Articles I’m reading
Reuters reported about Taiwanese chip manufacturers expanding their operations in Japan, which is illustrative of the China decoupling trend that is taking place. Reuters estimated that at least nine Taiwanese firms have set up shop or expanded operations in Japan over the past two years. These firms include ASICs maker Alchip Technologies, chip designer eMemory Technology, Powerchip, Finesse Technology and the titan TSMC.
A friend shared a dated piece from the Bank of England’s blog that I came across before. I’ve re-read it and realised its immediate significance. The post is from Paul Schmelzing, covering how global real interest rates have evolved over the past seven centuries. A particular paragraph stands out and is something to chew on:
The 700-year average annual ex-post headline inflation for the risk-free issuer stands at 1.09%,, the 200-year average, since 1817, stands at 1.55%, with a further pickup in the 1900s. Three observations stand out: First, the past 60 years, in which the US has been the benchmark bond issuer has been the most inflationary in our whole sample period; second, current inflation rates of slightly below 2% remain fully in-line with the ex-post performance witnessed in modern times, with today’s typical inflation targets already being accommodative if measured against (very) long run trends. Third, never before has a longer period without deflation existed than the ongoing 70-year spell since World War Two.
Wondering how equity investors can beat the indexes? Bloomberg posted this article “In a Passive World, These Stockpickers Are Thriving” about a handful of asset management houses being able to outperform the averages. The same age-old concepts are surfaced: extending investment time horizons, taking relatively concentrated bets, operating with a contrarian philosophy.
I’m bullish on certain raw materials and the respective mining industry due to the structural trends of infrastructure built-out, decarbonisation and electrification. FT reported that New York hedge fund Elliott Management is setting up a US$1 billion venture to invest in mining assets globally. In their view, valuations in this industry are depressed and attractive. They are a bunch of sharp folks, so perhaps it’s time for you to take a look if you haven’t.
Also, Swiss bank UBS published its Global Investment Returns Yearbook 2024 recently, outlining high level views on the expected returns investors can expect from various asset classes. It is a long read with a lot of charts and tables.
Podcasts to listen
Economic historian Russell Napier, publisher of The Solid Ground Newsletter (one of my must-reads), came on Blockworks Macro podcasts recently with his views on China and its monetary policy. Take a listen.
Phu Quoc – A Beautiful Getaway
I took a few days off to a rather out-of-the-radar tropical Vietnamese island off the coast of Cambodia known as Phu Quoc. To get there, I first got over to Saigon city and then took a domestic flight over to Phu Quoc. The domestic flight is about under an hour.
There are many motels and hotels around Phu Quoc town, and you can get around the island via taxi or a motorcycle (if you can bike). Most of the food is locally sourced – vegetables and fruits are fresh and seafood is cheap and abundant. There’s bee farms and sauce factories you can visit by just booking local tours or you can just go around the town and hang out at cafes.
I put up at the Intercontinental, which is in the southern part of the island. It’s a beautiful resort with dreamy beaches that you can relax in. Forget Phuket or Ko Samui, consider Phu Quoc for your next Southeast Asia tropical island getaway.
Kean Chan 