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Permain basis observations

American frontier society principles and worldview

  • Trump is the best president that God has given to America
  • God’s deeds are done in actions not words
  • If you do not appreciate what God has given, it was be taken away and replaced with something not as good
  • God created put the government in place to maintain law and order
  • Your purpose is to become the best possible version of yourself in service to God
  • What you can do you keep. This is how you keep cash in the business
  • Observe the actions not the words. When you follow your line of reasoning from actions that actually happened, the outcome of your thought process must be true
  • Apply the principles of auto-suggestion. People will more readily to respond to your actions than your words. Never use it for evil. Examples:
    • stand by the road on the highway holding an empty tank and chances are someone would stop by and offer you a ride to get gas
    • setup a table properly with all the meal and bring out a container showing empty butter and the guest will likely volunteer to go get butter

Economic environment in Permian basin

  • Permian basin is the heart of America’s oil supply. It has gone through multiple cycles of boom and bust over the past 20 years. Each bust cycle typically last for a year.
  • Property valuation. and taxes
    • before 2018
      • Valuation USD150,000
      • Taxation US1500
    • 2018
      • Valuation USD4,000,000
      • Taxation USD40000
  • Boom years
    • Total revenue for Roper motel was above USD1,000,000 during 2018 when demand for oil was strong.
    • Property taxes is calculated based on property valuation. Property valuation is assess every year.
    • Government started including motel furniture installations as part of annual property taxes as it was considered capitalized expenditure used for the purpose of generating revenue
    • Water taxes increased as usage was categorized as commercial leading to a doubling of water bills
    • Motels are charged USD200 a month for ambulance service in town
  • Post COVID era
    • while taxes were increased during the boom years, downwards adjustments were slow. Pecos is ailing for heightened level of taxes and low oil demand

Social environment in the Permian Basin

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Chat with Joe and his dad

On Kaoshiong

  • KaoShiong is where the bulk of industrial manufacturing occurs
  • Taiwan is a Japan trend follower

On strategy

  • When macro economic environment is not conducive for continued operations, stop operations to conserve resources for future opportunities.
    • Decision to close wooden frame manufacturing factory
      • Europe became more environmentally conscious
      • Malaysia reduced the yearly quota of timber to be harvested
      • These two trends reduced demand for wooden frame and increased cost of raw wooden material

On personal growth

  • Adversity in youth provides an opportunity to build character and gain experience.
  • restricting the amount of resources your offspring has access to might be a good thing but it breeds resentment
  • Good things come from seemingly bad experience too

on DDP policy in KaoShiong

  • Too radical in their actions and lacks calibration in their policies. Really good at manipulating the press
  • Stance
    • Anti China
    • Pro resource less young
    • Pro taxing businesses for social welfare
    • Pro reducing pension to retired
  • Equally corrupt as the KMT but too aggressive in their policies leaving nothing for the business to continue operations
  • manufacturing businesses has been negatively affected with over regulation and rising administrative cost
  • Worker protection makes overtime illegal severely restricting the throughput volume businesses are allowed in their operations
  • Workers not making enough from their day job due to such restrictions are forced to take on a second job on top of their main one
  • 30,000 to 40,000 businesses have failed within the KaoShiong area over the past 12 months at the point of writing with more set to fail if policy should persist
  • While GDP growth rate has been reported at 2% in 2019, shipping volume through KaoShiong has continued to drop

On KMT

  • A more mature party with measured policies which lost leadership due to lackluster performance
  • Stance
    • Pro-China
    • Pro-business
    • Pro-protecting pension of the retired

Social security system and the aging population

  • Social security system is in a state of flux. Employers are required to contribute to two systems. The contribution for the old system is 5X the new system and was too much overheads for the employers.
  • Retirees are concerned their pension will get cut while the young are concerned their contribution to the social security system is to heavy a burden

