China’s Soft Underbelly

  • The WEF gets underway (virtually, of course)
  • Xi Jinping’s keynote speech takes a swing at Biden
  • U.S.-China trade war: “Winners” and losers
  • Jim Rickards on China’s more “vicious” trade war
  • American farmers party like it’s 2013
  • Loon goes the way of the dodo bird
  • Readers on deplatforming Parler… Humdrum texts and emails… “A modern-day Reign of Terror (without the guillotine)”… And more!

The World Economic Forum (WEF) got underway yesterday… virtually, of course.

So no global elites rubbing shoulders in picturesque Davos, Switzerland. No skiing in the Alps. No selfies with the Matterhorn in the background.

Just 2,000 or so world leaders, CEOs, academics and all-around luminaries hopping on what amounts to a bloated five-day Zoom call.

One theme this year? “The Great Reset.” Or how about this central theme?: “A Crucial Year to Rebuild Trust.” Not sure which is more chilling…

China’s President Xi Jinping was the keynote speaker Monday — his first appearance at the WEF since 2017 — and his speech’s central theme was equally chilling…

New Cold War

Xi “flexing” with the Great Wall-paper…

“The misguided approach of antagonism and confrontation — be it in the form of a cold war, hot war, trade war or tech war — will eventually hurt all countries’ interest and undermine everyone’s well-being,” Xi said.

Using a more velvet-glove approach, Xi also called for global openness, cooperation and “multilateralism” throughout his speech. (The kumbaya stopped, however, when it came to human rights. That’s strictly an “internal affairs” matter, Xi warned.)

Al-Jazeera notes: “[Xi’s] words appeared to be aimed at U.S. President Joe Biden’s plans to revitalize global alliances to counter China’s growing influence.”

While also taking a swing at the Trump administration… which signed the Phase One trade agreement just over one year ago.

Trump USTR

Chinese representative: Guess who pulled the short straw?
Courtesy: ustr.gov

Per the trade agreement, “China committed to purchasing an additional $200 billion of American-made goods and services over 2020 and 2021,” says the Peterson Institute for International Economics.

“However, the evidence indicates that the deal is failing to live up to Trump’s pledge.” According to data from September 2020, China had only reached 53% of “the expected purchase target…

“In fact, Chinese imports of U.S. goods are now lower than they were before Trump started his trade war with a blitz of U.S. tariffs on Chinese products in 2018.”

But to be fair… a pandemic?

U.S. agriculture might be one of the few “winners” of Phase One’s losing streak.

“China imported more pork to deal with local shortages caused by the [COVID] outbreak, resulting in U.S. pork exports exceeding their 2020 target,” says the Peterson Institute.

“A few other U.S. farm exports have also done better than their year-to-date targets… Through September, U.S. corn exports were above the commitment.” While not a food staple, U.S. cotton exports did “relatively better in 2020.”

The downside? “Even hundreds of millions of dollars of additional sales of pork, corn and cotton pale in comparison to billions of dollars of lost soybean sales.” To give an idea, before the trade war, soybeans made up 60% of all U.S. agricultural exports to China. In retaliation to trade war tariffs, China found new soybean suppliers in Brazil and Argentina.

And China turned to another trade partner closer to home…

“China has a huge bilateral trading relationship with Australia, which provides coal, iron ore, natural gas and agricultural output,” says our macroeconomics expert Jim Rickards.

“Most of China consists of mountains, deserts or high plateaus,” he says. “The size of fertile areas in China (mostly in the southeast) is relatively small in relation to the total area and the size of the population.

“What about water? If China had enough water, they could possibly grow their own food in abundance,” Jim asserts. “They don’t.

“With the world’s largest population — over 1.4 billion people, or almost 20% of the Earth’s entire population — the food challenge is compounded by the fact that China lacks energy resources other than coal,” Jim says. “It has limited oil or natural gas.”

Despite China’s growing dependence on Australia, relations have soured between the two countries…

“In the past six months, a major trade war has erupted between Australia and China,” Jim says. “This trade war is much more vicious than the U.S.-China trade war.

