’s the thing. Later in this year, Democrats and Joe Biden can have a real big problem unemployment numbers, starting to creep up. They can’t hide that forever with the BLS manipulation.

SR: Look at the household number. The household number is already not looking great. And that’s the one that they choose not to hide for a reason. Yeah, sure, the establishment is up, but you look at that household number and it’s printing negative already, guys.

TN: Yeah. One more thing I want to cover is this has to do with China shut down and it has to do with the possibility of political instability in China. So there are two separate issues. The newsletter today talked about reshoring.

So these things seem to provide more instability and a lack of reliability of Chinese sourcing. So what are you seeing to support the reshoring argument?

SR: Oh, lots of things. I mean, you have Hyundai. That’s likely to announce a pretty big factory next week in Georgia. You have everyone from Micron to a bunch of other call it higher tech firms beginning to announce that they’re moving back here. They’re building here and they’re going to manufacture here or they’re going to manufacture in Mexico. One of the other.

If you want to have China like characteristics without supply chain issues, you go to Mexico and that re regionalization trend. That’s the theme of mine. Is beginning to pick up steam and it’s going to pick up much more steam, in my opinion.

North America is going to be basically, in my opinion is going back to being the world’s, not manufacturing hub, but the world’s high end manufacturing hub. If you want something that it’ll be like big Germany.

AM: Yeah, I mean that’s just the most logical thing to do is to start putting your supply chains closer to your luxury consumers and you have to do that. But I’ve been high on the Canadian economy and the North American economy.

I think Europe absolutely they’re in deep trouble at the moment. So is Asia. But Europe especially.

TN: On the reshoring note, guys, if Germany can’t get power, will we start to see some German manufacturing firms potentially moving to the US?

SR: You already make AMGs here. Mercedez Ben’s AMGs.

TN: Yeah.

SR: They’re made in Alabama. But they’re made in Alabama.

AM: Yes. But Tony to your question, actually, I do have a colleague that works for Austrian driven outfit and they have been buying factories in the United States specifically for this reason. It’s the only place that people are going to be buying things or has money at the moment. Their entire export industry in China is dead and they’ve sat there and been lackadaisical and never sat there and tried to put their networks back into Africa where the real emerging market should be focused on Africa. It’s going to be bigger than Asia anyway.

SR: Let’s also be honest, they just got done pulling out of Africa in some ways. A couple of decades ago. They missed that boat.

TN: They did. And so did the Americans. So. Hey guys, thank you very much. Really appreciate this. If you’re watching please like and subscribe have a great weekend and have a great week ahead. Thank you.

AM: Thanks, Tony.

SR: Thanks, Tony.

Categories
QuickHit

QuickHit: What happens to markets if China invades Taiwan? (Part 2)

What happens to markets if China invades Taiwan?

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In this second part, Mike Green explains what will happen to Europe if China invades Taiwan. Will the region be a mere audience? Will it be affected or not, and if so, how? How about the Euro — will it rise or fall with the invasion? Also, what will happen to China’s labor in that case, and will Chinese companies continue to go public in the West?

You can watch Part 1 of the discussion here.


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This QuickHit episode was recorded on December 2, 2021.

The views and opinions expressed in this What happens to markets if China invades Taiwan? Part 2 Quickhit episode are those of the guest and do not necessarily reflect the official policy or position of Complete Intelligence. Any contents provided by our guest are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

TN: So we have a lot of risk in, say, Northeast Asian markets. We have a lot of risk to the electronics supply chain. I know that this may seem like a secondary consideration. Maybe it’s not.

What about Europe? Does Europe just kind of stand by and watch this happen, or are they any less, say, risky than any place else? Are they insulated? Somehow?

I want to thank everyone for joining us. And please, when you have a minute, please follow us on YouTube. We need those follows so that we can get to the right number to reach more people.

MG: No, Europe exists, I would argue, as basically two separate components. You have a massive export engine in the form of Germany, whose core business is dealing with China and to a lesser extent, the rest of the world. And then you have the rest of Europe, which effectively runs a massive trade deficit with Germany. I’m sorry. Germany is uniquely vulnerable in the same way that the corporate sector is vulnerable in the United States. That supply chain disruption basically means things go away.

They are also very vulnerable because of the Russian dynamic, as we discussed. In many ways, if I look at what’s happened to Germany over the past decade, their actions on climate change and moving away from nuclear, away from coal into solar, et cetera, has left them extraordinarily dependent upon Russian natural gas supplies. It’s shocking to me that they’ve allowed themselves to get into that place. Right.

So my guess is that their reaction is largely going to be determined by what happens with Russia rather than what happens with China. Right. In the same way that Jamie Diamond can’t say bad things about China. Germany very much understands that they can’t say bad things about China.

Europe, to me, is exceptionally vulnerable, potentially as vulnerable as it has ever been in its history. I agree. It has extraordinary… Terrible way to say it. I don’t know any other way to say it, but Europe basically has unresolved civil wars from 1810, the Napoleonic dynamics all the way through to today, right. And everybody keeps intervening, and it keeps getting shoved back down into a false equilibrium in which everyone pretends to get along, even as you don’t have the migratory patterns across language and physical geographic barriers that would actually lead to the type of integration that you have with the United States, right.

Now ironically, the United States are starting to see those dynamics dramatically reduce geographic mobility, particularly within the center of the country. People are becoming more and more set in their physical geographies, et cetera. Similar to the dynamics that you see in Europe, which has literally 100,000 more years worth of Western settlement and physical location, than does the United States. But they’ve never resolved these wars. Right.

And so the integration of Europe has happened at a political level, but not at a cultural level in any way, shape or form. That leaves them very vulnerable. Their demographics leaves them extraordinarily vulnerable, the rapid aging of the populations, the extraordinarily high cost of having children, even though they don’t bear the same characteristics of the United States, but effectively the lack of land space, et cetera, that has raised housing costs on an ownership basis, et cetera. Makes it very difficult for the Europeans, and they have nowhere else to go now. Right. So the great thing that Europe had was effectively an escape valve to the United States, to a lesser extent, Canada, Australia, et cetera, for give or take 200 or 300 years, and that’s largely going away. Right.

We are becoming so culturally distinct and so culturally unacceptable to many Europeans that with the exception of the cosmopolitan environments of New York City and potentially Los Angeles, nobody wants to move here anymore. Certainly not from a place like Europe. I think they’re extraordinarily vulnerable.

I also think, though, that they’ve lost sight of that because they’re so deeply enjoying the schadenfreude of seeing the unquestioned hegemony of the United States being challenged. Right. It’s fun to watch your overbearing neighbor be brought down a notch. Right. You tend not to focus on how that’s actually adversely affecting your property values in the process.

TN: Sure. Absolutely. So just staying on Europe, what does that do to the importance of the Euro as an international currency? Does the status of the Euro because of Germany’s trade status stay relatively consistent, or do we see the CNY chip away at the Euros, say, second place status?

MG: Well, I would broadly argue that the irony is that the Euro has already peaked and fallen. Right. So if I go back to 2005 2006, you could make a coherent argument that there was a legitimate challenge to the dollar right.

Over the past 15 years, you’ve seen continual degradation of the Euro’s role in international commerce, if I were to correctly calculate it, treating Europe as effectively these United States in the same manner that we have with the US, there’s really no international demand for the Euro. It’s all settlement between Germany, France, Italy, et cetera.

If I go a step further and say the same thing about the Chinese Yuan or the Hong Kong dollar, right. They really don’t exist in international transactions. To any meaningful degree. The dollar has resumed its historical gains on that front. Now that actually does open up a Contra trade.

And I would suggest that in just the past couple of days, we’ve seen an example of this where weirdly, if the status quo is maintained, the dollar is showing elements of becoming a risk on currency as the rest of the world basically says some aspect of we’re much less concerned about the liquidity components of the dollar, and we’re much more interested in the opportunity to invest in a place that at least pretends to have growth left. Right. Because Europe does not have it. Japan does not have it. China, I would argue, does not have it. And the rest of the world, as Erdogan and others are beginning to show us, is becoming increasingly dysfunctional as a destination for capital. Right.

Brazil, perennially the story for the next 20 years and always will be right. Africa, almost no question anymore that it is not going to become a bastion for economic development going forward. And we’re broadly seeing emerging markets around the world begin to deteriorate sharply because the conflict between the United States and China creates conditions under which bad actors can be rewarded. Right.

