Global Market Comments
December 12, 2024
Fiat Lux
Featured Trade:
(THE MAD HEDGE DECEMBER 3-5 SUMMIT REPLAYS ARE UP),
(THURSDAY, JANUARY 16, 2025 SARASOTA FLORIDA STRATEGY LUNCHEON)
(SEVEN REASONS WHY THERE WILL BE NO TRADE WAR)
Listen to all 22 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals.
The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here.
We look forward to working with you and the next summit is scheduled for December.
I am a firm believer in the wisdom of crowds.
This means that markets made of millions of participants can see things well before any individual human can.
The consequences for your portfolio can be earthshaking.
So, while the president campaigned on promises that he would immediately impose a 25% import duty on Canada and Mexico, here we are, some 38 days post-election, and many stocks that would suffer from a trade war are doing nothing.
In other words, there ain’t going to be no stinking trade war.
Markets came to this conclusion months ago. You could see this in a whole host of different and disparate asset classes.
Technology is the big one.
The biggest victim of any trade war would be technology firms, which operate the most globalized business models on the planet.
They design products here in the US and use slave labor in China to assemble them for pennies on the dollar, free of wage, OSHA, environmental, health, and child labor concerns.
They then sell them in the US and around the world for enormous profits.
In a world careening off the globalization cliff, you would expect Apple (AAPL) shares to get a pasting.
Yet, the jewel of Silicon Valley has seen its shares rocket by 38.46% since the November 5 election and an eye-popping 12.27%.
Remember, at $3.73 trillion, this is the largest public company in the world doing this! While no one was watching, (AAPL) approached an incredible $4 trillion market cap.
No trade war here!
Look elsewhere across the investment universe, and you see the same thing happening everywhere.
Emerging markets (EEM), whose economies are highly dependent on a functioning global trade system, have been unchanged since November 5.
And what has been the best-performing emerging nation?
Mexico (EWW), which has usurped about one-third of the US car industry. The (EWW) is up slightly since the election.
Guess what?
Not only is there not going to be a stinking trade war, but there isn’t going to be a stinking wall with Mexico either, just a token, Erector Set, pretend one. A budget-balancing Congress won’t pay for it.
China ($SSEC) is posting respectable gains, up 6.3%. What’s more, stock markets in Japan (DXJ) and Europe (HEDJ) have been edging out gains.
So, where did the trade war go?
I’ll list seven of the most obvious reasons.
1) The US has been a massive beneficiary of the globalized trade system. It has allowed America to remain the world’s most dominant and successful economy since WWII.
It has also preserved the US dollar as the world’s preeminent reserve currency, an enormous free lunch for US citizens.
2) American companies have been globalizing for 80 years, making them the most efficient and profitable on the planet.
Many trillions of dollars have been poured into foreign manufacturing and distribution systems. It all runs like a fine-tuned Swiss watch.
It cannot be undone or turned off by the slash of a pen on an executive order. Companies are better off paying lip service to the White House, which they have been doing on a daily basis, and then carrying on as they always have been.
4) To retreat from globalized business models would reduce the profitability of US corporations and send share prices plummeting. There’s no way you increase labor costs from $8 an hour to $80 and then increase your dividend.
5) A retreat would also hand over the international trading system to the Chinese, not exactly a development in America’s self-interest.
6) Some of the most ardent globalizationists I know are the generals and admirals of the US military.
7) Not only are Americans making fortunes off of globalization, so are foreigners. Wealthy customers are the best ones to have. If they are getting rich off you, they tend not to bomb you.
When notified that the State Department budget was going to get cut by 30%, former Defense Secretary James Mattis, a friend, replied, “Then I’m going to need a lot more bullets.”
Bottom line: It’s cheaper to talk to people than to kill them.
Those who were around during the early days of the globalization, like myself, remember that it was originally conceived as a national defense strategy.
By trading with a potential adversary, you create an embedded core of local businessmen who don’t want any political stability or wars to interrupt their profit stream. When Putin came back into power, the first thing he did was remove Russia from the global trading system.
Since there isn’t going to be a trade war, the investment implications are obvious.
You want to use every dip to load the boat on every globalization stock out there, especially in technology.
How do You Spell “Made in USA?”
“People are investing with a rear-view mirror. Last year, you had people scared out of the market. Unfortunately, you are losing a generation of investors at a time when they ought to be thinking about buying high quality stocks,” said Hersh Cohen of Clearbridge Advisors.
