The 5G ban is effective as of this week, according to the people, who asked not to be identified to discuss nonpublic communications.

The rules create a more explicit prohibition on the export of components like semiconductors, antennas and batteries for Huawei 5G devices, making the ban more uniform among licensees. Some companies had previously received licenses that allowed them to keep shipping components to Huawei that the Chinese company may have then used in 5G equipment, while other companies were already subject to tighter restrictions.

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Shut Up ‘n Play Yer Guitar

Last week I was sent a video clip of hard rock legend and former Deep Purple and Rainbow guitarist Ritchie Blackmore giving an interview with the ‘cool cats’ of Russia Today. Resplendently syrup-ed, his monologue to a politely nodding interviewer flowed thus:

“We all have to look within. I think a lot about death. More than life. Because we are going towards death. And I think death is very important. I think it’s going to happen to all of us. Most of us. Not all. Some of us might get away with it. It’s what Bob Dylan said. Bob Dylan came up to me once and he said: ‘Hey – who the hell are you?’. And I kind of admired him for that.”

Pure Spinal Tap! My point today is yet again that much of what we read and see in terms of geopolitical and market analysis can sound deep – but it’s nonsense wrapped around elements of the painfully obvious.

Chinese stocks slumped again because the PBOC introduced a policy that *must*, if followed, induce a huge slowdown in future economic activity – or “pulling back stimulus gradually”, as Bloomberg describes shifting liquidity growth of 35% y/y to 8-9%. Then the same stocks went up because ‘the National Team bought them’. So what the economy and asset prices do are to remain two unrelated factors entirely: because it’s one thing not to have enough fiscal stimulus, and hence low rates, and hence high equity multiples; but China is going to *delever* its bubbles and ensure they don’t burst. Good luck with that.

Another narrative not being discussed: the underlying signal that the US and China seem incapable of *both* managing to put their foot on the fiscal accelerator at the same time. Up until now it’s been all China: now it’s going to be all the US. (Chinese CPI and PPI today saw the former rise from -0.3% to -0.2% y/y and the latter jump from 0.3% to 1.7%: so input prices are rising and sales prices are falling – time to scale back borrowing? US CPI is out later today.)

That lack of willingness to coordinate, or perhaps ability given the problems if 50% of world GDP stimulates in tandem(?), has serious implications for markets and geopolitics. Instead, we get the press ‘scoop’ that China wants to meet with the US in Alaska to “reset relations”: perhaps because someone from the White House can see China from there?

Take off the syrup, and ask from which of the two possible sides this story came; and who would want the narrative out there; and to what end. Journalists, like the Russian who sat listening to Ritchie Blackmore pontificate about evading death, seem to have lost that art: but the RT/RB example was no more ridiculous than the New York Times salivating about ‘secret’ US plans to attack Russian cyber facilities. So secret it’s a good job no Russians can read the US press and find out about them there: Эти жалкие одноязычные русские шпионы!

But back to Anchorage and its handy view of China: is a relations reset compatible with the same Bloomberg coverage today(!) talking about China firing an anti-aircraft carrier missile in the South China Sea to send “an unmistakable message”, according to a top US admiral testifying in Congress? With the 6.8% y/y increase in Chinese defence spending? With Xi Jinping telling the PLA to “be prepared to respond in uncertain times”? With recent hawkish statements made by Secretary of State Blinken? With plans from both the US and China for tech supremacy? Or with building up a foreign policy “Quad”, which continues apace?

Perhaps, yes: as a necessary de-escalation, some might say; and look at what is happening with the US and Iran despite what Iranian-backed actors are doing in the region, others would add. However, good luck getting anything past Congress.

Now back to the fiscal: the US is going one way and China the other – what does that tell us about how well the globe can handle any real Building Back Better? Is US fiscal stimulus going to buy Chinese green goods, which they will have too many of for local demand if their own economy is slowing down? How do we manage the relationship between these two as at least partial decoupling becomes a domestic political priority? We need Bob Dylan-style questioning here. But expect lots of Russia Today style nodding, or Spinal Tap analysis instead.

Meanwhile, from the big picture to the small, and despite the USD having a down day for the most part vs. G10 FX Tuesday, the meme is still rapidly shifting to “America is back” in terms of higher long-end rates, and hence a bid for the buck against emerging markets in particular. Moreover, the OECD has just released their updated global GDP forecast in which they see world growth 1% higher than previously seen, and the US bouncing to 6.5% in 2021 – though Europe will lag behind yet again: who can VDL blame for that one? Well, we had a few months of Spinal Tap dollar bearishness at least – even if higher yields pushing the USD up are themselves Tap-py.