If I sell out my people, we just saw this in the Congo, for example, if I sell out my people for political influence, I can suddenly put tons of money into a bank account somewhere. Right. China writing a check for $20 million. It’s an awful lot of money if I’m using it in Africa.

TN: For that specific example, and for many other things, the interesting part is China is writing a check for $20 million. Yeah, they’re writing a check for €20 million. They’re not writing a check for 20 million CNY. It’s $20 million. All the Belt and Road Initiative activities are nominated in dollars.

So I think there’s a very strange situation with China’s attempt to rise, although they have economic influence, they don’t have a currency that can match that influence. And I’m not aware, and you’re such a great historian. I’m not aware of an economic power that’s come up that hasn’t really had its own currency on an international basis. I’m sure there are. I just can’t think of many.

MG: Well, no. I mean, the quick answer is no. You cannot project power internationally unless effectively the tax receipts of your local population are accepted around the world. Right? Broadly speaking, I would just highlight that the way I think of currency is effectively the equity in a country right now. It’s not a perfect analog, but it’s a reasonable analog. And so, what you’re actually saying is the US remains a safe haven. It remains a place where people want to invest. It remains a place where people believe that the rule of law is largely in place. And as a result, anyone who trades with the United States is willing in one form or another to say, okay, you know what? I can actually exchange this with somebody who really needs it at some point in the future.

I think one of the reasons that we tend to think about the dollar as having fallen relative to the Euro or the CNY is we have a very false impression of what the dollar used to be. Right. So we tend to think about the dollar was the world’s reserve currency following World War Two and everything happened in dollars. Right.

People forget that half the world, certainly by population, never had access to dollars, never saw dollars. There was a dollar block. And then because of their refusal to participate in Bretton Woods, there was a Soviet ruble block and then ultimately far less impactful things like a Chinese Yuan, et cetera. But the Soviets, for a period of time, had that type of influence. They could actually offer raw materials. They could actually offer technology. They could offer things that had the equivalent of monetary value to places like Cuba, to places like Africa, to places like South America, et cetera. China right.\

That characterized the world from 1945 until 1990. Right. I mean, the real change that occurred and really in 1980 was that Russia basically ran out of things to sell to the rest of the world, particularly in the relative commodity abundance that emerged in the 1980s after the 70s, their influence around the globe collapsed.

And I think the interesting question for me is China setting up for something very similar. Right. It feels like we’re looking at a last gasp like Brisbanev going into Afghanistan, right. And oh, my gosh, they’re moving out and they’re taking over. Well, that was the end. They make a move on Taiwan. And I think a lot of people correctly point to this. It’s probably the end of China, not the beginning of China.

I just don’t know that China knows that it has an alternative because it’s probably the end of China, regardless.

TN: Sitting in Beijing, if you bring up any analogues to the Soviet Union to China in current history, they’ll do everything to avoid that conversation. They don’t want to be compared. Is Xi Jinping, Brezhnev or Andropov or. That’s a very interesting conversation to have outside of Beijing. But I think what you bring up is really interesting. And what does China bring to the world? Well, they bring labor, right. They’re a labor arbitrage vehicle. And so where the Soviet Union brought natural resources, China’s brought labor.

So with things like automation and other, say, technologies and resources that are coming to market, can that main resource that China supplied the world with for the last 30 years continue to be the base of their economic power? I don’t know. I don’t know how quickly that stuff will come to market. I have some ideas, but I think what you’re saying is if they do make a play for Taiwan, it will force people to question what China brings to the world. And with an abundance of or, let’s say, a growing influence of things like automation technologies, robotics, that sort of thing, it may force the growth of those things. Potentially. Is that fair to say?

MG: I think it’s totally fair. And I would use the tired adage from commodities. Right. The cure for high prices is high prices. If China withdraws its labor or is forced to withdraw its labor from the rest of the world, there’s two separate impacts to it.

One is that China’s role as the largest consumer of many goods and services in things like raw materials, et cetera. That has largely passed. Right. And so as we look at things like electrification, sure, you can create a bid for copper. But at the same time, you’re not seeing any building of the Three Gorges again. Right. You’re not seeing a reelectrification of China. You may see components of it in India. And I would look to areas like India as potential beneficiaries of this type of dynamic. But we’re a long way away from a world that looks like the 20th century. And you’ve heard me draw this analogy. Right. So people think about inflation.

The 20th century was somewhat uniquely inflationary in world history. The reason I think that happened is because of a massive explosion of global population. Right. So we started the 20th century with give or take a billion people in the global population. We finished the 20th century with give or take 7 billion people. So roughly seven X in terms of the total population. The labor force rose by about five and a half X.

If I look at the next 100 years, we’re actually approaching peak population very quickly. And if I use revised demographic numbers following the COVID dynamics, we could hit peak global population in the 2030s 2040s. Right. That’s an astonishing event that we haven’t seen basically since the 14th century, a decline in global population. And it tends to be hugely deflationary for things like raw materials. Right. People who aren’t there don’t need copper, people who aren’t there don’t need houses, people who aren’t there don’t need air conditioners, et cetera.

I think the scale of what’s transpiring in China continues to elude people. I would just highlight that we’ve all seen examples of this. Right. So go to any Nebraska town where the local farming community has been eviscerated with corporatization of farms, and the population has fallen from 3000 people to 1000 people. What’s happened to local home prices? What’s happened to the local schooling system? What’s happened to deaths of despair, et cetera. Right. They’ve exploded. China’s facing the exact same thing, except on a scale that people generally can’t imagine. The graduating high school classes are now down 50% versus where they were 25 years ago. That’s so mind blowing in terms of the impact of it.

TN: That’s pretty incredible. Hey, Mike, one of the things that I want to cover is from kind of the Chinese perspective. Okay. So we’ve had for the last 20-25 years, we’ve had Chinese companies going public on, say, Western exchanges and US exchanges. Okay. So if something happens with Taiwan, if China invades Taiwan, do you believe Chinese companies will still have access to, say, going public in the US? And if they don’t, how do they get the money to expand as companies?

Meaning, if they can’t go public in the west, they can’t raise a huge tranche of dollar resources to invest globally. So first of all, do you think it’s feasible that Chinese companies can continue to go public in the west?

MG: Yeah. Broadly speaking, I think that’s already over. Right. So the number of IPOs has collapsed, the number of shell company takeovers has collapsed. So the direct listing dynamics. I just had an exchange on Twitter with a mutual friend of ours, Brent Johnson, on this. Ironically, that would actually probably help us equities for the very simple reason that the domestic indices like the S&P 500 and the Russell 2000 do not include those companies. Right.

So if those companies fail to attract additional capital or those companies are delisted, it effectively reduces competition for the dollars to invest in US companies and US indices. Where those companies are listed and are natively traded, at least are in places like Hong Kong, China, et cetera, those are incorporated in emerging market indices. And I would anticipate, although it certainly has not happened yet. That on that type of action, you would see a very aggressive move from the US federal government to force divestiture and prohibit investment in countries like China.

I think that would very negatively affect their ability to raise dollars. Again, and I mean, no disrespect when I say this. I want to emphasize this, but we tend to think of Xi Jinping as this extraordinarily brilliant, super thoughtful, intelligent guy. The reality is he’s kind of Tony Soprano, right? I mean, it’s incredibly street smart, incredibly savvy, survived a system that would have taken you and I down in a heartbeat. Right. You and I would have been sitting there. Wow. Theoretically, someone would have shot. Congratulations. Welcome to the real world, right. He survived that system. But that leaves him in a position where I do not think that he’s actually playing third dimensional chess and projecting moves 17 moves off into the future. I think he very much is behaving in the “Ohh, that can only looks good.”

I think it’s really important for people to kind of take a step back and look at that in the same way that Japan wasn’t actually forecasting out the next 100 years. The Chinese are not doing that. It’s a wonderful psychological operation. One of the best things that people can do is go back and relisten to the descriptions of IBM’s Big Blue computer or Deep Blue. I’m sorry beating Gary Kasparov. Right. So one of the things that they programmed into that computer was random pauses. So the computer processed things and computed things at the exact same speed. But by giving Kasparov the illusion that he forced the machine to think, he started to second guess himself.

Well, what did I do there that made it think, right. He didn’t do anything. It was doing its own thing and designed to elicit a reaction from you. I think China’s done probably a pretty good job of getting a lot of people in the west and elsewhere. And I think Putin is even better at this, of second guessing our capabilities and genuinely believing that we’re second rate now.