On China

  • China has imposed restrictions on independent Chinese tourist to Taiwan
    • Chinese tourist are easy customers who engage in indiscriminate spending
    • Night markets looked empty
    • Quite a few restaurants have closed down along the main street due to the lack of tourist spending
  • The bulk of Taiwan’s export has been to China it makes economic sense for both territories to become unified
  • noteworthy to observe Joe’s shift to a pro Chinese stance the on Chinese Taiwan relationship as compared to the high school days.
  • Observation of Taiwan style politics in contrast to Chinese style politics leads me to have reservation about how these two systems can be resolved.
    • the Taiwanese have no reservation with injecting outrageous humor into the legal framework afforded to them by their political system with candidates as outlandish as Mr Crazy Friday and Mr Fortune God
    • China’s one country two system need to become more robust for this undertaking
    • Recent HongKong riots has caused concern for Taiwanese and has lead to increased support for the DDP whose leader English Tsai is known to be a strong negotiator

On Korean Japan trade war

  • Huge influx of Korean tourist observed during this period of tension (Sept 2019)
  • Korean tourist are more discriminate in their spending, hence a lower per capita spending as compared to the Chinese tourist.
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Investment Biker, Jim Rogers

Key take aways

  • Central investment thesis:
    • Always bet against the central banks and with the real world
    • truly down trodden people do not rise, but hell hath no fury like suppressed peoples whose expectations have been aroused
    • people don’t change their ways until their are forced to
    • while it is easy to figure out an investment is cheap, the real work is figuring out if a change is about to occur in the near future. It is important to study markets and their history
    • when seeing a big change coming (the opening of the trans Siberian railway), consider the economic, political and social shift
  • modus operandi
    • Why buy a new sofa when it could be put to work in the markets
    • Only invest in what I can sell quickly
    • do nothing until you can see the money to be picked up around the corner
  • key areas of study
    • geography
    • politics
    • economics
    • history
  • Company assessment criteria
    • Price to book value
    • sound balance sheet
    • pay dividend
    • Price to earnings ratios
    • Viable industries
    • start with largest soundest enterprises
      • banks
      • mines
      • news papers
  • On assessing countries
    • Watch out for statism – governments getting in the way of an organic market
      • democracy does not equal prosperity
      • US government piling more and more regulations
      • SnL crisis of the 1980s
      • Artificially suppressed prices
        • 1970s gold in America
        • 2019 prices of pork in China
      • Foreign aids (IMF, UN and Peace Corps) just props up a system that does not work and delays the actual rebuilding process. Have faith in the locals to rebuild themselves in a configuration that works for them as opposed to a system suited to foreigners liking (hubris)
    • On ethnic strife and separatism
      • Some geographical boundaries don’t make sense.
      • no borders remain stable for long
      • economic hardship will bring to surface these fault lines as they get used as a vehicles to get more
      • Wait till wars are fought and border issues sorted out. It might then become a great investment opportunity to enter at the bottom
      • examples
        • Rise of Islam and Christianity in Siberia prior to Soviet collapse
        • Hong Kong riots
        • Barcelona declaration of independence
        • XinJiang, Tibet
    • black markets as signals: difference between black markets rates and official exchange rates provide an indicator of how much the central bank has propped up the exchange rate. Minimal to no differences are signs of a strong economy
    • major red flags:
      • currency controls, import taxes, export restrictions. Makes it hard to pull funds out
      • is country trying to devalue its way out of its internal problems instead of doing a proper fix?
      • frantic purchase of gold in local jewelry store
    • Positive signal:
      • Is the country trying to get foreign hard currency by making things other people want to buy – quality goods
      • Is the country learning to compete and out innovate its competition
      • an educated population
  • On centrally planned economies
    • the market feedback mechanism is missing
    • resources get ruined due to misuse
    • it would have thrive if it was a sound economic theory
  • On China
    • while Russia abused their resources, China having nowhere to go were more deliberate and took better care of their resources
    • success had a lot to do with economic and political organization
    • example
      • took bees to blooming flowers to work them 5-7 times harder than their foreign counterparts
    • Hong Kong, Guangzhou and Shanghai being captured by the capitalist spirit generally ignores capital’s policies
  • Note worthy collations
    • China (labor) / Siberia (natural resources)
    • Australia (natural resources) / Japan (capital)
    • US (capital) / Canada (natural resources) / Mexico (labor)
  • On commodities
    • most local markets will eventually get assimilated into the global market
    • diamonds have artificially propped up prices that will be hard to maintain in the long run. DeBeers will eventually run out of cash buying up supplies from the black market and it will lead to sudden price collapse. Opt for gem and rubies instead
    • when gold gets too cheap companies will figure out ways to use it thereby depleting its supply driving up price. Same could be said of oil
    • underlying structural issues within a country can stay hidden for long during times of a commodity boom
  • The key to success
    • out of every 1000 people who wants to be rich only 6 can master the discipline to do so
    • stay focus on a single goal for five, ten, twenty years

