All In Podcast Episode 88 Notes July 21 2022

 

July 21 2022

• Cold open with Chamath’s daughter and Friedberg’s dog
• First principle politics

• Sacks expects red wave in November

• JD Vance

• Blake Masters is close in Arizona

• Peter Thiel has articulated his philosophy around making politics more efficient

  • Could also be that he wants whole sale reset and that’s why he is backing disruptive candidates
  • Trump even pulled hispanics, etc which was surprising - and even though Trump himself might be a problem, it might be good overall that politics is becoming centrist

• Paul Pelosi is trading in specific chip equities based on his wife’s insider trading

  • Then Nancy Pelosi goes to Taiwan against even government recommendations
  • Media doesn’t say shit
  • Imagine the media coverage if Trump had done this in 2016-17-18
  • No coverage by media

• If chips are the new oil, Taiwan is the new middle east/gulf

• Govt just passed $50B chips act - its well intentioned policy but Intel and Nvidia are getting giant handouts and Paul Pelosi is making crazy money on Nvidia options

• ROIC is probably in high teens for these companies - so its hard for them to raise capital to make such crazy investments without money from government

• Giving capex subsidy is meaningless to companies that have already not demonstrated they can do a good job when they just gave themselves stock bonuses recently

• Its better to give them the money overtime which makes the businesses more valuable - makes Intel and Nvidia more attractive and people invest in them and they become bigger

• Obama did this with Solar - Solyndra failed but Tesla did well

• Think about this from the board of Intel - they can’t think of investing $10B into fab plant because they are not sure when it will pay off

  • Instead getting money from government now helps them make the decision to invest now

• Its in Intel’s business interest to offshore this production

• Instead govt gives them money to build and run the factory and so it stays in the US

• How can govt officials be allowed to get away with this - if CEO had done this they have to announce their trades - these guys can do what they want

• Only Fox and ZeroHedge covered it

• Now media has lost all credibility

• Democratic party and media are captured by Class Hegemony - they are dominated by rich college educated people in droves

• Biden has 31% approval 60% disapproval, Hispanics 19% approval 70% disapproval - huge defections happening across the board

• Working class voters don’t want open borders, high crime or CRT but dems are pushing only that

• Democrats have been spending $44M on crazy MAGA Trump candidates against normal Republicans because of the perception that they will be easy to beat in November

• Democrats would rather fund raise off the issue of Gay marriage and Roe vs Wade in CA and NY from progressive elites instead of codifying it

• Obama campaigned on it but he said he didn’t codify it because he said its not the highest legislative priority

• There isn’t a super majority right now for Roe in govt right now but for Gay marriage there is - Republicans - 10 - will vote for it

• April 29 2009 - this is what Obama said

  
  
  

  
  

• Trump ran on a platform and activated his platform when he was elected

• Obama ran on a platform and didn’t activate his platform when he was elected but made political calculations instead

• Trump did simple coalition politics - he represented their interests

• If Schumer doesn’t bring up the gay marriage vote its cynical and strategic especially given that Republicans are ready to support it

• Democrats would rather raise off the issue instead of just winning the issue right now

• Independents are 4% of the vote - fiscal conservative, social liberal

• Its a privileged position to not want government in your lives - many people want government in their lives

  • Government should help those in need, not those in want, and should be accountable for that
  • People in privileged position should hold government to account for inefficiencies

• House has lot of city people for free food, Senate has lot of farm people from rural areas

  • There is lot of grift in farm spending in this country (similar to defence spending)
  • And there is no incentive to pare down this budget

• Risk from messing up social issues is less

• Risk from messing up economic issues is very high

• Their spin for 19% approval rating in hispanic vote is “fake news is now more spanish” - they can’t admit their problems

• First 2 years of Biden presidency are a missed opportunity from point of view of purple centrist people

  • They have the votes - they passed infrastructure bill, passed gun bill, they didn’t pass Gay marriage bill
    • Ron Klein is more powerful
• China issues
  • Bank protests, Mortgage protests, slowing economic and population growth, housing crisis
    • (JCal had called this out)
  • China has been bringing in tanks to protect the banks
  • Zero Covid - why is it such a big issue for them?
    • It might be coming from Xi - their credibility is tied up in this zero covid issue - they were a contrast at the start of covid - how orderly they were compared to disorderly west
  • Parallel to ancient China where Emperor shut off ship building - and so West took over the world
  • Autocrats don’t work - one mistake and they can’t do anything about it
  • Xi has been making many heavy handed decisions
  • Now crackdown on tech is also hard
  • Evergrand defaulted - people paid for homes prepaid - and now they are not getting it
  • Zoom out
    • Over last 30 years Chinese economy grew from $318B to $10.5T (1990 - 2020)
    • 2% → 20% of global GDP
    • per capita income from $300 to $12500
    • Manufacturing is only 6% growth
    • Bargain between CCP and people is - keep giving us stuff and we will support you - now its slowing
    • 2005 → 300M vs 2021 1.5B sqft real estate sold - now its collapsing
    • The economy does not have the drivers it has had for a long time
  • China has 1 massive problem - aggressively aging population due to 1 child per family
    • Could contract almost 50% by 2100
    • Birth rate is 1.15 in 2021 - lower than Japan 1.3 - US and Australia are 1.6 but they get above 2.1 because of immigration (needed for replacement level)
    • Projection is <600M by 2100
    • China is facing demographic collapse in the next decade
  • Xi is committing self-own - going against their policies for last 2 decades which made them great
  • What does this mean for US?
    • If China collapses, they are so big, it will have global repercussions - so we will be hurt also
    • Economics is a positive sum game
    • But geopolitics is not a positive sum game
  • China has 3M factories for manufacturing employing 112M people
  • US has 300K factories employing 2.5M people
  • Output of US factories are 70% of China factories - so very high output here
  • China can definitely evolve their manufacturing to be high value and high leverage so they have an opportunity here
    • Additive manufacturing, 3D printing, Automated factories
  • They are building 400 nuclear power plants so cheaper power < 0.05c per KWh - US is more expensive
  • So the question is do they get there fast enough to drive economic growth that powers real estate, etc
  • They can do this effectively because they are not operating on 4-6 year political cycles - they can do 5-10-longer cycles of careful planning
  • Factories are cheaper in India, Vietnam ($6 in China, $3 in Vietnam or cheaper in India)
  • Generally speaking technology drives productivity gains but its deflationary
  • DallE2
    • Now Ben Hur can be made by AI
    • Think what will happen in the future
• BlackRock lost $1.7T in 2022
  • BlackRock is basically index funds - just reflects what we already know that stock market is down this year
  • Hard to beat index funds as an active fund manager
  • If central bank is involved, its hard to beat index funds, if not then active funds can win
• Public markets are so competitive - you have to do no work to buy Disney stock for example
• Private markets are different, you have to do a lot of work for the companies, thats why they choose you - in return there is less competition, not everyone can invest in it, the information and access is not public
• Environment is different right now - term sheets are getting pulled
• It is very hard to return more money than you have taken in
• Amazon hires One Medical for $3.9B for 182 franchises which is $21M per franchise
  • Synergy between this and Whole Foods
    • They can get a network of doctors that can do telehealth
    • Can hop on, get a prescription and medicines delivered in 1 hour
  • One Medical doctor will order a blood test, do analysis on telehealth and then food for that plan will come from Whole Foods
  • Google doesn’t know how to do messy things in the real world
  • This was done without Bezos at the helm - so they can continue to innovate - so its impressive to see this
  • Sacks’ friends Amir Ruben is CEO of One Medical
• Crypto people investigated by SEC for liquidating positions