It’s fascinating. There was just a piece that came out from the US Space Force where they’re talking about the rising capabilities of China. And if you read the public Press’s interpretation of this, China is moving ahead in leaps and bounds. And what actually he’s saying is, no, we’re way ahead. But they are catching up at an alarming rate.

TN: That’s what happens. Right.

MG: Of course, it is always easier to imitate than it is to innovate.

TN: Right. When I hear you say that it’s easier to imitate than innovate. I know you don’t mean it this way, but I think people hear it this way that the Chinese say IP creators are incapable of creating intellectual property. I don’t think that’s the case. I don’t think you mean that to be the case. They are very innovative. It’s just a matter of baselining yourself against existing technology. So it does take time to catch up. Right. And that takes years. Your TFP and all the other factors within your economy have to catch up. And it takes time. It takes time for anybody to do that.

MG: Well… And I think also it’s important to recognize that things like TFP, total factor productivity, tends to be overstated because we don’t do a great job of actually correctly defining it.

TN: It’s residual. I can tell you.

MG: Exactly right. And just to emphasize what that means, it means it’s the part that we can’t explain with the variables we’ve currently declared. Right.

TN: Right.

MG: And so when I look at TFP in the United States, I actually think TFP is quite a bit lower than the data sets would suggest, because I think that we are failing to consider the fact that we’ve introduced women into the labor force. We’ve introduced minorities into the labor force. Right. So the job matching characteristics or the average skill level of people has risen.

People live longer, so they get to work in different industries and careers for a longer period of time. The center of the distribution is now starting to shift too old, and that’s showing up as a negative impact. But we failed to consider that on the other side. And the last part is just again, remember going back to the start of the 20th century, the average American had three years worth of education at that point. Third grade education, where a year was defined as three months, basically during the non harvest season. Right.

TN: It’s the stock of productivity. Correct. We’re adding to that stock of productivity, and the incremental add is large compared.

MG: But small compared to the stock. Absolutely correct. Right.

TN: Okay. Just to sum up, since we wanted to talk about the impact on markets, I want to sum up a couple of things that you’ve said just to make sure that I have a correct understanding.

If China is to invade Taiwan, we would have in Northeast Asia a period of volatility and uncertainty. That would go across equity markets, across currencies, across cross border investments and so on and so forth. Okay. So we would have that in Northeast Asia.

MG: And I would just emphasize very quickly. So we’ve seen this rolling pattern of spikes in volatility. Right. So we saw it in 2018 in the equity markets. We saw it in late 2018 in the credit markets and commodity markets. We’ve now seen it in interest rate markets. What’s referred to as the Move index. The implied volatility around interest rates has reached relatively high levels of uncertainty.

The one kind of residual area where we just have seen no impact whatsoever has been in FX. That has been remarkably stable, remarkably managed. That’s kind of my pick for the breakout space.

TN: Okay. Great. Europe also appeared of volatility because of their exposure to both China and Russia. Since both China and Russia have a degree of kind of wiliness, especially Russia, I think almost a second derivative. Europe is volatile because of both of those factors. Is that fair to say? And that has to do with the Euro that has to do with their supply chains? That has to do with a number of factors.

MG: I would broadly argue that’s a reasonable way to think about it. I mean, almost think about it. Flip the image and imagine that the continents are ponds and the oceans are land. Right. What we’re describing is a scenario where a rock gets dropped into Asia or a rock gets dropped into Europe. You will see the waves spread across. There’s potential for sloshing over, and it’ll absolutely impact the United States. But in that scenario, we literally have two giant barriers in the form of the Pacific and the Atlantic Ocean that separate us.

And while our supply chains are integrated currently, in a weird way, COVID has been a bit of a blessing in starting to fracture those supply chains. We’ve diversified them significantly in the last couple of years.

TN: Okay. And then from what I understand from what you said about the US is supply chains will definitely be a major factor. Corporates will likely keep their investments in China until they can’t. They won’t necessarily come up with, say, dual supply chains or redundant supply chains.

US equity markets could actually be helped by the delisting of Chinese companies. Or we’ll say, US listed equities, meaning US companies listed could be helped by the delisting of Chinese equities, potentially.

MG: Certainly on a relative basis. I might not go so far as to say in an absolute simply again, because you do have people and strategies that run levered exposures. And so anytime asset values in one area of the world falls, you run the risk that the collateral has become impaired, and therefore there’s a deleveraging impact.

TN: Yes. Understood. And then the dollar continues to be kind of the preeminent currency just on a relative basis because there really isn’t in that volatile environment, there aren’t many other options. Is that fair to say?

MG: Well, again, I think there’s an element of complication. I would prefer to argue volatility. I think it is hard to argue that the dollar wouldn’t appreciate, but I also think it’s important, and this is why I go back and say we can’t actually stop Russia from taking Ukraine. We can’t stop China from taking Taiwan.

If they were to actually do that, then there is kind of the secondary loss of phase dynamic associated with it that may you could see and you’ve already seen Myanmar. You could see Thailand. You could see Vietnam. Say, you know what? We got to switch. I’m skeptical, but I’m open to that possibility.

TN: Interesting. Okay. Very good. Mike, thank you so much for your time. I really appreciate how generous you’ve been with what you’ve shared. I’d love to spend another couple of hours going into this deeper, but you’ve been really generous with us.

I want to thank everyone for joining us. And please, when you have a minute, please follow us on YouTube. We need those follow so that we’ve we can get to the right number to reach more people.

So thanks again for watching. And Mike Green, thanks so much for your thoughts on China’s invasion of Taiwan.

MG: Tony, thank you for having me.

Categories
Podcasts

Apple To Scan Phones For Child Abuse Imagery

This is another Business Matters episode at the BBC with Tony Nash as one of the guests. They discussed about the possible problems if Apple starts scanning phones for child abuse imageries, electronic vehicles and their future especially in the US where President Biden targets 50% total sales in the next decade, and should vaccines from developed countries be sent overseas to help developing countries?

 

 

This podcast was published on August 6, 2021 and the original source can be found at https://www.bbc.co.uk/programmes/w172xvqgghw0rpz.

 

BBC Business Matters Description:

Tech giant Apple has said that all of its smartphones and tablets in the US will soon scan them for images of child abuse and report those found. The move has already alarmed some, who are concerned devices could now be spied on. We speak to Matthew Green, a cryptographer and professor at Johns Hopkins University in the United States who revealed details about Apple’s plans before they were officially announced. President Biden has said that by 2030, half of the cars produced in the US will be zero emission vehicles. But is this realistic and does it go far enough? We ask Becca Ellison, deputy policy director at the environmental campaign group Evergreen Action. Vaccine maker Moderna has reported net income of $2.8bn for the three months to June 30th. Rasmus Bech Hansen is chief executive of the life sciences data analytics company Airfinity, and tells us how the company’s coronavirus vaccine has boosted its prospects. Plus, in the wake of the saga of office sharing company WeWork, the BBC’s Ed Butler explores whether technology startup founders have become the latest wave of cult leaders. And after the news that Lionel Messi will leave Barcelona, we ask his official biographer Guillem Balague, why money is the reason the world’s greatest footballer is leaving his club of 20 years.

 

All this and more discussed with our two guests on opposite sides of the world: Tony Nash, chief economist at Complete Intelligence in Texas and Zyma Islam, journalist for the Daily Star in Dhaka, Bangladesh.

 

Show Notes

 

BG: Tony, what’s your view on this? Do you wonder why the technology companies can really control how this software is used around the world and in years to come? Because there is a real risk that it is the thin end of the wedge? And what do you do on your phone is no longer private?

 

TN: Yeah, I share all of the concerns that Zyma mentioned. I have three kids. I have the same worries as the person you interviewed. But these things always start with good intentions. Here’s the problem. The biggest problem of the interview that I heard him say is it’s under development. They haven’t even tested this stuff. They’re going to put it on everyone’s iPhone to snoop in their photos too. And what I worry about, there are planned layers of review in this. But what about that person, man or woman who is labeled a pedophile on accident? They will never get their life back ever. So all of this stuff starts with good intentions, but I guarantee they will ruin people’s lives with this.

 

BG: But if illegal material is being stored, passed around on people’s phones, surely tech companies do have a responsibility to do something.

