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Satchu's Rich Wrap-Up
Friday 28th of January 2022

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Market’s expectations of number of rate hikes this year spiked higher (toward 5) after yesterday’s #Fed decision and presser @LizAnnSonders
World Of Finance

29-NOV-2021 ::  Regime Change

Tsunamis also start by receding For years now Central Banks have been enabling governments unwilling to confront structural problems by flooding economies with money.  @ELuttwak

For years now Central Banks have been enabling governments unwilling to confront structural problems by flooding economies with money.  But when we had deflation instead of inflation, the Krugmans told us not to worry ("different this time") Tsunamis also start by receding

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In 2021, Group of Seven central banks added more than $3 trillion to their balance sheets. In 2022, Bloomberg Economics forecasts that number will drop to about $330 billion. @economics @lisaabramowicz1
World Of Finance

29-NOV-2021 ::  Regime Change


There is no training – classroom or otherwise.. that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market. 
There's typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. Paul Tudor-Jones

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We’re Sloshing Toward Economic Regime Change @bopinion @johnauthers
World Of Finance

Archimedes’s principle can be useful to markets. When a large object drops into a pool, it will displace a lot of liquid that must subsequently go somewhere. The Greek mathematician and physicist discovered this by getting into a bathtub. The principle is also at work in world markets.

The return of inflation, and with it the return of a Federal Reserve that’s actually prepared to tighten financial conditions, has displaced many assumptions in the U.S. and is sending money coursing through other parts of the global economy. 

This could help the market and economy find their way to a self-righting mechanism, but the mess created also brings the risk of fresh accidents. 

We are witnessing a succession of dramatic shifts in the tectonic plates of financial markets and the economy. 

It’s fairly clear what is happening, but not yet clear where this process will end, and how swiftly it will work.

As ever, there is a risk of over-determining a narrative, or reverse engineering an explanation to fit disparate events. 

I’m trying to avoid that, but the comeback of inflation in the U.S. is, at the least, contributing to displacements across the world.

U.S. Growth Is Back

The latest gross domestic product growth numbers were emphatic and strong. Excluding the freak quarter a year after the Covid slowdown, when year-on-year growth appeared to go through the roof, the U.S. economy was expanding by the end of 2021 at its fastest since 1984 — the year Ronald Reagan pronounced “morning in America” and won reelection in a landslide. 

Viewed with only a little hindsight, the scale of the Covid shock grows even more apparent and it is completely in line with common sense that it would prompt a change in regime

Looking before 1984, however, we see that growth faster than this used to be quite a common occurrence, and that economic cycles were much shorter. 

Even if we date the current cycle from the trough of the Covid shutdown in April 2020 (and many would say that was an interruption of a much longer era of growth that started in the summer of 2009), then it’s already longer than many U.S. economic cycles since 1854. 

Much lengthier ones seem to have arrived, along with a typically slower rate of growth, in 1982. 

In other words, the long cycles of the last four decades didn’t exist when rising prices were a fact of life. They’ve only become the norm since Paul Volcker tamed inflation. 

This implies that we should be ready for this cycle to be much faster than its recent predecessors.

That certainly seems to be where the Treasury market is. Since Jerome Powell’s press conference Wednesday, the yield curve (the gap between two- and 10-year yields) has flattened dramatically. 

Very unusually, both ends of the curve contributed, with shorter yields rising sharply while longer yields fell. 

The curve has a mutually reinforcing relationship with the Fed’s monetary policy. 

Generally, when the economy is strong and in danger of overheating, the curve steepens (longer yields will be much higher, reflecting the belief that rates must rise), and this will prompt the Fed to start tightening. 

When the curve inverts, a classic and dreaded signal of an approaching recession, the market is saying that rates will be lower in 10 years than in two years — another way of saying that the Fed has tightened too much and will need to start cutting. 

The Fed generally has no choice but to take the hint.

What is startling about this yield curve flattening is that it’s come so soon before the Fed has even started raising rates. If the curve swiftly moves to inversion, it grows far harder for the Fed to carry on with its hiking program:  

The market is behaving this way because it expects inflation to force the Fed to bring forward its rate hikes, but not to increase the eventual amount by which it needs to raise. 

The following chart from BCA Research compares implicit market-based fed funds future expectations with the official projections from the Fed’s governors, most recently updated in the “dot-plot” published last month. 

The market now thinks that rates will be raised at each of the next three Federal Open Market Committee meetings, and perhaps as many as five increases this year. 

That’s a faster rate of tightening than the Fed currently expects. But then, the market expects the hiking campaign to end at 1.75%, while the Fed’s governors are braced to inflict a lot more pain than that: 

Why does the market believe this? Because it ultimately thinks that the Fed will be unable to carry on that much longer, and that this cycle will be a short one. 

The good news for the Fed is that this implies high confidence that it will soon regain control. The bad news is that it suggests uncomfortable things about growth.  

Global Repercussions

The rise in shorter U.S. bond yields has had some significant knock-on effects, prominently on the dollar. The widely followed dollar index is now stronger than at the beginning of 2020

The turnaround in expectations for the Fed has also turned around expectations for the currency, which appears to be in a clear upward trend once more:

Archimedes’s principle is at work here. The dollar cannot rise in a vacuum. Most significantly in the current environment, the Chinese yuan dropped by the most in almost a year, arresting a steady strengthening since it had fallen to more than 7 yuan per dollar during the tariff war with then-President Donald Trump in 2019, and again during the first wave of the pandemic two years ago.