Recall the great line from Tap bassist Derek Smalls (who looks the spitting image of Blackmore today): “We’re very lucky in the band in that we have two visionaries, David and Nigel, they’re like poets, like Shelley and Byron. They’re two distinct types of visionaries, it’s like fire and ice, basically. I feel my role in the band is to be somewhere in the middle of that, kind of like lukewarm water.” There is no such middle role in a K-shaped US economy, where fiscal stimulus is too much for some and not enough for others: so yields will shoot up and ultimately crash down again, and the USD will likely do the same – unless and until we get Fed yield curve control that is. Watch those stage pyrotechnics play out in awe.

The very small(s) picture is of the RBA belatedly reminding markets it might be able to set up a committee to include ‘whatever it takes’ on the agenda, but it will require a qualified majority vote that then goes to a special commission for review in a plenary session. In short, Governor Lowe verbally defended the yield curve control policy and reminded us he isn’t about to raise rates. This worked in regards to the 3-year: but on an underlying level arguably because parts of the global market can still react to what the PBOC said it is going to do. At least Lowe can be happy about what AUD has been doing, yesterday aside: but again that’s about what the US government says it’s going to do, not the RBA.

As Frank Zappa would have put it: Shut Up ‘n Play Yer Guitar. (An album whose tracks include “Five-five-FIVE”; “Hog Heaven”, “Treacherous Cretins”, and “Soup ‘n old clothes”, all of which sound like potential Bloomberg, Russia Today, or New York Times headlines.)

“Love is like socks – you got to have two and they have to match.”

This morning: It’s not what you know about value – it’s what the market believes that matters when it comes to price. Will Call My Agent win the streaming wars? And will widespread adoption fuel a massive boom in Socks… just as the shills say has happened in Bitcoin?

Yes, I did write Socks. That was not a typo.

This morning I am very much gratified to the Thunderer of London for pointing out there are now more Trabants on German roads than Teslas. 3000 refurbished Trabbies were (re)registered last year. If you’ve never driven one…. the Trabbie is said to be great fun. (People lie. It’s not.)

There is something of a race underway to be least effective government here in Yoorp. The UK the government has spent £30 odd billion on a test and trace system that does neither (but has made lots of MP’s chums exceedingly rich.) But, at least the Brits have tried. In Brussels they just failed to deliver at all in terms of a vaccine roll out. Which means someone has to accept blame. Which is yet another benefit of Brexit for Yoorp – blame the perfidious Brits! I am willing to take bets on how long before borders are closed…

If anyone has got any definitive data to explain the truth on who is closing their borders to vaccines and who is not, please share. I want to know where vaccines are made and delivered from and who signed what and when in terms of contracts. There is so much noise out there. The EU says the UK won’t share our toys, but we say yes we will.. who is telling porky pies? One rather feels the EU’s relationship with the UK is going same way as Megan Markel’s.

As for markets, well… who knows?

The greatest truth about markets is it’s not what you think you know that matters. It’s what other people collectively think they know that counts. You may be a bone fide financial genius knowing the exact value of everything – but the market is just an enormous calculating machine. It may completely ignore your value and set a very, very different price.

All of which means I can’t really explain why Tech stocks were off on a tear yesterday. Maybe it’s the cheques American’s are about to get through the post as a result of Stimulus Package 1.9? A relief rally? Or short-covering? Time to load up more on my Tesla leveraged short ETF I think.

Or maybe it was GameStop saying it’s going to become an ecommerce business (the whole point being it the company’s insistence on remaining highstreet retailer that attracted all the shorts earlier this year!) I wonder how long before GameStop is taken out by a SPAC?

When it comes to value I’m struggling to know what makes tech stocks – including great names like Apple, Amazon, Microsoft et al – worth so much more today than they were a year ago as Lockdown started to bite? What’s changed? That’s my intellectual contribution to the debate – they are good companies and worth holding, but not at these prices.

But the world does change. One thing I like more and more is Netflix – but that’s largely due to She-Who-is-Mrs-Blain and I having a new top series to watch: “Call My Agent”. It’s a remarkable and genuinely clever French programme that actually makes Parisians seem likable! Of course, we all know the denizens of Paris are the worst people in the world, making New Yorkers and Londoner’s appear calm and reasonable. Until I suddenly worked out last night I care far more about these characters than I ever had on any UK drama. The hook of the programme is having genuine French stars play themselves, often irreverently.

It set me thinking? I am becoming a closet Frogophile? The other great hit of the year has been “Emily in Paris”.  Gosh! I have a sudden urge to learn French and start watch French art-house films. Is it just me?

It’s interesting – a year ago I was a Netflix uber-bear on the basis mounting competition would swamp them. Disney would dominate quality programming, while Apple-TV would be savvy watching. A host of new cheaper entrants from Britbox to Starzplay would eat its lunch. But its not happened. Apart The Boys, Lower Deck, and The Expanse on Prime, Netflix gets most of our viewing. Apple has failed to deliver much. Disney even less so after you’ve watched all the Jeff Goldblum programmes.

For the life of me I can’t work out Telsa.. but hey-ho. Up 20% in a day? Whatever. Whom am I am to argue. I shall use it as a selling opportunity.

