Thursday, 16 November 2023 — Melbourne, Australia | By Greg Canavan | Editor, Fat Tail Daily |
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In this issue: Net Zero: hoax or necessity? Does it even matter? Bill Bonner: China surges in the tech race, the rise of AI weaponry and the West’s failing institutions |
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[1 min read] Dear Reader, The Aussie market surged yesterday. It’s all down to interest rates and the belief that central banks have tamed inflation. Interest rate sensitive stocks like real estate investment trusts [REITs] have performed particularly well. The ASX200 Property Trust index is up nearly 15% from its late October low. The REIT I told my readers to buy is up nearly 30% since I tipped it three weeks ago. It just goes to show, when everyone hates an investment idea or sector, it’s time to take a look. That’s not to say it’s going to be all smooth sailing from here. The inflation scare might be over for now. But there are plenty of inflationary pressures in the pipeline. As James Cooper points out below, McKinsey reckons the Net Zero boondoggle will require investment of US$275 trillion by 2050. No wonder the energy transition is popular! A lot of people stand to make a lot of money out of delivering you an inferior form of energy. Which is why you should be sceptical of many of the claims around it. I recently did a radio interview on the topic. You can check it out here. But for more on the Net Zero dream, read on. James reckons even a little bit of that US$275 trillion will have a major impact on some crucial commodities. Has the Push to Net Zero Run out of Steam? |
| By James Cooper | Editor, Fat Tail Daily |
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Twitter: @JCooperGeo [6 min read] Dear Reader, There’s growing pushback against the need to reach Net Zero. In an era of sky-rocketing living costs, rising inflation and energy prices, carbon neutrality looks more like a luxury to satisfy the ideological wishes of the rich. This once-in-a-century energy transition will cost the middle-class dearly and that’s an increasingly hard pill to swallow. In fact, my colleague Greg Canavan recently put together a series of videos outlining the severe challenges in meeting these goals. The series is called ‘NOT ZERO’ and features politicians, academics, and industry experts. It’s well worth watching and you can access the entire series for free here. In fact, one of the guests includes my former geology lecturer…Ian Plimer. Without doubt the most entertaining lecturer I ever had. Geology can throw up some pretty dry content at times but that wasn’t the case with Plimer’s presentations! He also happens to be a long-term critic of the green energy transition…an ideal fit for the NOT ZERO series. According to Plimer, climate change has been a recurring theme over the planets 4.5-billion-year history. These climatic shifts have occurred rapidly at times…scientists know this by studying carbon dioxide levels in polar ice sheets or looking at the fossil record. In fact, the shock discovery of crocodile fossils in the Canadian Arctic in the late 1990s followed by coal discoveries in Antarctica, proved the planet’s icy poles once bathed in hot sweltering sunshine, similar to the tropics today. As Plimer pointed out, volcanic eruptions were the primary cause for the hot conditions that existed across the planet millions of years ago. As well as molten rock, volcanoes spill out gasses into the Earth’s atmosphere, blanketing the planet in carbon dioxide and enhancing the atmosphere’s greenhouse effect. Volcanic carbon dioxide emissions back then were on a magnitude higher than today’s human CO2 contribution. It’s one of the key arguments used by Plimer against the green energy transition. And thanks to his views, he’s copped a tidal wave of criticism across the political and scientific spectrum. But whether he’s right or wrong, his voice and the data he presents needs to be heard. In fact, this is my biggest criticism of the climate agenda… This issue has been charged with emotion. Alternative views are ridiculed and berated as propaganda for the fossil fuel industry. For far too long this has remained a one-sided debate and that never ends well. So, I suggest you remain open minded about this issue… The NOT ZERO series is a great place to learn more about the other side of the argument, something you won’t find in mainstream news. But as investors does it really matter? According to the McKinsey Global Institute, to reach Net Zero, nations will need to fork out a staggering US$275 trillion by 2050! It’s why names like JP Morgan, Goldman Sachs, BNP Paribas to Blackrock…as well as billionaires, presidents, kings, and queens…have all taken a large stake in this green energy pie. And they’ll be playing into people’s sense of guilt to ensure the taxpayer coughs up the bill on this multitrillion-dollar energy transition. For better or worse, global capital is on the side of the green energy transition. The popular vote that pushed carbon neutrality to the mainstream has opened the door to powerful interests looking to build their position in this once-in-a-century money making opportunity. Whether it’s efficient, saves the planet, or lowers our standard of living matters little to them… The elite have taken charge and history shows this is what will drive the change. As I highlighted to my Diggers and Drillers readers last month, profits are the elite’s crack…for better or worse, change is coming. As an investor, all that matters is that you’re on the right side of this transformative shift. Electric guzzling EV’s, trucks, trains and busses will eventually move billions of people and cargo around this planet each day. That’s why we remain firmly leveraged to critical metals set to benefit from this once-in-a-lifetime money-making opportunity. Yes, rare earth, nickel, graphite, cobalt and lithium stocks have all taken a beating in 2023. But the long-term set-up remains in place. However, there is ONE commodity set to surge above all others in this multi-trillion dollar mega-trend. Next week, I’ll name the commodity, plus give you details of the hottest place in the world to find more of it. Until then, have a great week. Regards, James Cooper, Editor, Fat Tail Daily Advertisement: What’s Happening in This Picture Could Start a Crisis It might be happening thousands of miles away from Australia…but it could very well affect us all. Because it’s threatening the supply of what many consider the world’s most important commodity. Click here to know the full story. |