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The Dollar @bopinion @johnauthers
World Of Finance

The Markets Are Wilding Title: Bar, Las Vegas, Nevada Artist: Robert Frank

The Music has been playing for Eternity and its about to stop


Love Fellini. So brave, with that whiff of insanity. @DiAmatoStyle Federico Fellini's 8 1/2 @tcm

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U.S. stocks' outperformance of the rest of the world is in its 14th year @bopinion @johnauthers
World Of Finance

U.S. stocks' outperformance of the rest of the world is in its 14th year

Mirrors on the ceiling, The Pink champagne on ice

Last thing I remember, I was Running for the door

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My Struggle: Book 4 Karl Ove Knausgard

Oh, the muted lights in buses at night and the muted sounds. The few passengers, all in their own worlds. The countryside gliding past in the darkness. The drone of the engine. 

Sitting there and thinking about the best that you know, that which is dearest to your heart, wanting only to be there, out of this world as it were, in transit from one place to another, isn’t it only then you are really present in this world? Isn’t it only then you really experience the world?

We went up the creaky staircase. Yngve took Kjartan’s old room, I took the former children’s room. Switched on the main light, put my rucksack down by the old cot, drew the curtain and tried to peer through the darkness outside. 

It was impenetrable, but I sensed the landscape there nevertheless, the wind gusting through seemed to open it up. The windowsill was covered with dead flies. In the corner under the ceiling hung a spider’s web. The room was cold. It smelled old, it smelled of the past.

Then we had to get up and go skiing in the Alps, there was something dreamlike about that too, for the sky was completely blue, the sun was shining, everywhere we looked white mountains towered in the air, and after a few minutes on the lift, with our skis dangling beneath us, everything was perfectly still. 

As though we had passed into another state. All that could be heard was the low hum of the lift close to us, otherwise it was completely and utterly still. A sense of jubilation filled me, for the silence was as vast as an ocean, while there was also something painful about it, as there is in all joy.

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DAN WANG 2021 letter @danwwang

I’ve by now lived in each of China’s main megaregions. It is time to make assessments.

Everything that can go wrong in urban design has gone wrong in Beijing. The climate is arid and prone to northerly sandstorms. Its streets are unwalkable, but a stroll would reveal that its imperial heritage, made up of alley houses called hutongs, is slowly being taken over by its socialist heritage, made up of gray Soviet blocks that tower over all. 

Beijing is therefore a desert steppe city with Stalinist characteristics. A decade ago, the city was a lively place. One can find no shortage of people reminiscing about visiting art shows and fun bars in hutongs, then grabbing roadside barbecue just outside. 

Today, it is a concrete no-fun zone and the most restrictive city in the country. 

But Beijing is redeemed by its intellectual life. It is the center not just of state power, but also universities and the biggest-dreaming startups. 

For those who can work up the courage to confront the mess of its urban city, a sparkling dinner awaits.
A hundred years ago, Shanghai (where I currently reside) was the city in Asia where the ambitious could live comfortably while making a great deal of money. 

A rough few decades later, that fact is true once more. Shanghai is by far the most westernized city in China, attracting perhaps the majority of foreign nationals as well as Chinese who have spent time abroad. 

One can live in the tree-lined former French Concession, which today hosts the greatest concentration of coffee shops in the world, and work in office settings little different from those in Singapore and Hong Kong. 

It’s easy to make day trips to the canal cities of east China that enchanted poets and emperors alike. 

Shanghai today is culturally on par with Beijing, offering no fewer selections of visual and performance art. 

A more valid contrast is that Shanghaiers are more concerned with practical affairs. 

Its people are focused on producing the sorts of food and fashion businesses that make the city still more livable.

The Greater Bay Area is a bit more of a mystery to me, given that I lived in the failing part—Hong Kong—rather than the growing part: Shenzhen. At the start of reform and opening, Shenzhen absorbed the shock troops of Chinese entrepreneurialism. 

The central government has delineated around a hundred million people to each of these megaregions and charged them to drive future growth. 

Beijing, the political center of the country for most of the time since Mongol rule in the 13th century, anchors the northern hub, which also includes Tianjin and relatively smaller cities. 

Shanghai leads east China, a manufacturing and cultural center since the 10th-century Song dynasty, which counts the nearby cities of Hangzhou, Suzhou, and other medium-large cities. 

And there’s no obvious leader in the southeast, but it is between Shenzhen, the richest city in the region, and Guangzhou, the political capital of the province and a hub of international commerce since the 18th century.

Each region has a different personality. The north is economically dysfunctional. Large parts of it suffer from resource dependency, environmental problems, and the population loss that results from these trends. 

Cities near Beijing showcase overcapacity in steel and coal, while Tianjin is well-known for having falsified its economic data. 

The northeast provinces nearby have seen a population decline of around 10% over the last decade, while the north as a whole has seen its share of the country’s GDP shrink from half in 1960 to a third today.

Beijing however has bucked the region and seen strong growth. It is the political center of the country and reaps every economic advantage from that status. 

That means retaining the bulk of the state sector as well as the industries most dependent on political rents. 

Thus it’s not so different from Washington, DC, with its mix of embassies, think tanks, and industries that need lobbying. 

Not every sector in Beijing though is dependent on the beneficence of government. 

Although Alibaba is in Hangzhou and Tencent is in Shenzhen, Beijing hosts the preponderance of consumer internet firms, like ByteDance, Meituan, and JD. 

Beijing is a good place to find talent because it has led for so long and because many of the country’s best universities are there. 

Whereas a lot of the entrepreneurs in Shenzhen are dreaming of building billion-dollar businesses, those in Beijing are at work building the kind that reach hundreds of billions of dollars.
Shanghai is more commercially oriented. Around a thousand years ago, the region of east China started to transform into the fiscal center of the country, as people moved from the millet-growing north into the more productive rice-growing east. 

The area received another boost with the influx of New World silver, propelling Nanjing, Suzhou, and Hangzhou into the first cities in the world that made luxury goods for global markets. 

Dotted around these metropolises were market towns producing rice, ceramics, silk, and other goods. 

