Tech Review | US Imports From Vietnam Surge, While China Declines

Tech Review (TR 2019-06-29)--Domain Mondo's weekly review of tech investing news: Features • 1) Trump Effect: US Imports From Vietnam Surge, While China Declines, 2)  Facebook's Libra Could Disrupt the Remittance Industry, 3) Investing YTD & Investor Notes: China, EU, US, & Zombies,  4) ICYMI Tech News: Apple, Flipkart, iQiyi, Google, Microsoft, Amazon, and more.

1) Trump Effect: US Imports From Vietnam Surge, While China Declines
And it's not just Vietnam that is a winner from the US-China Trade War:

source: statista.com

Editor's note and caveat: "Exports from China are a murky thing. To dodge tariffs, some of it gets transshipped via other countries, such as Vietnam, before the products are shipped to their destinations, such as the US or the EU ..."--Wolfstreet.com.

Nevertheless, in a note this week, Anne Stevenson-Yang, co-founder of J. Capital Research  (domain: jcapitalresearch.com), wrote that China has already entered its “Japanese phase,” marshalling financial resources exclusively to avoid crisis. China's economy is overleveraged, as demonstrated clearly by the Baoshang situation, and China may now be prey to further problems, perhaps even a perfect storm event.

China is again resorting to such tactics as gross overproduction of steel in a desperate attenpt to keep its economy humming, but even that may fail. In order of tonnage of crude steel, ArcelorMittal is first with 96.4 Mt (in 2006, India’s giant Mittal Steel acquired French giant Arcelor; and is now registered in Luxembourg as a mailbox company run from India) and the EU has had tariffs on Chinese steel for years.

Also note:

• Vietnam economy (GDP April-June quarter) grows nearly 7% on trade war tailwinds--Manufacturing exodus from China propels one of fastest boosts in region--nikkei.com.
• India Plans to Offer Incentives to Companies Moving From China--"aim is to become a production base for firms fleeing tariffs."
• Vietnam's Vingroup in deal with Fujitsu unit, Qualcomm to make 5G phones to be manufactured in Hanoi and sold in the U.S. and Europe in 2020.
• A Dark Alley in China’s Credit Market Is Getting Rough--bloomberg.com June 24, 2019.
• As China's Banking System Freezes, SHIBOR Tumbles To Lowest In A Decade--zerohedge.com June 24, 2019.
• Trump Pressured by Congress to Stay Tough on Huawei--bloomberg.com June 24, 2019.
• The U.S. is now playing down expectations for progress from a Trump-Xi meeting during the G20 June 28-29, with the U.S. holding its hard line demands for meaningful Chinese economic reforms, according to Bloomberg.

2) Facebook's Libra Could Disrupt the Remittance Industry

source: statista.com

Money transfers a/ka "remittances" to low- and middle-income countries reached a record high of $529 billion in 2018, according to the World Bank and the world's total remittances in 2018 were $689 billion. “Success will mean that a person working abroad has a fast and simple way to send money to family back home,” says Libra’s white paper, and the UN Sustainable Development Goals aim to reduce the transaction costs of migrant remittances to less than 3 percent and eliminate remittance corridors with costs higher than 5 percent by 2030. Libra could lead the way. See also:  How Libra Cryptocurrency & Blockchain Network Will Work (video).

3) Investing

YTD (Year-to-date): NASDAQ Composite +21% | S&P 500 Index +17%  | DJIA +14%

The DJIA closed at 26,599 on Friday, up 73 points, its best first half since 1999 and best June since 1938. It was also the best June for the S&P 500 since 1955.

US: Economy Breaks Record on Trump’s Watch--bloomberg.com: “If voters went to the ballot box today, it would be the strongest economy in U.S. election history,” said Justin Waring, an investment strategist at UBS in New York. Unemployment is close to a half-century low and inflation is so subdued that some have pronounced it dead. 

Editor's note: this is neither a Bull Market nor a Bear Market, this is Trump's Market.

Investor Notes: 

Public default at Chinese trust company highlights cracks in market https://t.co/0jqIRRpbZa

— ChinaEconomicReview (@chinaeconreview) June 26, 2019

China: signs of a slowdown in China’s property market continue --office vacancies in tech-centric Shenzhen rose to more than 23% for the first half of 2019, a decade high, reported Caixin (domain: caixinglobal.com).

EU: "There is no common Fiscal Policy. Thus the Eurozone stagnates, withers and has utterly lost momentum …" The next ECB president? "Best candidate for the ECB job is going to be a secondary issue to how many other jobs France and Germany get."--Bill Blain. And Brexit? UK looks cheap ... but we still face a few more months of fraxious uncertainty.

US: "... investors, both foreign and domestic, continue to buy Treasuries, no matter the risks associated with them. And the longer they buy Treasuries, the bigger the US debt load becomes, and — ironically — the lower the risk of default."--cfainstitute.org.