In a bold strategic move that signals the company's commitment to technological innovation and global market penetration, Alibaba Cloud is embarking on an ambitious expansion of its artificial intelligence and cloud services across Asia, supported by a comprehensive new partner ecosystem and a meticulously crafted global expansion plan.
The Changing Landscape of Cloud and AI Services
The global technology landscape is experiencing unprecedented transformation, with cloud computing and artificial intelligence emerging as critical drivers of digital infrastructure and innovation. Alibaba Group Holding Limited (NYSE: BABA), a technology giant with deep roots in e-commerce and digital ecosystems, is positioning its cloud division at the forefront of this technological revolution.
Alibaba Cloud, the cloud computing arm of the Alibaba Group, has traditionally been a dominant force in the Chinese market. However, recent strategic initiatives indicate a significant shift towards broader regional and global market penetration, particularly in the rapidly evolving domains of artificial intelligence and cloud services.
Strategic Partnership Ecosystem: A Collaborative Approach
Central to Alibaba Cloud's expansion strategy is the development of a robust partner ecosystem that leverages local expertise, technological capabilities, and market insights across different Asian markets. This collaborative approach distinguishes Alibaba's strategy from more conventional, centralized expansion models.
Key Partnership Dimensions
- Technology Partnerships - Alibaba Cloud is forming strategic alliances with leading technology firms, research institutions, and innovative startups across Asia. These partnerships are designed to create localized AI and cloud solutions that address specific regional technological needs and challenges.
- Regional Integration - The company is focusing on creating deep integration points with local cloud infrastructure, telecommunications networks, and enterprise ecosystems in countries like Japan, South Korea, Singapore, Indonesia, and India.
- Startup and Innovation Acceleration - By establishing dedicated innovation centers and investment programs, Alibaba Cloud aims to nurture local technological talent and support emerging technology companies in developing cutting-edge AI and cloud solutions.
AI Capabilities: Beyond Traditional Cloud Services
Alibaba Cloud's AI strategy goes far beyond traditional infrastructure-as-a-service offerings. The company is developing comprehensive AI platforms that provide enterprises with advanced machine learning tools, natural language processing capabilities, and industry-specific AI solutions.
AI Technology Highlights
- Customizable AI Models: Enabling businesses to develop and deploy machine learning models tailored to their specific operational requirements
- Generative AI Frameworks: Providing advanced generative AI tools for content creation, design, and complex problem-solving
- Enterprise AI Integration: Offering seamless AI integration capabilities across various business processes and technological stacks
Market Expansion Dynamics
The expansion strategy encompasses multiple dimensions, reflecting a nuanced understanding of diverse regional technological landscapes and market dynamics.
Geographical Focus Areas
- Southeast Asian Markets - Countries like Singapore, Indonesia, and Vietnam represent critical growth zones with rapidly digitalizing economies and increasing technological adoption rates.
- East Asian Technology Hubs - Japan and South Korea, known for their advanced technological infrastructures, are key targets for Alibaba Cloud's sophisticated AI and cloud offerings.
- Indian Technological Ecosystem - With India's massive digital transformation and burgeoning startup ecosystem, the market represents a significant opportunity for Alibaba Cloud's expansion initiatives.
Technological Investment and Research
Alibaba is committing substantial financial and intellectual resources to support its cloud and AI expansion. The company has announced significant investments in research and development, with a particular focus on:
- Advanced machine learning algorithms
- Quantum computing research
- Edge computing technologies
- Sustainable and energy-efficient cloud infrastructure
Competitive Landscape and Differentiation
In a market dominated by global cloud giants like Amazon Web Services, Microsoft Azure, and Google Cloud, Alibaba Cloud is differentiating itself through:
- Deeper regional understanding
- More flexible and customizable solutions
- Aggressive pricing strategies
- Strong focus on AI and emerging technologies
Challenges and Potential Obstacles
The expansion strategy is not without challenges. Potential obstacles include:
- Complex regulatory environments across different Asian countries
- Intense competition from local and international cloud providers
- Geopolitical tensions affecting technology partnerships
- Data sovereignty and localization requirements
Economic and Technological Implications
Alibaba Cloud's expansion represents more than a corporate strategy—it signifies a broader shift in the global technological paradigm. By creating a more interconnected and locally responsive cloud and AI ecosystem, the company is contributing to the democratization of advanced technological capabilities.
Potential Impact
- Accelerated digital transformation across Asian markets
- Enhanced technological capabilities for small and medium enterprises
- Creation of new job opportunities in technology and innovation sectors
- Increased accessibility of advanced AI tools
Financial Outlook
While specific financial projections are closely guarded, industry analysts suggest that Alibaba Cloud's strategic expansion could significantly contribute to the company's long-term revenue growth. The cloud and AI services market in Asia is projected to grow exponentially, with estimates suggesting a compound annual growth rate of over 25% in the coming years.