Shanghai came into its own through the slow collapse of the Qing. 

By the turn of the 20th century, it attracted the most dynamic Chinese entrepreneurs and became the center of the country’s industrial works. 

Today, Shanghai’s seedy past is mostly out of view. But the economic dynamism has not quite faded away. 

The city hosts the preponderance of the Chinese headquarters of multinationals. 

And it attracts Chinese entrepreneurs who appreciate its business environment: they tell me that local government districts compete against each other to host companies, and are constantly asking how they can help. 

While the area around Beijing is failing, the cities around Shanghai are many of China’s best economic successes.

The fact I appreciate best is that Shanghai is highly livable. Among cities in Asia, Tokyo is a singular miracle, but I think that Shanghai is not lesser than Singapore, Hong Kong, or Seoul. Business executive types tell me that New York is the only city that rivals its dynamism. 

The Shenzhen region is harder to write about given its patchwork nature. Shenzhen surpassed Hong Kong to be the region’s richest city in 2018. 

But it hasn’t been able to wrest leadership away from Guangzhou, which jealously guards its political power. Dongguan, Zhuhai, and Huizhou each pursue their own strategies, while Macau fits into the constellation as well (although it is less interesting given that it’s a single-industry town). 

Hong Kong, meanwhile, is a world unto itself. Since the political problems there over the last three years, the central government has made it obvious that it can think of the city only with exasperation. 

Rather than expect it to lead, Beijing is treating Hong Kong as something like an ulcer: a problem to manage away with hopefully not much more pain.

I left Hong Kong in 2018, before its protests and the ensuing political crackdown. 

I had hastened to leave then because I already felt the keen disappointment of living in a city in structural decline. 

I acknowledge that Hong Kong is an urban paradise: a tropical island with a splendid geographic setting, featuring a ring of skyscrapers that hug thickly-forested mountains. 

Manhattan meets Maui, in other words, at the mouth of the Pearl River. 

But Hong Kong was also the most bureaucratic city I’ve ever lived in. Its business landscape has remained static for decades: the preserve of property developers that has created no noteworthy companies in the last three decades. 

I’ve written before that Philip K. Dick is useful not for thinking about Hong Kong’s skyline, but its tycoon-dominated polity: “governed by a competent but fundamentally pessimistic elite, which administers a population bent on consumption. Instead of being hooked on drugs and television like in PKD’s novels, people in Hong Kong are addicted to the extraordinary flow of liquidity from the mainland, which raises their asset values and dulls their senses.”

Beijingers are the way they are due to the imperial and socialist heritage of the city. The currency of Beijing is power. 

The party-state maintains a formal system of rank, a holdover of imperial times, which denotes the status of every public official.

The aura of state power is overbearing in Beijing. By power I mean the physical infrastructure, which is meant to intimidate. 

Beijing’s boulevards are so unwalkable because they are designed less for pedestrians than for army parades. And by power I mean the structure of personal interactions. 

But Beijing’s role is grander than mere enforcer of petty restrictions. Its control tendencies demonstrate a commitment to the transformative role of ideology. Shanghai and Shenzhen are creating wealth and leisure; Beijing is trying to lift their gaze towards its banner of utopia.

The “great rejuvenation of the Chinese people.” That is a messianic drive, complete with sacred texts, elaborate rituals, and the occasional purge.

Shenzhen might stand in for the purest form of the Chinese moneymaking spirit. Many people, including northerners, move to Shenzhen for its relaxed political climate. 

Shanghai is a bit more of a middle ground between Shenzhen and Beijing. Although there is substantial economic dynamism in Shanghai, the data shows that the state sector makes up around the same share of the city’s economy as Beijing’s. 

Many of Shanghai’s favorite sons have moved up to Beijing to run the Politburo—including Wang Huning, the present head of ideology.

I appreciate this line from Amia Srinivasan in Tyler’s interview this year: “One thing history might show us is that it is the prophets, and not the mere pragmatists, who are the most powerful world makers.”

Beijing’s goal is to channel entrepreneurial spirit towards useful goals. Profit cannot be the final standard of value, and the country’s best and brightest must work towards national salvation. I see that dynamic playing out in the regulatory campaigns this year.

The most important Politburo meeting of the year took place in April. 

The readout afterwards noted that the leadership identified a “window of opportunity” while growth was good to “concentrate on deepening structural reforms.” 

It had previously signalled its unhappiness with the property and consumer internet sectors, and the leadership announced with this readout that there would be no better time to escalate its crackdowns. 

The central government subsequently launched campaigns to clean house. 

The tightening on every front has led the economist Barry Naughton to refer to the regulatory squeeze as a “summer storm” fit for the history books. I agree, and will make some remarks on the leadership’s goals as I see them.

When Beijing punished Ant Financial and DiDi, all of us were nervous that these companies were pawns in a game of elite politics whose rules aren’t revealed to anyone who isn’t a player. 

At this point, however, the punishment of these two firms looks rather small compared to everything that happened afterwards: the decapitation of online tutoring, new restrictions on video games, anti-monopoly actions against internet platforms, and passage of statutes governing data and privacy.

While Beijing has restrained internet companies, it has done nothing to hurt more science-based industries like semiconductors and renewables. 

In fact, it has offered these industries tax breaks and other forms of political support. 

The 14th Five-Year Plan, for example, places far greater emphasis on science-based technologies than the internet.

In nearly all of my letters over the years, I’ve lamented the idea that consumer internet companies have taken over the idea of technological progress: 

“It’s entirely plausible that Facebook and Tencent might be net negative for technological developments. The apps they develop offer fun, productivity-dragging distractions; and the companies pull smart kids from R&D-intensive fields like materials science or semiconductor manufacturing, into ad optimization and game development.” 