Zombies: A report from the Bank for International Settlements found 12% of publicly listed companies around the world can be described as zombie firms:

"The rising number of so-called zombie firms, defined as firms that are unable to cover debt servicing costs from current profits over an extended period, has attracted increasing attention in both academic and policy circles. Using firm-level data on listed firms in 14 advanced economies, we document a ratcheting-up in the prevalence of zombies since the late 1980s. Our analysis suggests that this increase is linked to reduced financial pressure, which in turn seems to reflect in part the effects of lower interest rates. We further find that zombies weigh on economic performance because they are less productive and because their presence lowers investment in and employment at more productive firms."--BIS report, supra.

"Policies created to pull the world out of recession are still in place, but now they are strangling the global economy ... we are in a fat and slow world," wrote Ruchir Sharma in the New York Times, June 15, 2019. What exactly is the problem?

"The trademarks of the fat and slow world: larger corporations, declining competition and fewer start-ups (all of which contribute to wage inequality), ... together undermine and slow economies already hindered by falling growth in the working-age population."--Sharma, supra.

4) ICYMI Tech News:

Tech still drives US markets more than any other sector. If you don't like Tech stocks, it's hard to justify owning the S&P 500. We explain why here: https://t.co/W1RvpTkdHN $SPY $XLK $MSFT $FB $AMZN $AAPL $FB $GOOG $XLY $XLC pic.twitter.com/hUpUc0Qpib

— DataTrek Research (@DataTrekMB) June 28, 2019

Jony Ive Is Leaving Apple--but he's not being replaced, and the design team reporting to operations makes no sense--daringfireball.net.

Walmart Inc’s Indian unit Flipkart said late Thursday it plans to replace nearly 40% of its current fleet of delivery vans with electric vehicles (EVs) by March 2020.

iQiyi (domain: iqiyi.com) China’s version of Netflix, reportedly wants to enter overseas markets including North America and Japan after hitting a milestone of 100 million paying subscribers this month, even though the company has been in a cash-burning fight with Tencent’s video site and Alibaba-backed Youku Tudou in China. See also: China's Alibaba aims to double Tmall Global brands with English portal.

Toyota to invest $2 billion in developing electric vehicles in Indonesia.

Goodbye, Chrome? Google’s web browser has become spy software ... why Firefox is better says Washington Post (owned by Amazon's Jeff Bezos).

Google Drive vs. Microsoft's OneDrive: choosing the right cloud storage and collaboration service.

Bezos Blowback? Will The AWS JEDI Scandal Upset Amazon's Omnipotence?--zerohedge.com.

The Empty Promise of Data Moats--a16z.com: data goes stale over time…

The European Digital Social Innovation Index by Nesta, published for the first time this year, found London came out on top in a ranking of 60 EU cities on indicators such as funding, skills, infrastructure and diversity. The European Digital Social Innovation Index (EDSII) is the first index ranking how different European cities support digital social innovation (DSI) and tech for good to grow and thrive. London had a significant lead over Amsterdam, which came in second place. Copenhagen, Stockholm and Paris rounded out the top five.

Personal Tech: going 'off the grid' this summer? Iridium GO!--turn any smartphone into a satellite phone--you can get access to phone calls, text, and more, 'off-grid' via the Iridium satellite network.

Parting Thoughts:

• Tulsi Gabbard is the winner--Drudge instant poll shows Gabbard won the first Democratic debate in landslide.

• Always "ask if the algorithm, which is a model of the world, is working the way it was designed to work. Models represent the market, and models are not reality. As Alfred Korzybski said, “The map is not the territory.”

-- John Poole, Editor, Domain Mondo  

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DISCLAIMER

Trade War Begins: Why China’s Growth Doesn’t Work For America Anymore

President Trump Announces Trade Tariffs On China Imports

BloombergQuint.com video above published Jul 6, 2018.

Trump tariffs on Chinese goods fulfill campaign promise: Peter Navarro

White House Office of Trade and Manufacturing Policy Director Peter Navarro says President Trump has given China every possible avenue to address the theft of U.S. intellectual property. Fox Business video above published Jul 6, 2018.

Trade War Begins: Why China’s Growth Doesn’t Work For America Anymore

No longer does the United States see the Chinese system of economic growth as a tolerable process, says Law Professor Raj Bhala, an expert in International Trade Law, in the video above. Raj Bhala is the inaugural Brenneisen Distinguished Professor, The University of Kansas, School of Law, and Senior Advisor to Dentons U.S. LLP.

According to Bhala, two Trump administration documents detail why Section 301 actions are necessary:

The first is a 215-page investigation report, issued on March 22 by the United States Trade Representative (USTR), summarized in the USTR’s language:

• “China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies.”
• “China uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies.”
• “China directs and facilitates investments and acquisitions which generate large-scale technology transfer.”
• “China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information.”

The second is a 35-page report, issued on June 20 by the White House Office of Trade and Manufacturing (embed below), which contends that in addition to protectionist barriers, subsidized overcapacity, and cloud computing restrictions, China seeks to “acquire key technologies and intellectual property from other countries” and “capture the emerging high-technology industries that will drive future economic growth and many advancements in the defense industry.”

