1. A comparative assessment of India's macroeconomic indicators now with that at the time of taper tantrum.
The U.S. commitment to Taiwan has grown verbally stronger even as it has become militarily weaker. When a commitment is said to be “rock-solid” but in reality has the consistency of fine sand, there is a danger that both sides miscalculate... Admiral Phil Davidson, the head of U.S. forces in the Indo-Pacific, warned in his February testimony before Congress that China could invade Taiwan by 2027. Earlier this month, my Bloomberg Opinion colleague Max Hastings noted that “Taiwan evokes the sort of sentiment among [the Chinese] people that Cuba did among Americans 60 years ago.” Admiral James Stavridis, also a Bloomberg Opinion columnist, has just published “2034: A Novel of the Next World War,” in which a surprise Chinese naval encirclement of Taiwan is one of the opening ploys of World War III. (The U.S. sustains such heavy naval losses that it is driven to nuke Zhanjiang, which leads in turn to the obliteration of San Diego and Galveston.) Perhaps the most questionable part of this scenario is its date, 13 years hence. My Hoover Institution colleague Misha Auslin has imagined a U.S.-China naval war as soon as 2025.
3. The block of Suez Canal due to a huge container ship running aground is one more reminder about the strategic importance of the main trade route between Asia and Europe.
Every day, about 50 vessels sail through the 120-mile long Suez Canal. It is a key artery handling at least 10 per cent of global seaborne trade and a similar amount of oil shipments, leading to fears that a prolonged shutdown could disrupt supply chains worldwide. Taiwan-based Evergreen Marine, which operates the 220,000-tonne vessel, on Wednesday said the ship had entered the Suez Canal from the Red Sea on Tuesday and became stuck after being blown off course.
It also draws attention to the limits and risks of using the massive Suezmax or Panamax ships. The Ever Green is 400 metre long, 60 m wide, and has a gross registered tonnage of 220,000. The ship is diagonally stuck blocking the entire width of the 300 m canal.
The Canal's importance is based on the massive growth in global maritime trade,
In 2010, 8.4bn tonnes of cargo travelled by sea. By 2019, this had grown to 11.1bn tonnes. And as trade volumes have grown, so has the importance of choke-points for crucial goods such as food and fuel. In 2000, 42% of global grain exports passed through at least one maritime choke-point, according to Chatham House, a think-tank. By 2015, that had risen to 55%. In response, some choke-points have expanded their capacity. In 2015 an $8bn expansion project added 35km (22 miles) of new channels to the Suez Canal and dredged existing ones, allowing bigger ships to pass through. A year later an expansion of the Panama Canal was completed, making it big enough for 79% of cargo-carrying ships to pass through, versus just 45% before.
4. The majority of active fund managers in the US rarely beat even the market
5. Fascinating read on perhaps the most important company in the world, Taiwan Semiconductor Manufacturing Company (TSMC), the largest contract chip maker. The company is the runaway market leader in the semiconductor manufacturing market, and more importantly the only player (along with Samsung) to have mastered the manufacturing of the most advanced chips of 5 nm and below. Smaller the transistors on a chip, the lower the energy consumption and higher the speed.
“The automakers very much believe they are the giants in the world,” says Ambrose Conroy, founder and chief executive of Seraph, a supply chain consultancy. “But this is a situation where the semiconductor manufacturers are the giants, and the automotive purchasing teams are the ants.”... TSMC has long gone largely unnoticed because the semiconductors it manufactures are designed and sold in products by branded vendors such as Apple, AMD or Qualcomm. Yet the company controls more than half of the world market for made-to-order chips. And it is getting more dominant with every new process technology node: while it only accounts for 40 to 65 per cent of revenues in the 28-65nm category, the nodes used for producing most car chips, it has almost 90 per cent of the market of the most advanced nodes currently in production... Since every new node of process technology requires more challenging development and bigger investment in new production capacity, other chipmakers have over the years started focusing on design and left production to dedicated foundries such as TSMC. The steeper the cost became for new fabrication units the more other chipmakers started to outsource, and the more TSMC’s competitors in the pure-play foundry market dropped out of the race. This year, TSMC upped its forecast for capital investment to a whopping $25bn-28bn — potentially 63 per cent more than in 2020 and putting it ahead of both Intel and Samsung. Analysts believe that includes at least some investment in capacity the Taiwanese manufacturer needs to supply Intel. The US chipmaker is forced to outsource part of its processor production because it has struggled to master two successive process technology nodes — 10nm and 7nm — in time to make its own chips.
The sophistication of advanced chips is a prohibitive entry barrier,
The prohibitive cost has made it increasingly difficult for other companies to stay in the game of advanced chip manufacturing. But as the Intel example shows, money is not the only factor. Shrinking the size of transistors — the key feature necessary for cramming ever more components into one chip, which in turn allows continued cost and energy efficiency — is becoming a challenging feat of engineering. The transistor size in a 3nm node is just 1/20,000th of a human hair. The tweaks to machinery and chemicals needed to achieve this come more easily with the single-minded focus on this manufacturing technology, the large scale and broad range of applications that TSMC has developed.