I don’t think that Beijing’s primary goal is to reshuffle technological priorities. 

Instead, it is mostly a mix of a technocratic belief that reducing the power of platforms would help smaller companies as well as a desire to impose political control on big firms.

If venture capitalists are mostly funding social networking companies, then they would be able to hire the best talent while denying them to chipmakers. 

That has arguably been the story in Silicon Valley over the last decade: Intel and Cisco were not quite able to compete for the best engineering talent with Facebook and Google. 

Beijing wants to change this calculation among domestic investors and students at Peking and Tsinghua.

Beijing has regularly denounced the “disorderly expansion of capital,” and sometimes its “barbaric growth.” 

The attitude of business-school types is to arbitrage everything that can be arbitraged no matter whether it serves social goals. 

Beijing’s attitude marks a difference with capitalism as it’s practiced in the US. 

Over the last two decades, the major American growth stories have been Silicon Valley (consumer internet and software) on one coast and Wall Street (financialization) on the other. 

For good measure, I’ll throw in a rejection of capitalism as it is practiced in the UK as well. 

My line last year triggered so many Brits that I’ll use it again: “With its emphasis on manufacturing, (China) cannot be like the UK, which is so successful in the sounding-clever industries—television, journalism, finance, and universities—while seeing a falling share of R&D intensity and a global loss of standing among its largest firms.”

I see the Chinese leadership as being relatively unconcerned with talent flow into consumer internet and finance; instead it is trying to fashion an economy in which the physics PhD can do physics, the marine biology student can do marine biology, and so on.

There are of course risks with a blunt reshuffling of technological priorities. 

The investment model of venture capital—in which a relatively small amount of funding can trigger explosive growth—fits like a hand in glove with consumer internet business models.

No public figure in China dares to be too visible today. One motivation for dreamers to start companies might be to enjoy the outrageous excesses of being billionaire playboys. 

We might in retrospect see this summer as China’s high point in reining in the excesses of its own Gilded Age, which has produced ebullience as well as hucksterism. 

In this best case, Beijing would succeed at taming its robber barons without extinguishing dynamism in the following century.

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Alibaba hits record low in Hong Kong http://9988.HK @sunchartist
Law & Politics

There is frequently a "coming to Jesus" meeting in Beijing where any number of things can happen @ANDmagazine

Alibaba’s Jack Ma is still young, healthy, and his company is firing on all cylinders.  Yet, he recently stepped down as chairman at a handsome ceremony – posing as a rock star and singing a few tunes.  
The musical theme was appropriate.  He has been whistling past the graveyard for many years – as is the lot of prominent businessmen in the People’s Republic of China.

You see, the Jack Ma’s of China may be entrepreneurs, but they are as much “Chinese Communist Party (CCP) corporate trustees.”  And Ma’s usefulness as a CCP corporate trustee has reached the end of its shelf-life.

Indeed, maybe Jack Ma’s crowning achievement is not building Alibaba into a major global corporation.  Rather, it is staying both alive and out of jail as long as he has.
And there is frequently a “coming to Jesus” meeting in Beijing where any number of things can happen to a trustee – from forcing him to sell off non-policy debt-inducing assets, to accepting “retirement” to charges of corruption and a life sentence in prison….and no more access to the CCP’s official black hair dye #6.  

You're nothing but a cloud’ Xi's message to Jack Ma. @adam_tooze

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One of the defining bifurcations of the future will be the conflict between information masters and information victims.
Law & Politics

“We just put information into the bloodstream to the internet and then watch it grow, give it a little push every now and again over time to watch it take shape. And so this stuff infiltrates the online community and expands but with no branding – so it’s unattributable, untraceable.”
“It’s no use fighting elections on the facts; it’s all about emotions.”
“So the candidate is the puppet?” the undercover reporter asked. “Always,” replied Nix.

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DAN WANG 2021 letter @danwwang [continued]
Law & Politics

The summer storm has battered industries and left people feeling adrift. 

The trouble is that the party-state looks like the God of the Old Testament: a wrathful entity that demands harrowing displays of fealty to demonstrate commitment to a values-based faith. Disobedience provokes storms and other manifestations of celestial displeasure. 

If Beijing were only brutal or unpredictable, then people wouldn’t be so on edge. But it is both. 

No one is sure how far the state will prosecute its values-based agenda.

By my count, the country has produced two cultural works over the last four decades since reform and opening that have proved attractive to the rest of the world: the Three-Body Problem and TikTok. Even these demand qualifications. 

Three-Body is a work of genius, but it is still a niche product most confined to science-fiction lovers; and TikTok is in part an American product and doesn’t necessarily convey Chinese content. 

Even if we wave nuances aside, China’s cultural offering to the world has been meager. 

Never has any economy grown so much while producing so few cultural exports. 

Contrast that with Japan, South Korea, and Taiwan, which have made new forms of art, music, movies, and TV shows that the rest of the world loves.

The reason for China’s cultural stunting is simple: the deadening hand of the state has ground down the country’s creative capacity. The tightening has been continuous. 

At the same time, the propaganda authorities have weaponized the public sphere to wring out dissent. 

A critical comment posted to Weibo or WeChat might prompt the platform to delete one’s account. 

If that doesn’t happen, then the internet mob will pounce. In spite of the greater visibility of this internet mob, I think we are still only scratching the surface of Chinese nationalism.

One of Xi’s legacies has been to push officials to err on the side of implementing controls too tightly, such that party officials are now trying to prove themselves to be more Marxist than the general secretary. 

It’s a safe bet that the government will control too much rather than too little.

The consequence is that there’s little way for Xi to achieve his exhortation this year for China to make its image more “lovable and respectable.” 