 

TN: No I don’t. I run an artificial intelligence company. Computer vision is very good. That’s the technology generally that they’re using for this. But there are always anomalies. There are always problems. Tech companies have a responsibility to be tech companies. Tech companies are not the police. If we get pulled into an investigation, then we in all of our contracts, it says we will cooperate with the police. But it is not our responsibility, nor is it any other tech company’s responsibility to play the role of a police officer, unless they know that something’s going on. But this is going above and beyond, and I guarantee you they will label people pedophiles who are not pedophiles and they will ruin their lives.

 

BG: What kind of incentives do you think might be needed to try to get half of car sales to be electric or some other type of zero emission vehicle by the end of the decade?

 

TN: I think one of the things they really need to do is respect the intelligence of drivers. And they really need to look at the total emissions of the manufacturing process and the operation process of vehicles. Electric vehicles produce massive emissions during their manufacture with battery technology and so on. Once they’re alive, they plug into the grid. And depending on what your local power plant is generating from coal or gas or nuclear or whatever, there are other issues associated with those emissions, other indirect emissions.

 

What I would love to see is a side by side comparison with petrol based cars and electric vehicles through the lifecycle of their manufacture and use. How do they compare drivers in America? They like to have cars just like people in other places, although a little bit bigger here. I live in Texas. People here, though, are are getting wise to electric vehicles and the damage that the batteries that electric vehicles do just in the neighborhood, aside from mine here in Texas, a Tesla car caught on fire and melted the street, killed both people in the vehicle.

 

Consumers are becoming much more aware of the dangers of electric vehicles and they want to understand what’s going to happen. So those types of considerations as this transition happens, and I believe it will, but those types of considerations have to be taken into account and consumers have to be made aware or have to be told this information. Truly, the problem with these fuel efficiency standards is they only look at carbon and petrol vehicles. They don’t look at electric vehicles. So electric vehicles will look like zero when in fact. They’re not.

 

BG: This target that Joe Biden announced today is voluntary. What do you think it will be met this target of 50% of sales by 2030? You seem pretty skeptical that it will indeed, perhaps that it should be.

 

TN: I don’t think it will because I don’t think EVs can make that target without a subsidy for the buyer. So there’s these standards, but there are also massive subsidies for SUV buyers. What you’re doing is you’re penalizing low income people who pay taxes through sales tax or other things to subsidize. Let’s be very honest, highly educated cosmopolitans who buy EVs. You get fairly wealthy people who are subsidized by poor people with the subsidies they get when they buy a car. It’s a real problem.

 

BG: Tony, when you hear about the almost total lack of vaccine supplies there in Bangladesh, and we had the comments from the World Health Organization earlier in the week saying that they should wait in developed nations where pretty much every adult has been vaccinated. What do you think countries like the United States should be doing?

 

TN: I think we should make them aware. I think we should make them available globally so that people can catch up. Giving the boosters there is there is a sufficient portion. I know it’s not what the federal government wants, but there is a large portion of the U.S. population that has been vaccinated. Older people, people with complications who wanted to get vaccinated have been vaccinated early. So I think it’s time to move these into South Asia and other countries like Africa to make sure that there is enough for those countries. I’ve actually been pretty vocal about that.

 

BG: Presumably, though, there are an awful lot of Americans who say the US helped fund the research effort and they want their kids to be vaccinated.

 

TN: But kids under 12 can’t get the vaccine now. It won’t be approved by the FDA until the end of the year. So send it overseas. I just don’t understand what the problem is with sending this stuff overseas if they’re needed overseas. Again, I’m very supportive of sending this stuff overseas because kids can’t get the vaccine until it’s approved at the end of the year.

 

BG: Tony, in business, is the cult of the leader or of the entrepreneur really a bad thing?

 

TN: I think it can be a good thing. But specific technology, I founded our firm, I’m a tech CEO and I speak to a lot of investors. And no venture capitalist thinks that any of their companies are. We work. No venture capitalist believes that can happen to them.

 

BG: Which is a problem, right? Because, of course it can

 

TN: It’s an absolute problem. And when I listen in out of nowhere and pitch, gosh, I wish I could pitch in as well as he does because venture capitalists are suckers for a great pitch. They will fund anything that has a great pitch. And again, they’ll tell you they’re not OK, but they are. I meet so many entrepreneurs, founders who can pitch, but what is there to their business? Well, they get funded and that’s it. I think the pitch is something that that every tech founder really, really focused on learning how to do. They don’t actually learn how to run a business. Very few.

 

BG: Is there is there a cult of Tony Nash at your company?

 

TN: I wish there was. I wish that was the case, but it’s not. I’m sorry.

 

BG: It’s such a shame. This is Business Matters with my thanks Tony Nash and Zyma Islam. And join us again same time tomorrow bye bye.

 

 

 

Categories
News Articles

“Take a tooth for a tooth”: Is it possible to use the “American version of the Belt and Road” to counter China?

This article originally published at https://www.voachinese.com/a/beat-china-at-its-own-game-will-us-belt-and-road-work-20210224/5792031.html on June 3, 2021.

 

WASHINGTON — The former U.S. Secretary of the Navy and former Senator Jim Webb recently issued an article in which he put forward an interesting proposal in which he called on the Biden administration to launch the “American version of the Belt and Road Initiative” to counter China’s influence in the world. Weber believes that the United States can do better than China. This proposal has sparked a lot of debate. Some scholars believe that the United States encourages free competition and that the “Belt and Road” initiative is not the way the United States does things.

 

Weber published an article in the Wall Street Journal on February 17 advising the Biden administration to consider launching the “US version of the Belt and Road.” “China invests in large-scale infrastructure projects all over the world to increase its influence, and the United States can do the same,” he said.

 

Weber pointed out that as an important part of China’s global strategy for hegemony, the Chinese government has established economic and diplomatic ties with developing countries in Asia, Africa and Latin America through the “One Belt, One Road” project, and conducted military infiltration on the grounds of protecting the interests of these projects. However, public discussions in the United States have not paid enough attention to this.

 

Weber believes that the Chinese government’s escalating military, diplomatic provocations and human rights persecution in recent years have made many developing countries hesitate to participate in the Belt and Road Initiative. He called on the Biden administration to seize this opportunity and begin to attach importance to the “often neglected countries” in U.S. foreign policy, and to give these regions the opportunity to choose the U.S. in order to counter China’s influence and prevent the world system from being coerced by authoritarianism. This is conducive to the “diplomatic and economic health” of the United States.

 

“This is not a doomed career, but an unrecognized opportunity,” Weber said.

 

Weber proposed that the Biden administration implement a comprehensive and coordinated policy in Asia, Africa and Latin America, integrating thoughtful diplomacy, security commitments, and project investment and participation by the American business community to fill the vacuum.

 

Weber also believes that the United States can do better than China. “The U.S.’s major investment in this—without colonial motives and based on a more credible and more time-tested business model—will forcefully start developing economies, and at the same time boost the U.S. economy, and inspire further progress in a global free society. Pre-development,” Weber said.

 

The United States encourages free competition, “One Belt One Road” is not our way of doing things

 

As soon as the article came out, supporters called Weber a “visionary pragmatist”, and the United States urgently needed to implement it, and it was not too late. Jose Manuel, a student of international relations at King Juan Carlos University in Spain, said on Twitter: “If the United States wants to prevent China from winning the title of world superpower, it will be able to retaliate and support the Asian and African countries. Investment projects in Latin America.”

 

However, American liberal economists urged that the United States should not follow China in its competition with China.

 

Tony Nash, founder of the data analysis company Complete Intelligence, told VOA: “The Belt and Road Initiative or the Made in China 2025, this is not an American way of doing things.”

 

Nash believes that the best way for the United States to deal with competition among major powers is to encourage free competition. The United States’ world influence should come from an international system that advocates transparency and free competition.

 

On February 23, John Tamny, editor of RealClearMarkets, a US economic news website, pointed out that “the influence of the United States is freedom.” He believes that projects such as the “Belt and Road” highly dependent on government regulation will only waste huge amounts of resources. , And damage the United States’ world image of advocating free competition.

 

In an interview with VOA, Michael Kugelman, director of Asian projects at the Wilson Center in Washington think tank, said that the United States’ number one strategic competitor, China, is exerting its influence on a global scale through the Belt and Road Initiative. It is true that the United States has increased its investment in overseas infrastructure projects. There is strategic value, but now is not the time. Currently, the focus of the Biden administration is to revitalize the US economy.

