Recent comments

Here are some of my modified comments starting from the China-US negotiation in D20 summit in Seeking Alpha News.

On Security threat

Security threat is an excuse. Trump wanted to stop Huawei. If we do not ban Huawei to US, Apple will lose half of the market value. Is it a security threat?

About 20% of the internet traffic goes thru Chinese routers. There are many ways to protect our data.

A company from Israel demonstrated they can spy with any smart phone.

Do you want to be spied by a foreign company (Huawei or other) OR by your own government? Why Huawei would spend all the resources to spy U.S. citizens?

It is about stopping China but not security threat.

On the book “The 100 Year Marathon” by Michael Pillsbury

The book makes you feel better via dumb nationalism. It is good for those who always put the blame on others but not on themselves. The trade deficit is not a Chinese problem but ours.

The real fixes are:

1.       Improve our education system.

If you go to any high tech company or tech institution such as MIT, you will find many yellow faces and Indian faces. Chinese kids spend at least more hours in studying every day than our kids.

2.       Government should subsidize in science research to “Make America Great Again”. We subsidize many sectors (that’s why our milk is so cheap), but we complain China subsidizing their science research. Does it make sense?

3.       Improve infrastructure.

Our politicians care about 4 years and hence they will NOT do the above due to no immediate payoff. Our CEOs care about the next quarter and their bonuses.

4.       We need to save more.

It must be similar that this book would make folks with my background happy. To these folks, be neutral and seek out the truths.

On 5G

If we chose not to use Huawei 5G, we may be 2 years behind. It is likely that we would even be behind some developing countries in Africa.

It happened before in 4G: When the Orientals were watching TV from the phones during commute, we're reading Kindle books. I bet books are more educational than movies. However, 5G changes the world and hopefully for the better.

ATT's 5Gx is just 4G with 'potential' or a marketing gimmick. VZ's 5G has used a lot of Huawei's patents even they're not Huawei's products. Huawei asked Verizon to pay 1 billion for the patent use. If they do not pay for any ‘regulations’ from our government, China and many countries will not pay royalties on many U.S. patents.

At the G20 Summit

The reversal is not sudden at all. All the U.S. chip companies told Trump that they would suffer a lot if they cannot sell their components to Huawei. In recent years, the chips produced by the U.S. accounted for about 75% exported to China. Apple said they needed China for many reasons including China’s market and the Chinese technicians.

Trump's thought he has the trump card but actually no.

It is globalization under attack. Huawei just combines the best components from all over the world into a good product that is better or at least the same as Apple's products at about half prices.

You have gone a long way baby

US is about 6 months ahead of China in AI research and China ahead in AI application in years due to our protection on personal security.

China is ahead in EV buses. Boston is buying China's design in subway cars.

China is many years behind US in military stuffs such as fighter jets, carriers... But they have caught up in several areas such as military drones and some missiles.

By 2025, China will be the only space station. China recently visited the moon but I cannot say they are 50 years behind us.

50 years ago, China was behind U.S. in EVERY sector, and they could not even build a reliable bicycle. Now China is catching up. They have gone a long way baby!

More than tariffs

The farmers are crying to the poor house and so are chip companies. The next steps for China:

1.       Already higher tariffs on farm products. It hurts China more but a tool for the farm states not to vote for Trump.

2.       Reduce rare earth elements export to U.S; WTO would have some restrictions.

It will be better in the long run with Australia ores and S.E. countries to process them. We're not ready today with a limited reserve.

3.       Dump our Treasuries. The long-term effect is the shaking of our status of USD as a reserve currency.

4.       We need a lot of raw materials from China to make products. For example, some drugs are made with about 80% of Chinese stuffs.

5.       Chinese currency Yuan may depreciate to be more competitive after the tariffs. However, most S.E. Asian countries peg their currency to the Yuan than USD. U.S. would complain on currency manipulation and take counter actions.

It does not look good for both countries. It seems to me China is determined to bit the bullet and betting Trump's failure to be reelected. China asks to free Huawei as the main bargain chip. China has no time frame but Trump’s one and a half year.

Cooperation could be mutually beneficial. But, you do not find too many divorcees who still sleep together.

Who will replace Chinese products?

After a few months, the U.S. government will not benefit from the tariffs. There are several scenarios:

1.       Some Chinese products are still competitive after the tariffs. In this case, they are not replaced.

2.       The Chinese products will be replaced by U.S. It is not likely as it is too expensive to manufacture here and some jobs would be done by robots. In reality we are losing jobs. Huawei moved the research in the U.S. to Italy and we’re losing about 1,000 high-paid jobs.