Instead, the country is more likely to be seen as a land of censorious commies. In the developed world, China’s unfavorability ratings have reached an average of 60%, according to Pew Research

Beijing worsens the situation with its need to answer every insult with insult. It unfortunately cannot practice restraint by invoking the proverb: “A decade is not too long for the gentleman to await his revenge.”

Thus China today faces a global surge of dislike. That’s due to the operation of detention camps for ethno-religious minorities, a political crackdown in Hong Kong, abusive threats against other countries, as well as other issues. 

And it is also because the country has failed to cultivate a “lovable and respectable” image. 

Sentiment can shift against the country so quickly because there is little curiosity in it. 

The party-state really seems to believe that the rest of the world must love China because of its economic growth. 

The joke is on them, because Americans and Europeans do not admire economic growth and have dreamed up a thousand reasons to avoid it for themselves. 

They care instead more about cultural issues, which is why people have fond views of Japan, South Korea, and Taiwan, which have combined economic growth with cultural creation.

The Chinese growth story is not simply produced by the government or by entrepreneurs. 

It is a heterogenous entity where different regions dialectically engage to obstruct and improve each other.

Economists have said for years that China needs to deleverage its property-driven economy, and this year the leadership decided to do so. 

The central government embarked on this agenda because it has judged that its program of structural reforms will support growth in the medium to long term. 

It has certainly made mistakes, especially in the power market, but the campaigns of this year display a willingness by Beijing to actively shape events. 

Ironically, it is these self-proclaimed Marxists who are especially willing to resist grand forces of history, for example in the cases of globalization or financialization.

During my time in Hong Kong, I found it absolutely hilarious to see annual rankings by think tanks giving the city-state the highest marks on economic freedom, while its business landscape has been static for decades. 

I submit that observers are making a mistake in the opposite direction when they use macro indicators to underrate dynamism in China.

An American friend who sends his kids to school in Shanghai tells me that Chinese schools teach math the way that American schools teach sports: with the expectation that every child is capable.

.One major question now is whether the central government still has the stamina to reform. After this summer, I think the answer is yes.

An important factor in China’s reform program includes not only a willingness to reshape the strategic landscape—like promoting manufacturing over the internet—but also a discernment of which foreign trends to resist. 

These include excessive globalization and financialization. Beijing diagnosed the problems with financialization earlier than the US, where the problem is now endemic.

A willingness to assess foreign imports as well as a commitment to the physical world combine to make me suspect that Beijing will not be friendly towards the Metaverse. 

Already state media has expressed suspicion of the concept. If the Metaverse will exist in China, I expect it will be an extremely lame creation heavily policed by the Propaganda Department.

 It might make sense for San Franciscans to retreat even further into a digital phantasm, given how grim it is to go outside there. But Xi will want Chinese to live in the physical world to make babies, make steel, and make semiconductors.

The Chinese state has long placed greater value on resilience over efficiency, which has dragged down its performance on metrics that economists care about, like return on equity. In my view, that is as often an indictment of the economic profession. 

Too much of Washington, DC’s attitude smacks of “Are our people unable to handle a five standard-deviation shock? Well, let them eat black swans!”

Since the US government is incapable of structural reform, companies now employ algorithm geniuses to help people navigate the healthcare system. This sort of seventh-best solution is typical of a vetocracy.

The US is ahead of China on the sort of mathematical economics that win Nobel Prizes. But China is ahead of the US on the actual practice of political economy. 

One study I enjoyed this year noted that the Chinese government sends more jobs through state-owned enterprises to counties with greater labor unrest

The US exports on the order of $200bn in goods and services to China each year; but according to the Bureau of Economic Analysis, that figure is dwarfed by the $600bn of US sales in China. (The latter counts a sneaker or a phone made and sold by a US company in China.) 

I spend quite a lot of time engaging with US multinationals. They tend to cite with approval the Five-Year Plans, which make clear targets for say renewable energy deployment, which companies can match to their expansion plans. 

Policy continuity is less certain in the US, where economic incentives might disappear after the next election. 

The rule of thumb for US businesses is that China makes up half of global demand for most products, from wind turbines to structural steel; and China will account for a third to a half of expected growth over the next decade. These aren’t the figures of the Chinese government, but company projections. 

Thus American companies are quietly localizing more of their Chinese production to remove their products from the jurisdiction of US controls. 

an essential analytical prior is to recognize that things are getting better and things are getting worse. 

As Chinese businesses and the state are growing more capable, the leadership is becoming more brutal towards many of its own citizens as well as foreign critics. 

China is, in other words, a place that both moves fast and breaks things and moves fast and breaks people.

China is like the thinking ocean in Stanislaw Lem’s Solaris: a vast entity that produces observations personalized for every observer. These visions may be a self-defense mechanism, allowing leftists to see socialism and investors to see capitalism; or, as Lem’s ocean might be doing, 

China is vastly indifferent to foreign observers and generates visions to play with them. 

Whatever the case, we need a better understanding of this country. Too many commentators have been interested in the story of China’s collapse. 

When the collapse doesn’t come, they lose interest and move on. 

It’s a more important and more subtle skill to figure out how this country can succeed, because that is the exercise the Chinese leadership is engaged in.

The good and/or bad thing about China is that everything changes every 18 months. So it’s all the more important to observe reality on the ground. 

Graham Webster has a good line that the reality of China includes “a mix of brutality and vitality and mundanity.” It’s important to recognize the entire medley

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They now turn to rule over the people by means of what could be dubbed big data totalitarianism and WeChat terror. @ChinaFile #COVID19
Law & Politics

You will all be no better than fields of garlic chives, giving yourselves up to being harvested by the blade of power, time and time again. @ChinaFile #COVID19 
[ “garlic chives,” Allium tuberosum, often used as a metaphor to describe an endlessly renewable resource.]
What is thriving, however, is all that ridiculous ―Red Culture and the nauseating adulation that the system heaps on itself via shameless pro-Party hacks who chirrup hosannahs at every turn @ChinaFile #COVID19

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The ’Wolf Warrior’ Strategy #Wuheqilin
Law & Politics

Actually I think Xi Jinping has been singularly brave and bold a la the Mellon doctrine. 