“Australia questioned Chinese propaganda about the origin of the Wuhan virus that led to the COVID-19 pandemic,” he says. “Australia called for an impartial international investigation to get to the bottom of whether the virus came from a lab or a ‘wet market,’ as China claims.

“China has now cut off most imports from Australia in retaliation,” Jim says. “In effect, China is trying to bully Australia into submission.

“But China’s tough-guy tactics have started to backfire.

“This brings us to the current situation in China, and its demand for food,” Jim says. “If China does not get natural gas, coal or produce from Australia, where do they get it?

“China has already maxed out its orders from Canada and Brazil,” he notes. Not to mention: “China is also in a nasty diplomatic fight with Canada over the house arrest of Huawei’s CFO in Vancouver and the illegal detention of Canadian executives in China.”

Jim asks: “Who’s left?

“All roads lead to the U.S.,” he contends. “In order to feed its own population China will have to drastically increase imports of corn, soybeans, natural gas, fertilizer and more from the U.S.

“Given these crosswinds in food security and geopolitics,” Jim says, expect “renewed enthusiasm for agriculture in the first half of 2021.”

[Ed. note: Keep reading for more on the sunny outlook for U.S. agriculture… But you should know that Jim and his team are working on ways investors can cash in on a bumper crop of stocks, including one under-the-radar company poised to benefit from an agricultural boom this year.]

Seems appropriate to check in on the Rural Mainstreet Index (RMI), which — for the third time in four months — indicates growth. Overall, the index for January rose to 52.0 from December’s 51.6 (a reading over 50 represents growth).

But the farming/ranching segment of the Creighton University survey surged to 56.3… or the highest level since July 2013. Likewise farm equipment sales: up to the highest level since April 2013.

Hmm… There’s something about that year: “Higher crop prices combined with record federal aid from the Trump administration pushed farmers’ incomes last year to their highest since 2013 even after the pandemic upended the U.S. farm sector, according to a USDA forecast,” The Wall Street Journal reports.

“Prices for corn, soybeans and wheat have soared to their highest levels in more than six years as dry weather and strong export demand from China drain U.S. stockpiles.

“There’s euphoria over prices,” says Illinois soybean farmer David Brown. “There’s a feeling out there saying, ‘Game on, we’re back.’”

Of course, as domestic stockpiles dwindle, expect higher prices at the grocery store. On the flip side, in line with Jim’s outlook, “Businesses across the agricultural supply chain stand to benefit, as newly flush farmers who have delayed purchases spring for new tractors or higher-yielding seeds.

“The activity could boost profits for farm-equipment maker Deere & Co. and seed and pesticide suppliers such as Corteva Inc.,” WSJ concludes.

“The market is slightly calmer today,” says Greg Guenthner. The Big Board’s up 40 points to a hair below 31,000. As for the other major U.S. indexes, the S&P and Nasdaq are in the green at 3,855 and 13,655 respectively.

Taking inventory of commodities, oil’s static at $52.58 for a barrel of West Texas crude; gold is down $5 to $1,850.20 per ounce. Silver? Above $25.

And market hijinks carry over from yesterday: “GameStop jumps another 50% above $100, but short sellers aren’t backing down,” CNBC says.

“This whole saga with GME and the short-squeeze crew isn’t just going to fade off into the sunset,” Greg says. “I have a feeling we’ll be hearing about these shenanigans for weeks.”

Google is killing off one of its “moonshot division” darlings: Project Loon provided internet service in hard-to-reach places via high-tech balloons.

“Alphabet, the parent company of Google, launched Loon in June 2013, and Loon ‘graduated’ from a moonshot to an independent company within Alphabet in 2018,” The Verge reports.

Alphabet

Courtesy: Alphabet

“Loon launched its first commercial internet service in Kenya in July [2020], comprised of a fleet of about 35 balloons that covered an area… around 50,000 square kilometers.

“Loon has also provided internet services to areas affected by natural disasters, deploying balloons to Puerto Rico following Hurricane Maria in 2017 and to Peru following an earthquake in 2019,” The Verge says.