6. Fascinating read on the social and environmental costs of distressed/ripped jeans!
7. On the costs of road accidents in India,
India loses nearly 40,000 youth like Thakur (aged 25-35) every year. The country has 1 per cent of the world’s vehicles but accounts for 11 per cent of all road crash deaths. In the last decade, road crashes have killed 1.3 million people and seriously injured over 5 million in India... As reported by a World Bank study, road crashes are estimated to cost the Indian economy between 3 and 5 per cent of gross domestic product (GDP) each year.
A new report by the World Bank and SaveLIFE Foundation analysing road accidents from four Indian states point to how road impact causes immiseration of the lives of the poor households,
More than 75 per cent of poor households that were affected by a road traffic crash reported a decline in their income due to the incident. The financial loss for the poor amounted to more than seven months’ household income, while it was equivalent to less than one month’s household income for rich households. Poor families were also three times more likely to seek financial help, often borrowing from informal sources... The survey also revealed that across all households, the impacts of road crashes were unequal among family members, with women being the most vulnerable — both as victims and as caregivers. In the absence of support systems and safety nets, women have to carry the double burden of physical and emotional labour, often taking up low-paying jobs outside the house.
8. On first reflection, the proposal to make math and physical optional for Engineering entrance examinations appears a case of Hamlet without the Prince of Denmark. The Approval Process Handbook released by the AICTE for the coming year does not make physics and math in pre-degree mandatory requirement for engineering entrances. As this oped points to, the decision also may have commercial considerations to keep afloat the large number of engineering colleges which are being closed down each year.
9. WSJ writes about how Covid 19 entrenched a triopoly of Google, Facebook, and Amazon in the US advertising market.
The pandemic pushed them into command of the entire advertising economy. According to a provisional analysis by ad agency GroupM, the three tech titans for the first time collected the majority of all ad spending in the U.S. last year. Beneath the shift are changes driven by the pandemic: more time spent on computer screens; more e-commerce; a jump in new-business formation, and a steady improvement in tech giants’ ability to demonstrate a return on ad investment. Success breeds success for what some call the “triopoly.” The increase in shopping and spending on Google, Facebook and Amazon’s platforms is adding to their already voluminous data on users, giving them even more appeal for advertisers that look to target their messages... The triopoly increased their share of the U.S. digital-ad market from 80% in 2019 to a range approaching 90% in 2020, GroupM estimates... Before the pandemic, a little more than 10% of retail purchases in the U.S.took place online. That jumped to 16% in last year’s second quarter when lockdowns peaked, according to Census data.
This is a fascinating case study of the appeal of digital advertising for companies,
This year, digital advertising is projected to account for more than half the roughly $1.1 billion Mondelez spends on media world-wide. It was only about 30% as recently as 2017... When Mondelez invests in digital advertising, it gets a 25% better return than with TV ads, the company says. It has found that its Google and Facebook ads do especially well, generating 40% higher returns than an average digital ad. The two now account for roughly 60% to 70% of Mondelez’s digital ad spending, up from less than 50% in 2017, the company says. The tech giants share data that allows Mondelez to understand its customers better, said the snack maker’s chief marketing officer, Martin Renaud. Google data showed Mondelez, for instance, that people tend to search the internet for healthier snacks in the morning and for more-indulgent treats as the day wears on. When the pandemic struck, Google provided updated data that helped Mondelez craft relevant ads. The company switched from showing college-age consumers an ad about eating lunch in the library to one that read: “Made it through an online class? Treat yourself.” Mondelez has been working with Google and Target Corp. to figure out how likely someone is to buy Oreos or Ritz crackers from Target stores after being served ads for them on Google’s YouTube... As it directs more ad money to the tech giants, Mondelez isn’t working with as many digital publishers in the U.S. In 2017, Mondelez worked with about 150; it now works with fewer than 10.
In simple terms, companies benefit with valuable information about consumer behaviour which helps target advertisements, and such information providers are by nature the largest few digital publishers.
10. Scott Galloway points to an important likely trend post-Covid, at least in the developed economies,
Commercial real estate is a $16T asset class. If gross demand for office space declines by a third, we could see the GDP of Japan ($5.1T) reallocated from office to residential real estate. Sonos, Sub-Zero, Restoration Hardware, and Slack — along with everything else that enables or enhances work from home — should benefit. In addition, we will see a great repurposing of office real estate. Many offices will remain, but no company will need the square footage they previously did, and companies will look for increased flexibility. In New York City, the amount of vacant office space available for sublet has doubled since 2019 and, as of December, the commercial vacancy rate in the city was the highest it’s been since the Great Recession. In 2020, San Francisco went from the lowest office vacancy rate in the city’s history to the highest.
11. Finally, NYT articles here and here about over heating and the likelihood of inflation in the US.
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