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Mellon advised him to liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system
Law & Politics

Mellon doctrine Territory. Mellon believed that economic recessions, such as those that had occurred in 1873 and 1907, were a necessary part of the business cycle because they purged the economy. 
In his memoirs, Hoover wrote that Mellon advised him to “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. ... enterprising people will pick up the wrecks from less competent people.”

Sheep spend their entire lives being afraid of the wolf, but end up eaten by the shepherd.

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The plan is to tokenise human behaviour and place it on blockchain ledgers run by algorithms. And the spreading of global fear is the perfect ideological stick to herd us toward this outcome. FABIO VIGHI
Law & Politics

And yet, not all is lost. Despite the unstoppable convergence of science and capitalism in establishing a watertight belief-system that excludes dissent, our successfully paranoid universe will fail to totalise its structure. 
Paradoxically, the current crackdown on humanity may be the best chance yet for radical opposition to the coming regime of capitalist accumulation and its relentless emergency blackmail.

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The massive buildup of Russia forces towards Ukraine continues. Here it’s older T72 tanks on their way to the confrontation zone. @carlbildt
Law & Politics

Eurooe hasn’t seen a concentration of military forces of this magnitude since decades.

24-JAN-2022 ::  looking through the deluge of hashtags, Russia has largely triangulated Europe

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Ex-MI6 chief Sir Alex Younger says he cannot see a scenario where Putin can back down over Ukraine in a way that satisfies the expectations he has created @jeromestarkey
Law & Politics

24-JAN-2022 ::  The Charge of the Light Brigade

The Charge of the Light Brigade 

Half a league, half a league, 

Half a league onward,
All in the valley of Death
Rode the six hundred.
“Forward, the Light Brigade! Charge for the guns!” he said. 

Into the valley of Death
Rode the six hundred.
“Forward, the Light Brigade!” Was there a man dismayed? Not though the soldier knew
Someone had blundered. Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die.
Into the valley of Death Rode the six hundred.

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Global 3.4M average COVID cases/day exponentially growing total 1% each day. #Omicron @jmlukens

The transmissibility of #Omicron is not in question, it clearly has a spectacular advantage.

"Preliminary calculations indicate that BA.2 is one and a half times more contagious than BA.1." @JosetteSchoenma


28-MAR-2021 we are seeing a sustained acceleration in mutant viruses.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.11371
Dollar Index 97.27
Japan Yen 115.5740
Swiss Franc 0.931255
Pound 1.339260
Aussie 0.702480
India Rupee 75.0295
South Korea Won 1209.710
Brazil Real 5.4069342
Egypt Pound 15.739618
South Africa Rand 15.476950

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SEP-2019 a conviction’’ Buy at Friday’s closing price of $270.75. $NFLX
World Of Finance

My Mind kept to an Article I read in 2012 ‘’Annals of Technology Streaming Dreams’’ by John Seabrook January 16, 2012.
“People went from broad to narrow,” he said, “and we think they will continue to go that way—spend more and more time in the niches— because now the distribution landscape allows for more narrowness’’
Netflix is not a US business, it is a global business. The Majority of Analysts are in the US and in my opinion, these same Analysts have an international ‘’blind spot’’
Once Investors appreciate that the Story is an international one and not a US one anymore, we will see the price ramp to fresh all-time highs.
I, therefore, am putting out a ‘’conviction’’ Buy on Netflix at Friday’s closing price of $270.75.


I am reiterating my Buy on $NFLX 

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Oil and the Russian Bear @bopinion @johnauthers
Minerals, Oil & Energy

While talk in financial markets is centered on monetary policy and inflation, the chances of an armed conflict over Ukraine involving Russia continue to be very real. 

Investors are assuming that neither Russia nor the U.S. and its NATO allies will get involved in a protracted military confrontation; it would be in nobody’s interests.
But the risk of economic sanctions to punish Moscow, which would have the effect of pushing up oil prices, is a different matter.
Hence, Brent crude is now its most expensive since an epic fall in 2014 as the OPEC cartel lost discipline.
What’s strange is that the dollar and the oil price usually have a strong inverse correlation. 

All oil transactions are denominated in dollars, so a rising oil price should automatically lead to a falling dollar, and vice versa.
As the chart below shows, this relationship has endured consistently for 15 years — but now, oil and the dollar have parted ways:
The strong inverse correlation between the two has disappeared
Further oil price rises might slow or reverse the dollar’s advance. 

Meanwhile, the oil price has also been a reliable supporter of the Russian stock market.
Given the economy's deep reliance on energy, this is no surprise. 

But, again, oil’s latest rally has been coupled with underperformance by Russian stocks:
Whatever happens in Ukraine over the next few weeks, investors are convinced that the Russian economy is in trouble. 