 

However, Joyce Mao, a professor of history at Middlebury College in Vermont and an expert on U.S.-Asia relations, supports the United States’ overseas infrastructure investment. She told the Voice of America that the US foreign policy that integrates mature diplomacy and strategic intervention is inseparable from the domestic development of the United States. But she also pointed out that it is a challenge to obtain sufficient American public support and bipartisan consensus on this point.

 

Whether the proposal can be supported by the American public

 

Henry Blodget, the founder of the news website Business Insider, said on Twitter: “Good idea, but the United States has not yet reached an agreement on investment in domestic infrastructure.” Independent media “Chinese “Non-projects” also said on Twitter: “U.S. taxpayers’ own roads, bridges, and airports are in a state of disrepair. It is hard to imagine that they will support huge investments in infrastructure construction in developing countries to compete with China.”

 

Nash of Complete Intelligence believes that the American public cannot accept spending trillions of dollars on overseas projects right now. Under the impact of the epidemic, there are too many places to spend money in the United States. If the US government spends money and energy on this knot to form a global infrastructure investment plan, it will certainly make many taxpayers angry.

 

Kugelman of the Wilson Center said that the top priority of the Biden administration is obviously to restart the motor of the US domestic economy. Investment in overseas infrastructure is a strategic issue worth considering in the future, but at least it will have to wait a few more months. “If you do this at the same time, Two things become a situation where you have to keep the cake and eat the cake,” Kugelman said.

 

“People who are struggling in the’rust zone’ due to industrial decline will not have a good response if they hear that their government will launch such a huge plan to develop infrastructure projects thousands of miles away,” Kugelman said.

 

Professor Mao of Mingde College said that Weber’s proposal while the U.S. economy is still trapped by the epidemic is worthy of scrutiny. She pointed out that there are many debates about where the health and well-being of the American economy come from. This has always been a classic political issue that has divided opinions between conservatives and liberals in the United States. At this special moment of the epidemic, this disagreement focuses on what kind of economic plan is the one that will enable the United States to recover from the epidemic.

 

Weber said in the article that US investment in infrastructure projects in developing countries not only helps to counter China, but also benefits the US economy. But Professor Mao pointed out that Weber’s proposal seems to “assume that most Americans can understand and agree that the future of the US economy depends on the existence of internationalism and interventionism”, but the reality is not the case. She said that although there is a lot of political support in the United States, especially within the Republican conservatives, in the fight against China, investing in large-scale overseas infrastructure projects may not be consistent with their political priorities.

 

“What benefits will the U.S. version of the Belt and Road Initiative bring to ordinary U.S. citizens? How will employment opportunities be realized? To what extent can it help develop overseas markets and other resources for U.S. goods?” Professor Mao believes that this proposal is necessary Get enough support. These are the basic questions that need to be answered to the American public and policymakers.

 

Kugelman: There are ready-made investment frameworks available

 

Kugelman pointed out that although a large-scale plan such as the “US version of the Belt and Road” should first give way to the restoration of the domestic economy, Biden’s policy can make good use of the relevant institutions and tools that have been established during the Trump administration to implement Related investment commitments.

 

In 2018, Trump signed the “Good Use of Investment Guidance and Development Act” (referred to as the BUILD Act), which merged the Overseas Private Investment Corporation (OPIC) and the Development Credit Administration (DCA) under the United States Agency for International Development (USAID) to form a new establishment The United States International Development Finance Corporation (IDFC) was established to enhance the United States’ international development financing capabilities, and expanded financing and financing tools to coordinate and promote the participation of the U.S. private sector in the economic construction of developing countries.

 

Under the “Free and Open Indo-Pacific Policy”, the Trump administration signed a memorandum of cooperation on a trilateral infrastructure investment partnership with Japan and Australia in 2018 to jointly encourage and support domestic private companies to build high-tech projects in the Indo-Pacific region that meet international standards. Quality infrastructure construction project.

 

In 2019, the United States, Japan and Australia jointly launched the Blue Dot Network (Blue Dot Network) to counter China’s “One Belt One Road” initiative in Asia. The plan unites the government, enterprises and civil society to evaluate and certify infrastructure projects under “common standards” to promote high-quality projects for sustainable development.

 

David Dollar and Jonathan Stromseth, fellows of the Brookings Institution’s China Program, also called on the Biden administration to implement a series of infrastructure investment commitments in Southeast Asia during the Trump administration. They pointed out that nearly 42,000 U.S. companies export products to 10 member states of the Association of Southeast Asian Nations (ASEAN), supporting approximately 600,000 jobs in the U.S. However, the U.S.’s economic position in the region is facing the erosion of China, and Southeast Asia has become Beijing. A hotbed of strategic competition with Washington.

 

Nash: Government-supported projects shouldn’t be a way of American competition

 

Nash, who had provided consulting and assistance to China’s National Development and Reform Commission on the “Belt and Road” project, told VOA that China’s “Belt and Road” operation principle is to transfer funds from banks that carry out overseas business in China to China, which invests in infrastructure projects around the world. Among state-owned and semi-state-owned entities, it is a way of financing overseas and domestic debt. Although the United States also has international financing institutions such as the International Development Finance Corporation (IDFC), its scale of operation is unlikely to support large overseas investment projects such as China’s “One Belt, One Road” initiative. In addition, China can provide loans with negative interest rates for certain projects, but US financial institutions that have always focused on risk management standards are unlikely to do so.

 

Nash also said that the best way for the United States to compete among major powers is to compete freely. Whether it is China’s “One Belt, One Road” or “Made in China 2025” industrial policy, it should not be the way the United States follows. These projects are highly dependent on the role of the government, and the government has invested heavily to support the technology industry or support domestic companies to invest in overseas projects. Doing so may nourish a group of companies and industries whose actual competitiveness is not up to the standard.

 

“The best way is to let American construction companies and infrastructure companies go out to compete for projects. If they can’t compete, then they should fail because they are not competitive enough,” Nash said.

 

At a seminar last month, Clyde Prestowitz, a well-known American expert on globalization and Asian issues and director of the Institute for Economic Strategy, said that the Biden administration should have a far-reaching industrial policy. “China has their Made in China 2025, and we should have our Made in America 2025,” he said.

 

Nash believes that the way for the United States and China to maintain influence and leadership on a global scale is to uphold the values ​​of transparency and free competition. He believes that the United States previously required NATO allies to be open and transparent in defense spending as a manifestation of leadership.

 

He believes that the United States should also continue to pursue transparency against government subsidies and non-tariff barriers, so as to ensure that the World Trade Organization can effectively perform inspections in this area, so that the world can see how the industries of various countries are protected. of. At the same time, the United States should also call on the international community to pursue transparency in foreign aid. Where does the money go?

 

“The United States has come forward to demand transparency in multilateral organizations, transparency in foreign aid, and a free competition environment for international bidding for infrastructure projects. This is the best way for the United States to demonstrate and maintain leadership,” Nash said.

 

How to do the “US version of the Belt and Road Initiative”?

 

Kugelman believes that the United States is still gaining the upper hand in the competition between the United States and China, whether it is military strength or a leading advantage in high-tech fields. Like Weber, he also believes that although the United States has faced some setbacks in soft power in recent years, it is still ahead of China.

 

Kugelman therefore emphasized that the United States should have its own pace and expectations in terms of overseas infrastructure investment, and there is no need to equalize with China in the order of magnitude. After all, China has already led too many steps in this area. “With some progress in the field of infrastructure investment, instead of investing heavily in this to catch up with China in vain, why not focus more on maintaining the United States’ competitive advantage and comparative advantage in its traditionally leading field?” Kugelman said.

 

Kugelman partially agrees with Weber’s view that the United States can do better in infrastructure investment. He said that the quality of many of China’s Belt and Road projects has been criticized, such as financial opacity, the breeding of corruption, damage to the local environment, and the substandard rights of workers. The United States can provide a higher standard and high-quality options for these issues. China has built surveillance systems through infrastructure projects in some areas to export authoritarianism. The United States obviously can also provide less intrusive options in this regard.

 

Like Weber, Kugelman also believes that China’s “wolf war diplomacy” in recent years has opened up opportunities for the United States. Kugelman cited, for example, that China’s aggressive strategy of flexing muscles in the South China Sea has sounded the alarm for many countries in the region, and began to question whether the consistent attitude of “asking the United States for security and asking China for money” should continue. He believes that the United States should focus on investing in countries like the Philippines that hesitate to China and are a key regional ally of the United States.