Meanwhile… Time to Go Long Socks

Don’t be blindsided (as Harry might say) by yesterday’s gains in Tesla and Bitcoin! Increased Adoption – word of the day – is fuelling a massive rally in socks.

I suspect many in the market might be missing the equally spectacular gains we predict in Socks. Following yesterday’s announcement from PayPal reminding us it accepts payments for Socks, the whole Sock sector is set to surge on increasing adoption and transactional ease.

The widespread adoption of foot apparel by leading bankers, investors and hedge fund managers, and now leading internet payment systems, is driving massive new demand. Although the sock market crashed during last summer’s sock-meltdown, analysts say that was a simple seasonal factor – caused by an unusual warm spell in Cornwall, and leading to many well known financial influencers being seen not wearing socks.

Now it’s increasing Sock adoption that’s driving the market. Analysts at the Sockcoin.com, the leading Sock Exchange, are predicting Socks will hit $1 million by May on the back of increasing adoption by major players across markets. Ralph Axeminster-Twill, COE of Sock.com, “socks are no longer on the periphery, but are increasingly being adopted as a valid investment thesis. With major financial players expected to return to offices from April, we expect to see even faster adoption, and in many cases the favouring of socks as a core investment and even fashion statement. We are seeing many Gen X,Y and Z customers putting a portion of their total wardrobe into Socks. Socks have gone mainstream on the back of increased adoption.”

Cathy Topshop of Threadbare Capital explained her decision to go long socks during the summer proved an inspired one; “We were on holiday but one day it was quite chilly so we went to something called a car boot sale and since the vendor could not change my £50 note, I bought his whole stock. Since then we’ve analysed the Sock market from toe to heel, and concluded it absolutely meets our Disruptive Innovation investment parameters. Our investments across Sock markets and driven returns on our AFF fund by 150%.”

Topshop’s Alternative Footwear Fund “AAF” has seen its 10% position in Sockscale Capital Trust, a fund entirely invested in Socks, cause some issues. The NAV of the Trust has turned negative, raising doubts on Threadbare’s ability to meet margin calls when Sock prices dipped last week. However, leading bank in New York and London have now agreed to provide sock clearing facilities – again accelerating the adoption of Socks across the investment community.

Perhaps the most exciting moment in the Sock expansion was last weeks $2bln SPAC of venerable 250 year loom-using Yorkshire sock-makers Paget and Son by SPAC Thatcher IV. Described as a: “high-tech opportunity to monetise the intrinsic value of craft socks through algorithms, difficult sums and 2 hour drone-delivery to anywhere in the country”, the merged firm rose 20% on Monday, crashed 40% on Tuesday and rose another 60% on Wednesday as Reddit Investors piled into the Sock Narrative.

However, a number of observers believe the Sock market is turning into a bubble. “The problem is the lack of duration”, said Noel Partington, the market’s harshest critic. “People find they fade in the wash, and there is little security. Sock gnomes are always nicking them, leaving single socks, and until that systemic weakness can be addressed, its difficult to be certain of the market and sock wallets.’

Other issues, including the multiplicity of Sock offerings is an issue. “The whole sock market was invented by Rukymoto Sockatoshi in his critical 2010 paper on the digitisation of the shoe/foot interface, but alternative sock offerings like the slipper sock and tights are triggering heresy in the market”, said some bloke on a market stall.

Another view comes from Bill Blain of Shard Capital who reckons there is room for both proper socks to go walking, and a nice pair of deck shoes sans socks in the summer. He advocates a balanced neutral position neither pro or anti sock.

Meanwhile, proponents of Cryptocurrency Buttcoin are peeved that Sock marketing scams have been using their line about the INCREASING ADOPTION of cryptocurrencies as just about the only argument to buy them. They dismiss Socks as a scam no one will ever need with no logical underpinning.

Hmm.. Unlike Buttcoin.. I think Socks are here to stay…

One of the many priorities outlined by the new Biden administration in the US is the priority his team has placed on re-establishing America’s commitments to addressing climate change. American leadership is being lauded and this renewed focus is being echoed throughout the world. While this is good news for the climate, it’s also putting additional wind in the sails of ESG investing as portfolio managers and Boards reset their investment agendas to put people and the planet front and centre.

As most observers look to the US and the potential growth of the solar sector resulting from Biden’s goals, people may not be aware of the significant investments in solar energy made in other jurisdictions like South Korea. The US solar module market has been valued at ~USD $11.2 billion (aggregate installed capacity of 76.1 GW in 2019 with the market forecasted to grow at a CAGR of ~18.6% from 2020-2027). Meanwhile, the South Korean solar module market, while smaller, was valued at ~USD $4.5 billion with an aggregate installed capacity of 10.9 GW in 2019. Surprisingly, the South Korean market is now forecasted to grow at an even faster rate than the US, with a CAGR of ~21.2% from 2020-2027… CLICK for the complete article