夫将兵者，不战则守，不守则走，不走则逃，不逃则死 – 司马懿
Regarding soldiers; if you do not attack, defend; if you do not defend, walk away; if you do not walk away, flee; if you do not flee, die – Sima Yi
Continuing our previous article on war preparation, today we will explore the available opportunities of today when looking at things from a macro-view, with a focus on China. Why China? It is the country with the highest capability, potential and desire to grow. It is a faraway number 2 compared to the US, but also precisely because of this, it can have a growth rate far higher than the US. Many of us were not old enough when China opened up and ushered in a period of tremendous growth, but China today provides us with another opportunity to do so.
From politics to economics, from clearing up its internal mess to cultural influence, China is now in attack mode. Every new territory gained will add to its war chest of not only money and physical firepower, but also diplomacy, patriotism, technology, supply chain control, production etc, and ultimately a push towards neocolonialism.
Xi Jinping is 69 years old this year. He does not have many years left till the end of his political career. As one gets older, it becomes increasingly difficult to control the bunch of younger and ambitious people under him. It requires a lot of energy and brain power to not only control his men, but to run the whole country. Before he steps down as the general secretary of the Chinese Communist Party, which in essence is the supreme leader of China, China will take down Taiwan even if it means going to war with other countries.
When one has achieved both power and money, the only remaining thing to do is to get fame. Fame that will last after one’s death. Better still, fame that will get recorded down in the history books. That is why Donald Trump wanted that Nobel Peace Prize that much. Should Xi Jinping takes down Taiwan and achieve reunification, he will be recorded down in history as the second man after Qin Shi Huang, the first emperor of China, to unify China.
Based on the current economic situation, we are now officially in a recession. On average an economic cycle will last 10 to 12 years. Based on past articles and what we know so far, China is doing almost everything the opposite way from the US. When the global recession hits big, China will suffer a hit but should not be as severe as the rest of the world, for the reasons which I will explain below.
When we piece the pieces together – age of Xi Jinping, magnitude of achievement in taking down Taiwan, China’s preparation so far and the economic cycle, I can say with much confidence (although to accept it or not is up to the individual reader) that there are a few big opportunities for us today. We cannot influence politics nor economics, but we can move our assets accordingly to make use of the opportunities.
Why The Macro Is More Important
Whether we are buying stocks or doing businesses, fundamentally we are investing in the country. Before anything else, we should ask ourselves if the country will do well. If the country goes to bankruptcy, like Greece or Sri Lanka, it will not be practical to invest or do business there. On the other hand, if a country is doing well, then businesses operating in that country will have a chance. That is the very foundation before everything else.
The micro-stuffs like balance sheet, profit and loss, dividends etc all comes in after that. Primarily, knowledge on politics, economics, current affairs and even warfare comes in first. I have seen many people researching on the financials of the company etc, but when it comes down to the big direction, all these analysis on the companies’ finances often do not tally with the market price.
Let me quote one very good example: Palantir.
Palantir is a very popular company with good fundamentals, good potential, good backing etc. Scores of analysis stating that their share price should be about 20 USD per share based on the numbers. Yet the share price has fallen short because the overall direction of the stock market is down, caused by the broader economic and political measures. Political instability, unsustainable economic bubble, Fed’s monetary policies etc all point only to one thing – a bear market in a recession.
Do not get me wrong, I am not saying that analysing the financials of the company is a useless thing. I am just saying I only do that after getting the big direction. As for which companies to invest in, I only choose big companies after doing some light reading on their numbers. I will read up on the homework of others if need be. You may agree or disagree with me on this.
China is gearing up for war. But beyond that, it is gearing up for a fight in many areas with the US. There are sectors it has to knock down when doing so, and sectors that it has to build up. In my article on education, housing and medical, we have discussed that these 3 areas are what wiped out a commoner’s life savings and ensure that the person and his future generations are poor. In the US as well as many other countries now, including China, we have seen young people giving up hope and lying flat. That is because the young have seen that no matter what they do, they will never make it in life. This very act is detrimental to the country. No longer are the young gullible enough to believe in the dreams of the country. If the young of the country gives up, the country has no hope.
In order to resolve this issue, along with many other objectives, China is now re-organising the 3 sectors. The ban on private tuition to level the playing field so the talented at the bottom class could shine, the early warnings issued by the Government not to speculate in properties and the (intentional) subsequent bursting of the property bubble so that housing can be made affordable and resources directed to actual production of useful items and not fluff, as well as the consolidation of the pharmaceutical industry to keep drug prices down so that healthcare is not too expensive. Among with many other policies, such reforms are meant to help the masses see hope and continue to believe in the China dream, so that the masses could willingly slog for a better future.
With that as the premise, there are a few fronts which China is active on, and which we could move a few of our chips to bet on. Of course, all these are just my analysis and readers are advised to exercise caution.
The impact of cultural influence cannot be underestimated. That is why the French and Chinese guard their turf fervently, limiting only a few foreign movies to show on their screen each year. Cultural influence helps people to understand, identify and ultimately be aligned with oneself. Above all, such influence creeps in slowly, without the people realising it themselves.