 

华盛顿 — 

前美国海军部长也是前参议员吉姆·韦伯(Jim Webb)最近发文，提出一项有意思的建议，他呼吁拜登政府启动“美国版的一带一路”来抗衡中国在世界的影响。韦伯认为，美国可以做得比中国更好。这项建议引发不少议论，有学者认为，美国鼓励自由竞争，“一带一路”不是美国的做事方式。

 

韦伯2月17日在《华尔街日报》上发文倡议拜登政府考虑启动“美版一带一路”。“中国在世界各地到处投资大型基建项目以增强影响力，美国也可以这么做，” 他说。

 

韦伯指出，作为中国争霸全球战略的重要部分，中国政府通过“一带一路”项目与亚非拉发展中国家建立经济和外交联系，并以保护这些项目利益为由进行军事渗透。但美国的公共讨论对此重视不足。

 

韦伯认为，中国政府近年来不断升级的军事、外交挑衅和人权迫害已让许多发展中国家开始对参与一带一路产生迟疑。他呼吁拜登政府抓住这一时机，开始重视在美国对外政策中“常被忽视的国家”，给这些地区选择美国的机会，以此抗衡中国影响力，防止世界体系为威权主义所胁迫，这有利于美国的“外交和经济健康”。

 

“这不是败局注定的事业，而是没被认识到的机会，” 韦伯说。

 

韦伯提议拜登政府在亚非拉地区实施一项各领域通力协调的全面政策，融合深思熟虑的外交、安全保障承诺和美国商界的项目投资和参与，填补真空。

 

韦伯也认为美国可以比中国做得更好。“美国在这上面的重大投入——不带殖民动机且基于更具信誉度、更久经考验的商业模式——将强力启动发展中经济体，同时提升美国经济，激励全球自由社会的进一步向前发展，” 韦伯说。

 

美国鼓励自由竞争 “一带一路”不是我们的做事方法

 

文章一出，支持者称韦伯是“有远见的实用主义者”，美国急需践行，为时不晚。西班牙胡安卡洛斯国王大学国际关系专业学生何塞·玛努埃尔(Jose Manuel)在推特上表示：“美国若想阻止中国夺得世界超级大国的头衔，就得以牙还牙，支持在亚非拉国家的投资项目。”

 

然而，美国自由派经济学家呼吁，美国不该在与中国的竞争中效仿中国的做法。

 

数据分析公司Complete Intelligence创始人托尼·纳什(Tony Nash) 告诉美国之音：“‘一带一路’或‘中国制造2025’，这不是美国式的做事方式。”

 

纳什认为，美国应对大国竞争的最佳方式是鼓励自由竞争，美国的世界影响力该来自于倡导透明和自由竞争的国际体系。

 

美国经济新闻网站RealClearMarkets编辑约翰·塔姆尼(John Tamny)2月23日发文指出，“美国的影响力就是自由”，他认为“一带一路”这类高度依赖政府调控的项目只会浪费巨额资源，并损害美国倡导自由竞争的世界形象。

 

华盛顿智库威尔逊中心亚洲项目主任迈克尔·库格尔曼(Michael Kugelman)在接受美国之音采访时表示，美国的头号战略竞争对手中国在全球范围内通过一带一路施展影响，美国增强海外基建项目投资固然有战略价值，但现在不是时候。疫情当前，拜登政府的重心是重振美国经济。

 

不过，美国佛蒙特州明德学院(Middlebury College)历史系教授、美亚关系专家乔伊斯·毛(Joyce Mao)支持美国的海外基建投资。她对美国之音表示，融合成熟外交和策略性干预的美国对外政策和美国国内的发展密不可分。但她也指出，要在这一点上获得足够的美国公众支持和两党共识是个挑战。

 

提议能否获美国公众支持

 

新闻网站商业内幕(Business Insider)的创始人亨利·布拉吉(Henry Blodget)在推特上说：“好主意，但美国都还没能在投资国内基础设施上达成一致。” 独立媒体“中非项目”也在推特上称：“美国纳税人自己的道路、桥梁和机场处于年久失修状态，很难想象他们会支持巨额投资发展中国家的基础设施建设以与中国竞争。”

 

Complete Intelligence的纳什认为，美国公众现下不可能接受花几万亿美元在海外项目上。疫情冲击下，美国国内有太多地方需要花钱。美国政府如果在这个节骨眼上花钱和精力组建一个全球基建投资计划，肯定会让很多纳税人生气。

 

威尔逊中心的库格尔曼表示，拜登政府的当务之急显然是重启美国国内经济的马达，投资海外基建是今后值得考虑的战略议题，但至少也得再等几个月，“若此刻同时做这两件事，就变成又要留住蛋糕又要吃蛋糕的局面，” 库格尔曼说。

 

“因工业衰退而挣扎在‘铁锈地带’的人们，如果他们听说自己的政府将启动如此庞大的计划，以发展千里之外的基建项目，不会有好反响的，”库格尔曼说。

 

明德学院的毛教授表示，韦伯在美国经济仍为疫情所困之际作出这样的提议有一定值得推敲之处。她指出，有关美国经济的健康和福祉从何而来有很多争论，这历来是个让美国保守派和自由派意见分歧的经典政治问题。在疫情这一特殊时刻下，这种分歧就聚焦在到底怎样的经济计划才是能让美国从疫情中恢复的计划。

 

韦伯在文章中说，美国在发展中国家投资基建项目不仅有助于抗衡中国，而且也有利于美国经济。但毛教授指出，韦伯的这一建议似乎是“假设了大多数美国人能理解和认同美国经济的未来依赖于国际主义的存在和干涉主义的存在”，但现实并非如此。她说，尽管在对抗中国方面，美国国内尤其是共和党保守派内部有很多政治支持，但投资海外大型基建项目可能与他们的政治优先项并不一致。

 

“美国版的‘一带一路’会给普通美国公民带来哪些实惠？就业机会将如何实现？能在多大程度上帮助开发美国商品的海外市场和其他资源？” 毛教授认为，这份提议若要获得足够支持，这些是需要向美国公众和政策制定者回答的基本问题。

 

库格尔曼：有现成投资框架可用

 

库格尔曼指出，虽然“美版一带一路”这样大规模的计划该先让位于恢复美国国内经济，但拜登政策可以利用好从特朗普政府期间已经设立的相关机构和工具，落实相关投资承诺。

 

特朗普于2018年签署《善用投资引导发展法》(简称BUILD法)，将海外私人投资公司(OPIC)和美国国际开发署(USAID)下属的发展信贷管理局(DCA)合并，新成立了美国国际发展金融公司(IDFC)，以增强美国的国际发展融资能力，对融资力度和融资工具都进行了拓展，统筹并促进美国私营部门参与发展中国家的经济建设。

 

在“自由开放印太政策”下，特朗普政府在2018年与日本和澳大利亚签署了三边基础设施投资伙伴关系合作备忘录，共同鼓励和支持本国私营企业在印太地区建设符合国际标准的高质量基础设施建设项目。

 

2019年，美国与日本和澳大利亚共同推出蓝点计划(Blue Dot Network)，在亚洲地区抗衡中国的“一带一路”。该计划联合政府、企业和民间社会，在“共同标准下”评鉴和认证基建项目，助推可持续发展的高质量项目。

 

布鲁金斯学会中国项目研究员杜大伟(David Dollar)和周思哲(Jonathan Stromseth)也在2月17日呼吁拜登政府将特朗普政府期间一系列针对东南亚地区的基建投资承诺落实。他们指出，近4.2万家美国公司向东南亚国家联盟(ASEAN)10个成员国出口产品，支持美国约60万个就业机会，但美国在该区域的经济地位正面临中国的蚕食，东南亚已成为北京和华盛顿之间战略竞争的温床。

 

纳什：政府扶持项目不该是美国的竞争方式

 

曾在“一带一路”项目上为中国国家发改委提供咨询帮助的纳什告诉美国之音，中国“一带一路”的运行原理是将资金从中国开展海外业务的银行输送到在世界各地投资基建项目的中国国有和半国有实体中，是一种为海外和国内债务融资的方式。美国虽也有像美国国际发展金融公司(IDFC)这样的国际融资机构，但其运行规模不可能支撑像中国“一带一路”这样庞大的海外投资项目。此外，中国能向某些项目提供负利率的贷款，但一向注重风险管理标准的美国金融机构不太可能这么做。