Meanwhile, eastern Europe has managed to avoid being caught up in the latest Russian selloff.
But the region still looks vulnerable if the Ukraine crisis deepens. Stock markets in Russia and central and eastern Europe have had a horrible decade

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EM – Already thinking about rate cuts? @NGurushina
Emerging Markets

> Frontloaded hikes + a prospect of disinflation (esp. in H2) + weaker growth = Doves stage a comeback in 6-12m?
> Rate hikes in DM/U.S. vs rate cuts in EM – that would be an interesting scenario for H2/2022+

Just in case anyone forgot: Sri Lanka is now governed by Gotabaya Rajapaksa, a man so sinister he used to keep a tank of sharks in his garden. Death of the Tiger @newyorker Jon Lee Anderson H/T @jamescrabtree

The Tamil army—known as the L.T.T.E., or simply the Tigers—was led by Velupillai Prabhakaran, a charismatic, elusive man who had become one of the most successful guerrilla leaders of modern times. 
The Tigers’ collapse began in January, 2009, when they lost the town of Kilinochchi, their de-facto capital
Hemmed in by the sea, a lagoon, and a hundred thousand government soldiers, they were all but helpless, as the Army kept up a barrage of fire from gunboats, aircraft, and field artillery.
There were later reports, which the government denied, that as many as forty thousand civilians were killed during the Army’s final offensive, and that their bodies were burned or buried in secret mass graves.
“Most of them were Black Tigers,” he said, referring to the Tamil suicide squad. “Prabhakaran was among us, too, but none of us saw him''.
One soldier said, in Sinhala—I understand a little—‘We have orders to shoot everyone.’ We were shouting for them not to shoot.” 
“It is in my mind. When I sleep, automatically it comes out—things I only saw in films in my youth. Bodies without heads. Bodies with the stomach open and the liver coming out.” He added, 
“At the end, we were walking out through fire and past dead people, and the soldiers were laughing at us and saying, ‘We have killed all your leaders. Now you are our slaves.’ You can imagine how I feel about my country.”
On the same day, May 18th, the Army announced that the Tiger leader, Velupillai Prabhakaran, had been killed, along with two hundred and fifty others, during an overnight escape attempt across the Nandikadal Lagoon, which separated the beach from the mainland. 
Images were released of his body lying at the feet of Army troops, a handkerchief over his forehead to conceal a yawning wound. The Army claimed that it had cremated his remains. 
Prabhakaran’s eldest child, Charles Anthony, was killed the day before, along with other fighters who launched a final assault on Army lines. 
Soon after, the Army said it had also Recovered the bodies of Prabhakaran’s wife, their daughter, and their youngest child, a boy, all of them dead of gunshot wounds. 
Rajapaksa declared a national holiday. “We have liberated the whole country from L.T.T.E. terrorism,” he said.
“Our intention was to save the Tamil people from the cruel grip of the L.T.T.E. We all must now live as equals in this free country.”
One of his brothers, Gotabaya, is his defense minister; another, Basil, is his chief of staff and minister for economic development; and a third, Chamal, is Speaker of Parliament. 
His twenty-four-year-old son Namal was recently elected to Parliament, and forty-odd additional brothers, sisters, cousins, nephews, nieces, and in-laws hold various other government posts.
The important thing, he said, was that Sri Lanka had ended terrorism, making it the first country in the modern age to have done so. 
In military circles around the world, the “Sri Lanka option” for counter-insurgency was discussed with admiration. 
Its basic tenets were: deny access to the media, the United Nations, and human-rights groups; isolate your opponents, and kill them as quickly as possible; and segregate and terrify the survivors—or, ideally, leave no witnesses at all.

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Literacy levels in Africa: H/t @RencapMan @MwangoCapital

Turning To Africa


Democracy has been shredded.
We are getting closer and closer to the Virilian Tipping Point
“The revolutionary contingent attains its ideal form not in the place of production, but in the street''
Political leadership in most cases completely gerontocratic will use violence to cling onto Power but any Early Warning System would be warning a Tsunami is coming

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Here's a clue as to why the military have taken over in #Chad, #Mali and #Guinea in 2021 @RencapMan

Grey is where adult literacy is still below 40% - a level when sustainable GDP growth is impossible. #Afghanistan is only at 42%. 

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Some investors bet on heady returns from Ghana's Eurobonds @business

Ghana’s pledge to stick to fiscal targets has stemmed a selloff in its dollar bonds, with some investors betting on juicy returns if the West African nation delivers on its promise.
The country’s dollar debt had the worst start to 2022 in the developing world, with a 11% loss until Jan. 19, when Minister of Finance Ken Ofori-Atta said the government is willing to cut spending as much as 20%, depending on revenue performance, to put the budget on a sustainable path. 

Since then, the risk premium on Ghana’s bonds has narrowed 111 basis points.
While yields are still signaling a high default risk, the extra premium demanded on June 2049 and March 2061 securities is already back below 1,000 basis points, the threshold considered distressed. 

The yield on 2026 securities fell 26 basis points on Thursday to 11.97%, the lowest in three weeks.
“There will be a continuation in the performance of the bonds if we can see the fiscal targets set by the government are being met,” said Joe Delvaux, a money manager at Amundi in London.

 “Certainly the intentions are good and it’s one of the reasons why the bonds have been rallying, but it will come down to the question: can they deliver?”
The government aims to meet this year’s budget deficit target of 7.4% of gross domestic product, down from a projected 12.1% of GDP for last year. 

The proposed introduction of an e-levy on electronic transactions, including mobile money, will help boost tax revenue to 15.4% of GDP by end-2022 from a forecast 12% of GDP for 2021, giving investors some comfort that the default risk is receding.
“There has been engagement from a variety of clients, which I think shows investor willingness to re-engage with the trade here,” said Calvyn Kirsten, a London-based emerging markets trader at JPMorgan Chase Bank. 

“The market has gone very quickly from pricing a severely distressed scenario. Once the finance ministry does what it says, then that should be taken off the table.”
Still, achieving the budget targets won’t be easy due to high interest costs and public sector wages that account for almost two-thirds of expenditure. 

At current yield levels, Ghana would find it difficult to access the Eurobond market to roll over debt.
“The majority of investors are likely to remain wary about the government’s ability to cut costs,” said Mark Bohlund, a senior credit research analyst at REDD Intelligence. 

“There is very little room to make substantial cuts in response to the likely underperformance of the very highly-set revenue targets.”
On the other hand, Ghana has $10.8 billion of reserves and is able to service maturing debt without tapping the Eurobond market this year. 