But Alphabet’s Astro Teller admits: “The road to commercial viability has proven much longer and riskier than hoped. In the coming months, we’ll begin winding down [Loon] operations.”

Loon joins other defunct programs spearheaded by Alphabet, including Makani — which experimented with wind energy using kites — as well as Project Foghorn, which researched the use of seawater for fuel.

[Note: Tech stock authority Ray Blanco is privy to one of Elon Musk’s favorite projects. It has nothing to do with Tesla, solar energy, PayPal or anything else Elon is currently working on. This is BIGGER than that.

And it might just have something to do with the demise of Loon… Uncover NOW what might be the profit opportunity of the 2020s.]

From our digital mailbag, a reader says: “I believe Amazon’s excuse for deplatforming Parler is the app wasn’t taking any action against violators of Parler’s own terms of service.

“This can’t be verified because Parler no longer has a platform. However, if AWS can unilaterally decide what violates one of their client’s terms of service with their own customers, that raises a lot of questions with anyone who hosts their website on AWS.

“Let’s go with a ridiculous example of a video streaming service hosted on Amazon. If a user uses a VPN to connect from Canada to watch content that is only licensed in the USA, would Amazon deplatform the whole service?

“Mr. Bezos, what is the yardstick to deplatform a customer? Is Amazon monitoring all traffic to know what meets its standards and what does not?”

“I have only thought about the topic of self-censorship a couple of times,” a reader replies to Dave’s inquiry last week.

“I quickly concluded that if any of the spooks in the myriad surveillance agencies around the world are reading my texts and emails, they must be very bored.”

“Censorship, cancel culture and other actions from the self-anointed elite guardians of information might be a modern-day Reign of Terror (without the guillotine).

“Or maybe a Cultural Revolution without the Red Guards (or blue guards)? Take your pick.

“Like Dylan sang: ‘You don’t need a weatherman to know which way the wind blows.’”

The 5: Indeed…

Best regards,

Emily Clancy
The 5 Min. Forecast

P.S. Elon Musk threw a grenade at the tech industry…

And it might kill some of the world’s BIGGEST companies.

Why is no one talking about it?

Because Musk’s revelation happened behind closed doors…

At a private event attended by a small number of tech insiders.

Luckily, Ray Blanco was on the inside.

In Ray’s must-see presentation, he reveals what Elon Musk talked about…

Including pictures of a breakthrough technology…

While predicting what might put some tech companies out of business.

See for yourself what Elon Musk discussed in this closed-door event.

Emily Clancy

Emily Clancy

Recent Alerts

Wall Street Goes Clean and Sober

If mainstream financial media are to be believed, all of Wall Street’s operating assumptions since the Panic of 2008 have been flipped on their head. Read More

“A Different Economy”

Nomi Prins on the “reopening” economy: “The old model will be supplanted by different businesses.” Read More

Real Profits From AI Invasion

“[AI] has slowly become ingrained into our everyday routine,” tech maven Ray Blanco observes, “and has become more powerful every year.” Read More

59 Days to Critical Mass

It’s the fastest that any technology has reached critical mass — and our resident futurist Robert Williams says it’s not too late to get in. Read More

“Climate Lockdowns”

We hasten to point out this “lockdowns for better climate” thing is not new. But last fall brought a new twist… Read More

Yes, in My Backyard! (YIMBY)

“Millennials are just aging to their PEAK buying years,” says Zach Scheidt. This industrywide shift — and others — makes homebuying a trend to watch… Read More

Life Cycle of a SPAC

“This trend isn’t going anywhere,” says our tech maven Ray Blanco. “So how can you invest in SPACs for profit?” Read More

The “Two-Thirds” Myth

Our biggest beef with GDP is that it’s a nigh-meaningless statistical abstraction. Now for a new spin on one of our long-standing complaints… Read More

The Stealth Dollar Crisis

The global power elite are set to declare a crisis of confidence in the U.S. dollar… Not that they’ll put it in those terms… Read More

Our Green (Nuclear) Future

Like it or not, a “greener” world will require more electricity, and — surprise — environmentalists are resorting to nuclear power. Read More