 

纳什同时表示，美国进行大国竞争的最佳方式就是自由竞争。不管是中国的“一带一路”还是“中国制造2025”这样的产业政策，都不该是美国效仿的方式。这些项目都高度依赖政府角色，由政府出巨资扶持科技产业或扶持本国公司进行海外项目投资。这样做有可能滋养一批实际竞争力并不达标的公司和产业。

 

“最好的方法是让美国的建筑公司和基础设施公司自己出去竞争获得项目。如果他们竞争不到，那他们就该失败，因为他们没有足够竞争力，” 纳什说。

 

在上个月一场研讨会上，美国知名全球化和亚洲问题专家、经济战略研究所所长普雷斯托维茨(Clyde Prestowitz)曾表示，拜登政府该有一个影响深远的产业政策。“中国有他们的中国制造2025，我们应该有我们的美国制造2025，” 他说。

 

纳什认为，美中在全球范围内维持影响力和领导力的方式是秉持透明和自由竞争的价值理念。他认为美国之前要求北约盟国在国防开支上做到公开透明就是领导力的体现。

 

他认为，美国也该继续针对政府补贴和非关税壁垒等现象追求透明化，确保世界贸易组织能够切实做到这方面的督查工作，以让全世界都能看到各国的产业是如何被保护的。同时，美国也该呼吁国际社会在对外援助方面追求透明化，出去的钱到底流向何方？

 

“美国站出来要求多边组织的透明度，要求对外援助的透明度，要求基建项目的国际竞标有自由竞争的环境，这才是美国展示和保持领导力的最佳方式，” 纳什说。

 

“美版一带一路”怎么做？

 

库格尔曼认为，美国目前仍在美中竞争中占上风，不管是军事实力还是高新科技领域的领先优势。和韦伯一样，他也认为尽管美国近年来在软实力上面临一些挫折，但仍然领先于中国。

 

库格尔曼因此强调，在海外基建投资方面美国该有自己的步调和预期，没必要非得在数量级上和中国平分秋色，毕竟中国在这上面已经领先太多步了。“在基建投资领域取得一些进展的情况下，与其在这上面投入巨资徒劳追赶中国，何不更加专注于保持美国在其一贯领先的领域的竞争优势和相对优势呢？” 库格尔曼说。

 

库格尔曼部分认同韦伯对于美国可以把基建投资做得更好的看法。他说，中国不少一带一路项目的质量收到批评，比如财务不透明、腐败滋生、破坏当地环境、工人权益不达标等等。美国可以针对这些问题提供一个更高标准高质量的选择项。中国在部分地区通过基建项目大造监控系统，输出威权主义，美国在这方面显然也能提供侵入性更小的选择项。

 

和韦伯一样，库格尔曼也认为中国近年来的“战狼外交”给美国开创了机会。库格尔曼举例说，中国在南中国海愈加秀肌肉的蛮力战略给该区域的许多国家敲了警钟，开始质疑“向美国要安全，向中国要钱”的一贯态度是否还该继续。他认为，美国该重点投资像菲律宾这样又对中国产生迟疑又是美国关键区域盟友的国家。

Categories
Podcasts

Biden administration backs lifting vaccine patent protections

Our CEO Tony Nash recently guested at the BBC Business Matters to share his thoughts on the lifting of the vaccine patent protections to help in manufacturing more vaccines faster. Is that fair specially in this time of need? Also discussed are the special case of Facebook and Twitter’s suspension of Donald Trump’s social media accounts, college football, and the growing industry of recycled furniture.

 

This podcast was published on May 6, 2021 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172xvq9r0rsxwz.

 

 

BBC Business Matters Description:

 

The US government has backed a temporary suspension of intellectual property rights for Covid-19 vaccines in a move likely to enrage the pharmaceutical industry, which strongly opposes a so-called waiver. Shares of the major coronavirus vaccine companies were hit by the announcement but is it just an empty gesture? We speak to Jorge Contreras, Chair of the Open Covid Pledge, a group that is lobbying organisations to share their patents and copyrights in relation to vaccine efforts. We also hear from Thomas Cueni, of the International Federation of Pharmaceutical Manufacturers & Associations. And there’s no status update for Donald Trump anytime soon; Facebook decides to uphold it’s ban of the former US president. We speak to Issie Lapowsky, Senior Reporter at tech site Protocol. Also in the programme, college sports in the United States are a big business, but the athletes taking part have typically been compensated through scholarships rather than salaries. But could that change? The BBC’s Will Bain reports. Plus, the Swedish furniture retailer Ikea has launched a scheme in the UK to buy unwanted furniture back from its customers, in a bid to save items from going to landfill. Hege Saebjornsen is the company’s sustainability manager for the UK and Ireland explains how it works. And we’re joined throughout the programme by Tony Nash, chief economist at Complete Intelligence in Texas and the writer, Rachel Cartland in Hong Kong.

 

Show Notes

 

VS: Tony, do you think, people in Texas will be as upbeat as George, our first speaker?

 

TN: Yeah, absolutely, I think people here are pretty happy about that. A couple of weeks ago, there was an uproar in India over Americans not sharing vaccines with India. Houston has a very large Indian community. And so we were very supportive of everything that could be done to help get vaccine components and vaccine intellectual property to India. So this is a positive development in every way.

 

VS: And so in terms of an anxiety of giving vaccines away before the population is fully inoculated, does that not exist in your experience?

 

TN: I don’t think so. There’s plenty of capacity, at least in Texas, if you want a vaccine today, you can sign up to get it. So it’s not really an issue here. I think India has the manufacturing capacity and the know how to do very good vaccines in India. So once the licensing is clear and the components are there, they can manufacture for India and for many parts of Asia, Middle East and Africa.

 

VS: Tony, what does this actually mean for Donald Trump? He’s not allowed to use social media at the moment.

 

TN: There are other social media channels, but I think it’s bigger than that. I think the real issue here is around what’s called section 230 in the U.S. government, which allows websites to not be considered publishers. And under Section 230, they are supposed to provide unrestricted access to posting content unless it’s a rules based system. This is clearly a personal deal. Whether you like Trump or not, this is this is making special rules for an individual. I think the bigger issue is around whether Facebook and Twitter and the other social platforms are abiding by Section 230 or whether they should be considered publishers. The BBC is a publisher there and certain things that the BBC has to adhere to that Facebook doesn’t. And so if Facebook was a publisher, they would have to adhere to the rules that the BBC abides by. So if they’re going to restrict postings like this, they should be a publisher. Otherwise, they need to have rules that they enforced regardless of the individual, regardless of the political party, regardless of the country someone from. I think they need to be applied consistently.

 

VS: So this idea of this board is a way of sort of perhaps circumventing that.

 

TN: But nobody does. I mean, nobody if you ask anybody in America, nobody actually believes this is an unbiased board. It’s just a fallacy so…

 

VS: Wide ranging from all around the world, different types of backgrounds. So you can kind of argue that they are a mixed background with lots of different worldviews.

 

TN: I run an artificial intelligence company. Nobody in the technology community, hand on heart. I actually believe this is an unbiased view. I’m sorry. It’s just not true. And it’s a big pretend game to act like this is unbiased. I’m not on Trump’s side here necessarily. But if you’re going to make rules personal, that really companies lose credibility as a result of that. And all I’m saying is that Facebook should be considered a publisher and they should abide by the rules that publishers like the BBC abide by.

 

VS: I’m sure it’s not going to last that we’re going to hear from this issue. And for those of us outside the United States, we don’t understand the significance of college football in everyday American life. Tony, you’re in Texas. Can you paint us a picture of that?

 

TN: Yeah, so college football is not professional and it’s kind of professionalizing, but by professional, I mean paid, right. So this California bill starts to professionalize college football. I think part of the problem with that step is that we have students who come out of high school effectively 17 or 18 year olds who have really raw talent. They’re not necessarily trained to play professionally. They typically spend time with high caliber coaches in universities to develop their skills in their craft over three to four years. Many of them go out early to try to go pro, but it’s over three to four years and then they’ll go into the professional leagues and make money.

 

So there is a very large investment that universities are making into those athletes. And what happens at the university level is,  when students come to a university, they do get a scholarship. The athletic dorms are not normal dorms. They are first class dorms. The food they eat is first class food. I’ve been in their cafeterias. It’s amazing. So they are not treated like normal students. So they do get a lot of advantages above a scholarship, but there’s this huge investment in their skill. And so, the other side of this is if students want to get paid when they leave high school, they’re welcome to try to go pro after their senior year in high school when they’re 18 years old.

