Just Saying!

Good afternoon…by the time you all (or should I say y’all) will be reading this, it will be Friday…so the 13th issue of Global Gab is coming out on a Friday – I did not and do not intend to make fun of anyone’s beliefs or superstitions….the reason that I pointed out such an abstract correlation is to clearly demonstrate how disparate facts can be taken totally out of context and made to seem like they are in a meaningful relationship. The old saying of, “Figures don’t lie, but liars figure”, is not only apt, but the history of the saying underscores the truth. For over 100 years this pithy comment has been attributed to Samuel Clemens, otherwise known as Mark Twain – because it really sounds like something that he could/would have said; but seeing as the first attribution of this comment to him occurred in 1913, some 3 years after his death….just FYI, the earliest known mention was unattributed and appeared in a North Dakota newspaper in 1884 – just saying!

John Authers, a Bloomberg columnist whom I strongly recommend that people receive on a daily feed (and, don’t be silly – he did not pay me to shill for him…1) he doesn’t need me  2) he doesn’t know that I exist LOL) stated today that China stocks are a risky bet. Previously mentioned was “irrational exuberance” in the market, how stock prices have not really seemed to take into consideration what is going on, what the repercussions are, and how long this scenario could take to play out.

When it comes to an example of what I feel is ill-placed exuberance, take a look at the scenario of Luckin Coffee…it started 2 years ago and now has 2370 locations. Yes, you read the number correctly – the thing is, these are mainly not your Starbucks-style ‘drink and ruminate in some degree of comfort’ shops; these are tiny ‘ buy and go’ locations with few tables and chairs. And last year it apparently lost “only” US$475 million …yes, you read that figure correctly (that is one stiff brew!). It went public last week at a valuation that, for a time, exceeded US$5.5 billion – put it another way, each coffee shop, which has a minimum of equipment and a paucity of decoration and fixtures is valued (sic) at more than $2,200,000 each. So, the natural next question is how does that compare to Starbucks (who makes money)….according to GOBANKING.com, in 2017 Starbucks was located in 77 countries, had 28,000 locations, and did US$22+ billion in business, giving it a valuation of US$3 million per location (revenue just under US$800,000 per location). Luckin did, according to REAL MONEY, just under US$53,000 per location (using the figure of 2370 locations)….and, yes, they are also suggesting that Luckin’s luck will fall! And, going on to Lyft and Uber, according to MARKETWATCH today, short interest in Uber’s stock is 11.8% of the float and in Lyft’s it is 61%! Considering that normal short interest in a stock is about 1%, you can undoubtedly draw your own conclusions – and I am sure that they won’t be pretty. Whoever bought these shares without covering their play is going to take a long drive off a steep cliff. Just saying!

Given the reported propensity of Tesla cars to occasionally self-combust, even when they are sitting in a parking garage, the recent reductions in Tesla X and S models prompted me to call it “a fire sale”. Seems like the appellation is catching on – but I do feel sorry for those who bought the hype  ie. the stock. They bought the smoke and the sizzle, but there was no steak to be had. And what about those buyers of Tesla’s latest bonds – no guarantees, personal or corporate, no liens….just a ‘promise’ to pay. Hey, there are lots of Venezuelan ‘railroad’ bonds available …for that matter, there are lots of Venezuelan Government bonds available…just saying!

There has been a huge amount of press given recently to the issue of Modern Monetary Theory, referred to as MMT. It seems to be the, “Egghead Theory of the Month”…or, as Sebastian Edwards referred to it in a recent article, “Modern Monetary Disasters”.  I am not going to expound on, much less explain, MMT at this time– there isn’t enough space and I don’t have the patience. While the proponents of the theory for the most part seem really bright, they also are just theorists – and you know how that story goes….ignore the facts and, when the facts can’t be ignored, say that they are ‘incomplete’ or ‘we’ve learned from that lesson’ or…blah blah blah. The fact that MMT has been tried in numerous ways and has failed equally numerous times  ie. not any success to date does not deter them at all. Pressed for facts, pressed for details, they demur. The say that MMT, for a country that can borrow in its own currency (such as the USA), does not pose a concern, much less danger. About all I can say to this is that economists that are on all sides of the ‘academic line’, such as Paul Krugman, Kenneth Rogoff, and Larry Summers have finally agreed on something besides what day it is – MMT (in Prof. Edwards’ words) “makes little sense” – just saying!

Bloomberg reported on May 15th that China’s figures are looking weak, based on reports of April’s industrial output, retail sales, and investment. The only problem is how true are the figures anyway? And that is part and parcel of the recent acrimony – Western figures are usually accurate within acceptable limits and China, when it joined the WTO, promised to abide by the same rules and procedures. Then again, China also signed the Montreal Protocol banning CFC’s and now has been found to have producing them all the while because, according to one company, “it’s cheaper”. Well, when the ozone layer is depleted beyond recovery, I’m sure that their grandchildren will appreciate their consideration and concerns – just saying!

So, the elephant in the room is the recent trade mess, and “mess” is the most polite 4-letter word that I can think of. No one is understanding anyone….Trump wants a win like he wants a wall….gotta have it, just gotta! Because any loss will eat away at his support just in time for the 2020 election, or so he thinks (if he ever does that).  Xi, on the other hand, listens to everything but is walking a tightrope over a pit teeming with alligators snapping just below his heels. This has been the plight of every emperor of China since at least the Song dynasty. He cannot afford to lose face, not his and not China’s.

So they have taken their marbles and gone home for awhile, calling the US all sorts of names, “bully” just being one. Of course, they don’t refer to their actions against Canada or their threats against Germany as bullying; what they do is ‘defending their rights’. 6 of one is still half-a-dozen. There are a lot of indications that the RMB will soon break the psychological level of 7 to the dollar and the Chinese Government may not have the resources and/or the will to maintain it. If non-government bonds default – so? If China-based exports are less-expensive – so? If Chinese citizens cannot afford to travel outside China or buy foreign products – again, so what? And if US farmers cannot sell their products; and US consumers cannot afford the higher prices occasioned by the tariffs; and unemployment rates start to go skywards because of the bankruptcies; and inflation rears its ugly head due to the higher prices…and…and…and….so…so…so? All they see is pressure on Trump, exacerbated by their ‘delays’ in allowing (sic) export of rare earths (so many ways to do that and China is master of all of them – need a chop on a paper but the person is ‘unavailable’; transport to the port is ‘unavailable; machinery to process the ore broke down with parts ‘unavailable’; official to see to clear up the problem is, you guessed it, ‘unavailable’. I haven’t heard Donald recently repeat his March 2nd/18 pronouncement of, “Trade wars are good, and easy to win”. Just saying!

Have a great weekend.


PS: before sending this, I decided to read it over one more time. While doing that, a Bloomberg clip came in – The US brewing industry says that they have already lost 40,000 jobs because of his trade war. Just saying!


LJ Capundag

Tags:Bennett's Column, Global Gab

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