| Keeping up with the Wangs |
| By Bill Bonner | Editor, Fat Tail Daily |
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[4 min read] Dear Reader, Is it true? Are the West’s most important institutions failing? Democracy? The nation state? A ‘free’ press? Fossil fuels? Government-manipulated capitalism…and Fed managed money? Technological superiority? Firepower? Those are the things that put the ‘West’ on top; have they been corrupted? Have they exhausted their benefits? Is the ‘West’ in decline, as Oswald Spengler predicted more than 100 years ago? Our capital allocation model told us to sell out of US stocks nearly 30 years ago. The model is ‘dumb,’ in the sense that it tells us nothing about the state of the world, the future of interest rates, or anything else. It is designed to help avoid the ‘Big Loss’ simply by letting us know when stocks are expensive in terms of gold. An investor avoids big losses by buying stocks when he can get the 30 Dow stocks for less than five ounces of gold. He sells them when they go over 15 ounces. So, it was that the model told us to favour gold (over stocks) back in 1996. We didn’t know it at the time, but it might also have been signalling something much bigger. An all-time high for US stocks came in August of 1999, with the Dow stocks trading at 42 ounces of gold. It now looks as though that was not just a high for US equities, but it was the peak of the power, wealth and prestige of Western civilisation. The US budget was more or less in balance. US debt was still manageable. Except for its disastrous involvement in Kosovo, the US was at peace. Since then, things have gone downhill. All Too Human Yesterday, we looked at democracy. It is not scalable, we saw. Common voters can’t make the decisions for a far-flung empire. They can vote; but the votes mean almost nothing. Groups of the elite are the real deciders. Being all too human, as Nietzsche put it, they make decisions that benefit them…not the ‘The People.’ Gradually, the government becomes corrupt, self-serving and incompetent. Today, we turn to technology and firepower. Two more announcements — both from China — suggest that the West has lost its technological edge. From defenseone.com comes this: US is losing AI edge to China, experts tell lawmakers “If you compare as a percentage of their overall military investment, the PLA[China’s defense agency] is spending somewhere between one to two percent of their overall budget on artificial intelligence whereas the DoD is spending somewhere between 0.1 and 0.2 of our budget on AI.” Govini CEO Tara Murphy Dougherty told reporters on Monday: “China is outpacing the United States by innovation measures.” It was superior firepower that allowed the West to conquer most of the planet — North and South America, Australia, most of Africa, and much of Asia. An example: the battle of Omdurman in 1898. The British and their allies had 25,000 troops. The Sudanese had 52,000. But the British also had modern rifles, machine guns and artillery. The Sudanese did not. And by the end of the fighting, 47 of the English (and Egyptian allies) had been killed, compared to 12,000 of the enemy. Heirloom Firepower But gross spending on weaponry isn’t enough. Au contraire, it gets in the way. The firepower industry makes its money by selling yesterday’s weapons. The more you spend, the more out-of-date hardware you have. That’s why a defence agency that is young and lean is often more effective than a richer, more established military bureaucracy. China, with less of an heirloom firepower industry to support, is able to devote more of its defence budget to new technology — including AI and drones. In the next war, these innovations are likely to be decisive. Warontherocks.com: ‘Sea Drone Technology Will Transform Naval Warfare ‘While in Ukraine this technology is being deployed to resist an invading nation, elsewhere it is likely that rogue states will benefit. ‘Advances in autonomous technologies will democratize access to core naval capabilities, so that nations and groups without sizeable navies can fast become contenders at sea. ‘…They [naval drones] are also being designed to operate in swarms, enabling coordinated missions with multiple vehicles, like the one at Sevastopol where at least seven Ukrainian uncrewed surface vessels breached the harbor’s defenses. Furthermore, hybrid propulsion systems combine electric and conventional power to extend the operational range and endurance of marine autonomous vehicles.’ With no WWII-style navy to support, China is able to focus on newer, more modern, seaborne firepower. A similar phenomenon runs throughout much of the whole Chinese miracle. With few legacy industries in 1979, when China took the ‘Capitalist Road,’ it had to create new ones. With few old factories, it got to build new ones. With only a busted shell of infrastructure remaining, after the debacles of the Great Leap Forward…and the Cultural Revolution, China had to build new trains, planes, automobiles…highways, railways, and freight ports. That is why China has a whole network of high-speed trains — including a maglev train in Shanghai that goes 373 mph. They’re testing another one that goes more than 500 mph — very different from the lumbering, trundling Amtrak trains that pass through Baltimore. High Speed Information But wait…America invented the internet. It still leads in communication technology, doesn’t it? Out yesterday was this splash of more cold water from the South China Morning Post: ‘China launches world’s fastest internet with 1.2 terabit per second link, years ahead of forecasts ‘China has beaten a global deadline, launching the world’s first next-generation internet service — more than 10 times faster than existing major routes — two years ahead of industry predictions. ‘The backbone network — so called because it forms a principal data route between cities — can transmit data at 1.2 terabits (1,200 gigabits) per second between Beijing in the north, central China’s Wuhan and Guangzhou in the southern province of Guangdong. ‘Most of the world’s internet backbone networks operate at just 100 gigabits per second. Even the United States only recently completed the transition to its fifth-generation Internet2 at 400 gigabits per second.’ Which is not to say that all of the US’s technology is as decrepit as Amtrak. But there’s always ‘more to the story’. Tune into tomorrow. Regards, Bill Bonner, For Fat Tail Daily All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. |
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