 

And so if there’s a problem with them getting paid, they’re welcome to to try to join the draft and go through that process. They can do it at any time. They could go pro at 18 years old. I doubt many of them, if any of them, at least in football, would would qualify, would get drafted by a team.

 

VS: As you say and say presumably then, sports is encouraged at quite a young age, given how lucrative it can can be.

 

TN: Sure. And so they can try to do that, LeBron James actually went into the NBA out of high school, he never went to university. So there are kind of phenoms who can do that and, more power to those guys. They’re welcome to do it. But university, so the school where I went, where I did my undergrad is Texas A&M University. It has the largest revenue sports program of any university in the United States, very large. But the facilities that Texas A&M has for their student athletes are amazing. They rival any pro facility. And so what’s happened over probably the past 20 years, I would say, is a dramatic kind of upskilling and a dramatic improvement of not just the facilities, but the coaches.

 

And so there are coaches who go from college level to pro and back because the skills that they impart on the students are are amazing. So, the path to getting paid for your sport is one that is always there. They can always go pro straight out of high school. LeBron James did it, other athletes to it. But it’s a very, very, extremely rare process, I think, paying student athletes. Part of the reason I like college football, I prefer college football to pro because you root for a team in college football, you don’t root for an individual in pro football, really. It’s rooting for individuals. And it’s not really a team sport as much as it is at the college level. So I think a lot would change. I really do think a lot would change.

 

VS: When we heard that about Rachel’s lockdown project. Lack of. And are you cycling anything?

 

TN: Always, you know, so we just moved back to the U.S. about three years ago, so we’re not recycling much, but when we lived in Asia, we would regularly recycle as my kids grew up, as we worked through furniture, we would regularly, regularly recycle in Singapore.

 

There’s a guy named the current goony man in every neighborhood who would come and take your recycled materials. And so we would work with with him and he would donate it or something like that. So, you know, every community has its own way of dealing with these things.

 

VS: Do you sell on furniture that you don’t know because of these websites these days? You can do that well now.

 

TN: We do that as well. And it’s pretty common. I mean, there are loads of websites where we can do that. So it’s pretty common. We don’t really throw away much big stuff there. We had my son, my son’s bunk bed here. We just sold it on one of those sites about six months ago. So, yes, it’s very common.

 

VS: Costly to these sites around. Don’t say I wonder if if a company or a retailer decides that they’re going to buy back things. They’ve actually got quite a bit of competition, haven’t they?

 

TN: Yeah, I mean, I think they’ve probably done that calculation, it’s a pretty crowded market, so, you know, people will dispose of it in a pretty economic way and make money where they can. So I don’t know that everything will be coming back to them.

 

That’s probably just a small, small fraction that will actually.

 

VS: Thank you very much, Rachel and Tony, for joining me today.

 

Categories
QuickHit

QuickHit: Understanding the Covid Vaccine Supply Chain

Blue Maestro co-founder Kirstin Hancock joined us this week on QuickHit to explain the sensitivities around transporting the Covid vaccines. How vaccine manufacturers are adjusting to the special handling requirements, and how technology helps make sure that these are delivered in perfect condition?

 

Kirstin is the co-founder of Blue Maestro, which was set up eight years ago. Blue Maestro designs and manufactures Bluetooth sensors and data loggers. These are very small devices that have a PCB chip in them that use Bluetooth technology to communicate with smartphones to measure variations of the environmental conditions such  as temperature, humidity, barometric pressure, etc.

 

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This QuickHit episode was recorded on December 11, 2020.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

 

Show Notes

 

TN: Great. Okay. That sounds really interesting and I’ve been looking at you guys for a long time and what I’m really interested initially to talk about as we look at the environment with Covid and a number of other things happening this week and next week, I’d really like to understand what you’re seeing around the vaccine supply chains because I know you guys do some work there and I know it’s critical to see your types of products in those supply chains. Otherwise, we don’t get live vaccine, right? So, can you talk to us about a little bit of the work that you’re doing there?

 

KH: One of the criteria for the CDC is that sensors and data loggers are able to measure temperature in real time and that this is able to be recorded over a period of time and that maximum and minimum temperatures can be seen throughout the time.  Our sensors and data loggers are all unique.

 

They have a unique MAC ID address on them and they can be named, and logging intervals can be set at specific intervals. So, within the storage and transportation of vaccine, Tempo Disc in particular, is a really useful tool because it does all of these things. Now, we have actually been using Tempo Disc in a number of different countries to transport vaccines already.

 

We’ve been working with the UN this year, 2020, to deliver vaccines in developing countries in Africa through a project that they’ve been working on and that’s been very successful.

 

TN: Very good. So, what are the considerations like how long are these things usually in transport? I mean, what variability are… are there huge temperature swing variabilities? Are there huge… What are the kinds of things that the vaccine makers are really worried about because this seems like a really delicate supply chain?

 

KH: What vaccine makers are really concerned about is that the vaccines go out of their temperature range. Now, using our app for Tempo Plus 2, you can see real-time data. So, you can see exactly what the temperature is of the container that the vaccines are being put in and that’s generally what our users are doing.

 

They’re using Tempo Disc in the containers and they’re labeling them according to that batch of vaccines and that’s really important so that they’ve got the traceability from when they go from the manufacture of the vaccine right out to the pharmacies, the nurses, the clinics where these vaccines are administered.  And I think that’s probably the number one concern that these vaccines go out of temperature range because when they do, there is an emergency procedure that goes into place and basically, all of the vaccines have to be disposed of.

 

TN: Interesting. Okay. I really wanted to talk to you because with all of the talk of this distribution, I know this is probably something that there’s not a lot of thought from kind of your average consumer. But it’s such an important part of what’s happening here that I wanted to get some understanding of that. So, can you also tell me or help me understand… Blue Maestro does a lot of other work around healthcare and we’re an artificial intelligence company, we use a huge amount of data. You guys are an IoT company. You do the same. So outside of the vaccine supply chain, how are people using your products around health care and life sciences?

 

KH: We have a number of different use cases for Tempo Disc in a number of different healthcare applications. We work with a number of different US companies to monitor specific environmental conditions and I’ll just give you a couple of examples. We’re working with Boston O&P Orthopedics and Prosthetics to develop a solution where Tempo Disc is used in prosthetics to monitor how long people are wearing their prosthetics.

 

We also work with a company called GoGoband on a device that monitors when children or people with disabilities have wet themselves at nighttime because then their parents can get alerted. So, there’s a variation. We work with some international companies to actually monitor and record the pharmaceutical equipment that they have throughout the factory and then for its transportation to particular pharmacies within a number of different countries.

 

TN: Interesting. So, with the pharmacy activity, I mean that’s very precise manufacturing processes. As we get more into say precision manufacturing, how are manufacturers using your devices to understand precision around their manufacturing processes? Because again, as we have more sophisticated products, manufacturers have to know this stuff. It reduces defects. But it also creates ultimately better products for customers. So, can you help us understand a little bit about that?

 

KH: So, we issue conformity certificates and calibration certificates. They’re a little bit different. But basically, what they do is they track the PCB devices from the very start of the manufacturing process. So then when they’re programmed by our team, we have each device has a unique ID so that particular device can be tracked right from its manufacturing cycle right to its end user.

 

Now this is really important for traceability within the supply chain because the end user knows exactly which product they’re using for what purpose. So, if they’re looking at just temperature, they can have an ID that they can trace all the way through. And this ID is, it’s embedded in the electronics firmware. But then the end user can also change this so they can give it its own name.

 

So, if you’ve got a vaccine batch, then you can give it that idea of the vaccine batch. But then you can trace it right back. Now, our calibration certificates are two-point temperature calibration certificates. They’re very accurate.  Our devices use a product called si7020 silicon labs sensor. It’s one of the most accurate on the market. Its accuracy is 0.3 percent and we’ve had that tested and very verified by labs and our devices are very accurate.

 

TN: Very interesting, Kirstin. I think we could go on for a couple hours talking about this stuff. But I just wanted to kind of get a quick overview out to people so they understand what’s happening particularly with vaccines but also with other aspects of the manufacturing supply chain. So, thanks so much for your time today. I really appreciate it.

 

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