A third document is April 18 testimony to Congress by Pacific Commander Admiral Philip Davidson that the CCP’s military intentions in the South China Sea threaten to “displace the U.S. as the security partner of choice for countries in the Indo-Pacific” and “prevent the United States from intervening in any regional conflict on China’s periphery”.

"… [T]he United States advocates for a free and open Indo-Pacific, supported by regional partners and allies that respect international law, freedom of navigation and overflight, and the free flow of commerce and ideas. ...[I]t is increasingly clear that China wants to shape a world aligned with its own authoritarian model and inconsistent with these principles. Through coercive diplomacy, predatory economic policies, and rapid military expansion, China is undermining the rules-based international order. We must be willing to cooperate with China where we can, while consistently and unapologetically confronting China when it engages in behavior that undermines the international order or harms U.S. interests in the region."

Bhala says that on July 6, 2018, President Trump changed the U.S. narrative on trade with China. He imposed under Section 301 of the Trade Act of 1974, a 25 percent tariff on $35 billion worth of Chinese imports into the United States, effective July 6, with more levies possible, up to $500 billion on Chinese goods, and China immediately counter-retaliated.

According to Bhala, the U.S. will no longer facilitate Chinese economic growth because the U.S. no longer believes Chinese Communist Party (CCP) led planning is good for the U.S. or the world--that the CCP’s economic behavior, not to mention military intentions, erode America’s economic vitality and thereby undermine its national security. Bhala adds:

"The European Union fought most of the rest of the world over bananas throughout the 1980s and 1990s. Canada and the United States have been whacking each other with softwood lumber since 1982 ... The prudent historical inference for businesses to draw is to re-think their models.

• Is there exposure to imports, exports, or foreign direct investment in China?
• What alternative sources of supply exist?
• Are alternative sales markets appealing?
• Are alternative production venues viable?

"Even if, perchance, hostilities cease with a truce or treaty, the re-think will prove useful. That’s because the new narrative is a testament to enduring Chinese-American tensions." Read more by Bhala here.

See also:

• Unsustainable: This is what the US imports from China | weforum.org

• Tariffs are getting real | SoundCloud.com

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DISCLAIMER

IEA Report Forecasts USA Dominating Global Oil Markets Going Forward

World Energy Outlook 2017: A world in transformation

WEO-2017, the International Energy Agency’s flagship publication, finds that over the next two decades the global energy system is being reshaped by major forces: the United States is set to become the undisputed global oil and gas leader; renewables are being deployed rapidly thanks to falling costs; the share of electricity in the energy mix is growing, and China’s new economic strategy takes it on a cleaner growth mode. International Energy Agency (domain: iea.org) video first published Nov 14, 2017. Learn more at http://www.iea.org/weo2017.

The latest report from the IEA.org forecasts an oil market dominated by the United States. See the report at Oil 2018 | iea.org as well as a Bloomberg.com video Mar 5, 2018.

iea.org slides:

See also:

• Record oil output from US, Brazil, Canada and Norway to keep global markets well | iea.org

• Oil reserves | Oil | Statistical Review of World Energy | Energy economics | BP.com: "Global proved oil reserves in 2016 rose by 15 billion barrels (0.9%) to 1707 billion barrels, which would be sufficient to meet 50.6 years of global production at 2016 levels."
• WEO Analysis: A sea change in the global oil trade | iea.org: "The surge in tight oil output from the United States has already triggered major changes in the dynamics of global oil supply and prices. Through a decline in imports and a surge in exports, US tight oil is now having a similarly profound impact on global crude oil trade. Crude oil imports to the United States fell by more than 1.3 million barrels a day (mb/d) between 2010 and 2016, to 7.9 mb/d. At the same time, since the ban on crude oil exports was lifted in late 2015, US exports have skyrocketed to over 1 mb/d in October 2017, and have expanded their range of destinations from a single country, Canada, to more than 30 countries across Latin America, Europe and Asia. Looking to the future, WEO projections in the New Policies Scenario suggest a continued fall in US net crude oil imports, from more than 7 mb/d today to less than 3 mb/d by 2040. Meanwhile, net product exports double from 2 mb/d to almost 4 mb/d over the same period, pushing the overall net oil trade balance of the United States into positive territory by the late-2020s, an astonishing turnaround."
• Momentous Shift in US Natural Gas, with Global Consequences | WolfStreet.com: "The LNG export trade in the US is powered by the huge price differential between natural gas in the US — where a “glut” has crushed prices since 2009 — and what large LNG importers such as Japan and Korea are paying in the global LNG markets."
• In the Oil Patch, Bigger Is No Longer Better | WSJ.com: investors are growing leery of free-spending energy firms, but like the discipline of ConocoPhillips.
• Old Fields Die Hard | WolfStreet.com:"thriftier times have called for a re-strategizing and getting back to basics. This means focusing on existing wells and mature oil fields instead of drilling and prospecting in a short-term effort to get more oil more cheaply and efficiently. It’s all a response to the same issue — low oil prices — but with exactly the opposite approach from OPEC ..."
• Oil Demand: The Price Is Right or the Customer Is Right? | Bloomberg.com: "Research suggests producers can no longer assume global consumers will buy fuel at any price."

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DISCLAIMER