Command & Conquer: Red Alert was one of the classic games many of the guys played during their childhood. The storyline featured the USSR trying to take over Europe, while the Allied Nations stood out and defended against the invaders. The implied message is simple. The Soviets are the bad guys, the Allied Nations represents justice. You play to dominate (negative connotations) the world or fight on to save the world from tyranny (positive connotations). From Red Alert to Captain America, the America represents an indomitable will to fight against injustice, no matter how much the odds are stacked against them. Brainwashing is sometimes not so outright.
Entertainment, especially games, is the fastest way to get people to understand the culture of another country. Games require people to understand the gameplay and the game resources (eg character, military forces) well in order to win. With tweaks to the gameplay or even movie plots, a country can teach the players about the country’s history and culture, and guide the viewers to align their views in a certain manner. It is no wonder that China is also gearing up to intensify its cultural exports. From its drama series to its games to its songs, the quality of its entertainment has improved significantly over the last few years, with a very stringent approval process to ensure what people learn and know about China is according to what the Chinese Communist Party wants. Whether we agree with this or not is one thing, but it is also a fact that people overseas have been warming up to Chinese entertainment.
Finding the right company dealing with cultural exports will be a good sector to look into. To quote an example, Tencent is the largest game company in the world, with businesses in other entertainment branches such as film making as well. It is also the owner of Wechat, the largest standalone social mobile app with 1 billion monthly active users both from China and overseas, featuring a whole host of services from games to social interaction to business services. It can be said to be one of China’s pillars of cultural export.
Side note 1: Tourism and food are also great cultural exports. The food sector may be a bit more difficult in terms of investment though.
Technology is important not only in the military sector, but also to be self-reliant in the supply chain and to actually control it. Its aim is simple – reduce reliance on others, increase others’ dependency on them and level up the overall technology in the country for the citizens. For example, China has been wanting to take down TSMC because its semiconductor industry is not up to standard. TSMC is a company sought after not only by China but also the West. With the West’s famed freedom and rights, TSMC is being lured into the US, where it will contribute significantly to US’s technology. Take note that the US has fallen behind in this sector for 15 years.
We might want to check out technology sectors which China puts a focus in, in order to catch up to the rest. From electric vehicles to semiconductors to cloud computing, China is focusing a lot of resources on relevant technology which will enable it to achieve the objectives laid out above. Technologies which will place China in an advantage in terms of national strength should be considered a priority. Companies which focuses on profits only but not on the advancement of national objectives should not be considered. For example Xiaomi and Lenovo, which relies heavily on foreign resources instead of being independent and also do not produce anything significant to advance the national interests, should not be considered.
If I have to choose a company to invest in this sector, I will choose Alibaba. Alibaba is not only involved in B2B and B2C, but also dabbles into artificial intelligence and cloud computing which includes data mining, processing and customisation among many other things. It has also reduce its reliance on the West significantly. If Huawei is a listed stock today I will definitely put it in my priority list.
Side note 2: To advance their technology, China had the Thousand Talents Plan, which FBI even published a warning against. The plan serves 2 objectives – to attract talent to China to contribute as well as to conduct espionage in the technology sector. Before we jump to condemn this act, do note that US also do the very same thing. Attracting talents is what every country wants to do, and espionage is more common than we think. The Thousand Talents Plan has since been totally censored on the Chinese internet.
Tools Of Production
If the current tool of production is oil to power up the machineries, then the future will be data to power up all the artificial intelligence. Big data is one of the phrase we hear recently in these few years. Data to power up the advertisements we see online, to recommend endless videos and songs to keep us scrolling on the platforms, to let decision makers know the exact situation for policy formulation and ultimately to expand territories in every aspect for both the companies and for the country.
The gold mine of Tesla does not lie in its cars but in its data collection ability, the wealth of Google lies in the sheer amount of data it is able to collect and utilise. The 2G network is for sending messages, the 3G network for surfing the web, the 4G for video streaming and the 5G presents an even higher possibility more than what many of us can imagine. With an exponential increase in data, those who can process it (technology paragraph above) and those who can supply it are like the oil refineries and the oil fields of today.
Today’s tools of production are controlled by Russia and Saudi Arabia (at least on the surface). Who will control tomorrow’s tool of production? The company, and by extension the country, which can collect the most data and one which can process the most data. Going by this logic, we look at the sectors or the companies who can do it or have already done so. Internet companies, ride hailing companies, food delivery platforms, ecommerce platforms etc are some sectors you can consider for data collection. That is also why Palantir is such a hot stock – its data processing capabilities are a notch above the other companies. Not only that, it has big customers globally.
Side note 3: I am planning to buy Palantir, but minimally after the Fed is done with all its rate hikes. Within China, I am more inclined towards Tencent and Alibaba.
There are definitely other sectors around not mentioned here, and I am unable to list them one by one. As a guide, know where the country is launching its attack and on which front, and you will see which sectors are the priority and where the country’s resources are going. As long as you get that, you just need to do some light reading to make sure the company you have chosen is decent, and time it accordingly in the market according to the big flow of things. We will not be able to time it perfectly, but we do not need to earn every single cent possible. If you are playing the stock market, stagger your investments at different times slowly and steadily once you have a buy range. If you are doing business, be ready to make use of any opportunity which may arise.
Most of us have limited funds, so we have to be very selective about what we buy. Companies that can fit as many of the above as possible will be put in the priority list. As countries march towards war in different areas, so also must we deploy our resources accordingly in order to conquer the greater personal goal of financial freedom.