3.       Supply chain is not easily set up in U.S. or other low-wage countries. We have to deal with the reduced import of Chinese rare earth elements. Australia ores and S.E. Asia countries to refine them could be a long-term solution. In the mean time we will depend on limited reserve and recycle.

4.       Many factories have moved to South East Asia. Most if not all have problems such as skilled labor (Apple can get hundreds of engineers to work on a new design for example), unions, inadequate infrastructure, corruption (yes, worse than China)…

5.       In some ways, China is solving some problems such as building infrastructure and supplying educated labors. Many factories moved to this region are owned by Chinese.

6.       There may be some low-wage countries who did not compete with China but now they can with the tariffs on China. Judging from banning Chinese tires, I bet these products cost the consumers more and at a worse quality.

7.       I bet U.S. will be better in handling cross shipment as they did in the last decades. A shirt could be completely made in China, except two buttons and the “Made in Vietnam” label. The buttons, the label and the thread is made in China.

Our trade deficit will be worse in the contrary. These low-wage countries do not buy our airplanes and computers as Chinese are doing. China is biting the bullet and betting Trump will not be reelected.

Global depression

We have been a sucker for too long. To do so drastic measures in this scale and to too many countries may lead to a global depression. Some even predict the USD will collapse together with the stock market. So far, we do not have the 'predicted' earthquake that would destroy the east coast. Keep on praying.

Go back to your own country

If Trump’s wife goes first, I will too. Native Indians and Eskimos were Chinese or Mongolian and I had my genes to prove it. They crossed the once-frozen Bering Strait due to losing their way after too many Maotai or escaping from enemies.

Another shooting

It will not be last until we love our children more than our guns. If the police cannot enforce the peace (do not say it is not possible), the folks with guns will loot and rule. We have more guns than the population. Praying for the victims’ families does not do much for the next shootings. Politicians, wake up and do something useful and stop counting your donations from NRA with your filthy hands dripping in blood. I am glad Hong Kong does have gun control.

No one forces you

You do not have to buy any goods made in China. No CEOs are forced to open shops in China.

However, Walton family became one of the richest families because of Walmart importing goods from China and made many investors rich. GM and Ford may survive with the profits from China. I bet part of our market success in recent years is due to China.

Hong Kong riots

It seems they are organized and many protesters have been paid. I do not know their agendas. Obviously the results are bad for Hong Kong especially the youths. Tourism will be hurt to start and foreign investments will be withdrawn together with the migration of rich folks out of Hong Kong. The government will contribute less for social services such as housing and the job market will be far worse than today. I bet Hong Kong will be in an economical depression. The protesters today will suffer economically tomorrow if they cannot immigrate. Does U.S. have enough of these ‘trouble makers’?

China has not sent soldiers to suppress the protesters. Hong Kong is not important to China as it was used to. The ‘educated’ advocates to Hong Kong independence think naively that U.S. would send a carrier to help them. Even they do, China can win easily by turning off the water supply and the electricity supply without firing a single bullet.

Is 2019 a good year for the market?

Since WW2, we do not have a down market on the third year of the presidential cycle. I commented this again after we had a market correction due to the trade war on 8/4/2019.

If China is not important, why the trade war negotiation make such a big splash on the market? We have more than 10 years of bull market. Partly it is due to the corporate profits made in China. Recently it is due to the low interest rate and tax cut.

Religions

First I like religions judging from the quality of the followers. However, it has caused a lot of wars from Crusade to today. Where in any religious books teach us to kill? The preachers who made sexual advances to the altar boys and the Popes who covered it up should go to the lowest level of hell. When the church is selling their properties to pay for the damages, is it the end of the church?

Objectives in life

There are more important objectives in life than seeking wealth such as happiness, health, relationship… With wealth, a wise man can make the other objectives easier to obtain but an unwise man can do the opposite. When you lose a lot of money, you’re still smiling then you’re a winner.

My friend’s friend died of worrying about losing most of his life saving in the stock market. Eventually the market returned, but he was dead already.

A win-win toaster diplomacy

If the toaster is made in US, it will cost $50 instead of $10 but it would last forever. Hence we save the environment.

The trick is made it in China for $10 according to our spec and QC. Import it, sell it with a trusty brand name and charge $20. It will still last forever too and the middle man such as Walmart would pocket the $10 difference. That’s why Walmart is so rich.

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The above is from my new book "Trade War with China". Click here.