The average premium investors demand to hold Ghanaian debt has narrowed from its 21-month high to 1,035 basis points, the least among 10 emerging nations with debt trading at distressed levels, according to data compiled by Bloomberg.
“We view valuations as attractive and we expect Ghana to regain market access next year,” said Richard Briggs, a London-based money manager at GAM Holdings who holds Ghanaian debt. 

“We know that the fiscal side in Ghana is challenging but foreign-exchange reserves are reasonably ample and their external financing needs are not huge''

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Tropical storm Ana has killed at least 12 people in Mozambique and Malawi, authorities say, as well as destroying homes and infrastructure. David Doyle has more. @ReutersAfrica

In chaos theory, the butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state. 

Lorenz wrote:
"At one point I decided to repeat some of the computations in order to examine what was happening in greater detail. I stopped the computer, typed in a line of numbers that it had printed out a while earlier, and set it running again. I went down the hall for a cup of coffee and returned after about an hour, during which time the computer had simulated about two months of weather. The numbers being printed were nothing like the old ones. I immediately suspected a weak vacuum tube or some other computer trouble, which was not uncommon, but before calling for service I decided to see just where the mistake had occurred, knowing that this could speed up the servicing process. Instead of a sudden break, I found that the new values at first repeated the old ones, but soon afterward differed by one and then several units in the last decimal place, and then began to differ in the next to the last place and then in the place before that. In fact, the differences more or less steadily doubled in size every four days or so, until all resemblance with the original output disappeared somewhere in the second month. This was enough to tell me what had happened: the numbers that I had typed in were not the exact original numbers, but were the rounded-off values that had appeared in the original printout. The initial round-off errors were the culprits; they were steadily amplifying until they dominated the solution." (E. N. Lorenz, The Essence of Chaos, U. Washington Press, Seattle (1993), page 134)[7]
Elsewhere he stated:
One meteorologist remarked that if the theory were correct, one flap of a sea gull's wings would be enough to alter the course of the weather forever. The controversy has not yet been settled, but the most recent evidence seems to favor the sea gulls.

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Menace terroriste (27/01/2022) @francediplo

Il est constaté une persistance de menaces sérieuses contre les ressortissants occidentaux au Kenya. 

Il existe un risque réel ciblant des lieux publics fréquentés par les ressortissants étrangers (restaurants, hôtels, lieux de loisir, centres commerciaux…), en particulier à Nairobi.

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.@EABL_PLC East African Breweries Ltd. reports H1 2022 EP +312% earnings here
N.S.E Equities - Industrial & Allied

Par Value:                  2/-
Closing Price:           155.00
Total Shares Issued:          790774356.00
Market Capitalization:        122,570,025,180
EPS:             5.51
PE:                 28.131

H1 Earnings 6 months through 31st December 2021 versus 6 months through 31st December 2020

HY Gross Sales 96.836b versus 78.164b

HY Net Sales 54.899b versus 44.460b +23% 

HY Cost of Sales [28.429b] versus [25.127b]

HY Gross profit 26.470b 19.333b

HY Selling & distribution costs [4.810b] versus [3.878b]

HY Administrative expenses [5.052b] versus [4.258b]

HY Other costs and expenses [3.730b] versus [5.361b]

HY Profit before Tax 12.878b versus 5.836b

HY Profit after Tax 8.738b versus 3.792b +131% 

HY EPS 8.45 versus 2.71 +312% 

Interim Dividend 3.75 a share 


Operating Environment
Across the region, we have seen an easing of COVID-19 restrictions contributing to a more favourable trading environment, as consumers return to pubs and bars. 

The broader economic rebound across East Africa continues to strengthen consumer demand across all our product categories, supporting our overall performance.
Performance Overview
EABL’s performance for the half year ended 31 December 2021 demonstrates a strong recovery from the impact of the Covid 19 pandemic that affected the last two financial years. 

Net sales grew 23% to Kshs 54.9 billion driven by investment behind brands and channel innovation in response to consumer behaviour shifts. 

At country level, Kenya, Uganda and Tanzania revenues grew 27%, 18% and 15% respectively compared to the same period last year, as Covid-19 restrictions were lifted.
Profit after tax grew 131% to Kshs 8.7 billion driven by the increase in net revenue and effective cost management. 

As a result, earning per share grew 312% reflecting faster growth in profits attributable to equity holders.
To support future growth, capital expenditure increased by 51% to Kshs 6.2 billion against the same period last year mainly in relation to capacity expansion in Tanzania and Uganda.
Net debt reduced from KShs 40.7 billion at 30 June 2021 to Kshs 34.7 billion as at 31 December 2021. 

During the period, the group raised Kshs 11 billion through the issue of a Medium Term Note in the capital markets. 

The proceeds of the issue were utilised to refinance existing debt and fund capital expenditure.
The performance in the half-year ended 31 December 2021 is testament to the resilience of EABL’s employees, brands and business strategy.
Future Outlook
The trading environment remains uncertain with the lingering socio-economic impact of the pandemic, excise tax volatility, and shifting political changes on the horizon. 

However, we are cautiously optimistic that improved consumer incomes, on-trade recovery, and off-trade resilience will continue apace, fueling our net sales growth momentum across East Africa.
The Board of Directors has recommended an interim dividend of Kshs 3.75 per share

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@EABL_PLC H1 2021/22 results: @MwangoCapital
N.S.E Equities - Industrial & Allied

- Gross revenues up 23% YoY to KES 54.9B
- Profit after tax up 131% YoY to KES 8.7B
- Capex up 51% to KES 6.2B
- Interim dividend of KES 3.75
- Cash & CE up 185% to KES 7.2B


Thats one shapely rebound.

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by Aly Khan Satchu (www.rich.co.ke)
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January 2022

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