Related readings

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Observations on how public opinion is shaped in the US

Public opinion is observed to be very malleable and fickle. It’s highly susceptible to reshaping by main stream media.

In an unlikely twist of events, what was once presented as a war by the White House against China over trade and national security has overnight morphed to become a fight for American values like democracy, free speech and human rights.

While the ongoing unrest in Hong Kong have provided ample fuel, the tweet by NBA Houston Rockets general manager was the spark that caused the fire.

Related Readings

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The American Factory

Context

FuYao is a Chinese manufacturing company that products glass for automobiles companies:

  • Honda
  • Toyota
  • Hyundai

The company setup a factory in Dayton Ohio in 2013 to take advantage of the abundant supply of cheap skilled labor in the region resultant of the 2008 recession.

Overarching trends

  • globalization continues to apply downward pressure of wage growth around the world for commoditized labor
  • automation continues to eliminate entire categories of jobs around the world

In depth analysis of FuYao Glass America

The opening of a plant in the new country can be seen as a acquisition of sorts.  Acquisition activities is considered a merge of the following components:

  • Culture
  • Process
  • Assets

In this case, it could be seen as a merging of FuYao’s culture and process with Dayton Ohio’s asset which is cheap skilled labor.

Below are the key conflicts with the merger

  • highly structured and propagandized environment (Chinese) versus loosely structured and casual environment (USA)
  • processes built around social norms in a weak union environment (China) versus social norms from a strong union environment (USA)
  • productivity and throughput focused paradigm (Chinese) versus safety and family focused paradigm (USA)
  • workers paid USD29/hr when working for GM before it shuttered are now paid USD17/hr under FuYao
  • governor and grassroots were encouraging unionization to encourage more say American say in the running of the plan

Key transitions

  • removal of locally hired senior management (USA) with Chinese senior management (USA) for effective implanting of culture within company
  • battling against worker unionization
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Reasoning on more extreme weather patterns observed

August and September is the season for extreme weather patterns along the south eastern coast of major continents in the northern hemisphere.
Barely two weeks after Typhoon Lekima (the costliest ones in Chinese history) hits South eastern coast of the China, Hurricane Dorian (the largest one in US history) gets elevated to category 5 and is set to hit Florida, the South eastern coast of USA.

Attempt at reasoning increased magnitude of storm patterns

Both Earth rotates eastwards and the trade winds blow westwards at a constant rate. This explains why storm patterns always occur along the east coast of continents.
Intensified greenhouse effect resultant from increased carbon emission has caused greater heat to be trapped resulting in generally a warmer ocean. This leads to greater temperature difference between the upper and lower sections of the buildup and thus more severe weather patterns.
This phenomena is the most acute along the equator during the season when:
  • the northern hemisphere shifts from summer to autumn,
  • the Southern Hemisphere from winter to spring and
  • the equator is the hottest.

That happens to be during August and September.

Approaches to capping out the magnitude of the storm

  • Reduce the surface area of the water body the storm is allowed to build up momentum over. Reducing water supply in the ocean by freezing them up.
  • Reduce the delta between the hottest and coldest temperature during the year. Reduce the amount of heat trapped within the earth’s atmosphere.

 

Related references