Conclusion: A Strategic Vision for Technological Leadership
Alibaba Group Holding Limited's cloud division is not merely expanding—it is reimagining the future of cloud computing and artificial intelligence in Asia. By creating a dynamic, collaborative, and technologically advanced ecosystem, the company is positioning itself as a pivotal player in the global digital transformation narrative.
The strategy reflects a holistic approach that goes beyond technological capabilities, emphasizing regional understanding, collaborative innovation, and a commitment to empowering businesses through advanced digital solutions.
As the technological landscape continues to evolve rapidly, Alibaba Cloud's comprehensive expansion plan represents a bold and strategic approach to global market engagement. The coming years will be crucial in determining the success of this ambitious initiative and its potential to reshape the cloud computing and AI services landscape across Asia and beyond.
Mad Hedge Technology Letter
December 11, 2024
Fiat Lux
Featured Trade:
(OPTIMISTIC FUTURE FOR GOOGLE)
(GOOGL), (AAPL)
It isn’t a surprise that the Department of Justice is going after Google (GOOGL) to divest its Chrome browser following a ruling in August that the company holds a monopoly in the search market.
I don’t believe this will tank the cash cow business of Google Search, and let’s not forget the most likely outcome is that Chrome is retained as a division of Google.
At worst, if it does get divested, the appeal process takes many years.
Although I do believe it will become harder for Google Search to track and monitor user behavior without Google Chrome, this is by no means a deal breaker.
Plenty of traffic comes from completely different operating systems like Apple (AAPL) iOS that don’t employ the Chrome browser.
In fact, spinning out its browser would result in a massive windfall because the current setup hides the aggregate value and synergies within a larger corporation.
Once Google Chrome is spun out, animal spirits could take hold, and the value could skyrocket.
Google will naturally profit from this as well.
Chrome, which Google launched in 2008, provides the search giant with data it then uses for targeting ads. The DOJ said in a filing that forcing the company to get rid of Chrome would create a more equal playing field for search.
The DOJ said that Google will be prevented from entering into exclusionary agreements with third parties like Apple and Samsung. The department also said that Google be prohibited from giving its search service preference within its other products.
Search advertising accounted for $49.4 billion in revenue, representing three-quarters of total ad sales in the most recent period.
The DOJ’s request represents the agency’s most aggressive attempt to break up a tech company since its antitrust case against Microsoft, which reached a settlement in 2001.
In August, a federal judge ruled that Google holds a monopoly in the search market.
Also, the DOJ suggested limiting or prohibiting default agreements and “other revenue-sharing arrangements related to search and search-related products.”
The most likely outcome is that Google will be legally forced to do away with certain exclusive agreements, like its deal with Apple. I also don’t believe that Google will be forced to divest from the Android operating system, and the chances of that happening are almost zero.
Even without an exclusivity agreement, most Apple users use Google Chrome because it is still the most useful search engine.
Will that be the case in the future?
With AI changing business models left and right, it is hard to say, but in the interim, it is hard to believe that a lack of exclusivity agreement will cause any meaningful change to the bottom or top line in the next few years.
Breaking up parts of Google would result in a massive windfall for shareholders, strengthen the tech ecosystem, and make Google and its spinoff entities more competitive.
However, high-up executives are wary about voluntarily dumping revenue from the mothership because it hurts negotiating leverage when agreeing on future compensation, and that is what usually standalone corporate executives care about.
I believe spinning out some of these businesses, like Waymo, Google devices, Google Maps, and YouTube, would be great for America and give an opportunity for investors to jump into great tech companies before they skyrocket.
“You want to be the pebble in the pond that creates the ripple for change.” – Said CEO of Apple Tim Cook
(BUY PRODUCTS NOW BEFORE TRUMP TARIFFS HIT)
December 11, 2024
Hello everyone
ON THE RADAR TODAY
November CPI report.
Economists expect a monthly increase of 0.3% for both the headline CPI reading and core CPI, which excludes volatile food and energy prices. The November producer price index, scheduled for Thursday, is expected to show an increase of 0.2% in its headline and core readings. The thinking on Wall Street is that the Fed is highly likely to cut interest rates next week if inflation comes in at or below expectations in those two reports. Still, there is an element who disagrees and believes the Fed will hold if the CPI reading came in above 0.40%. The Labor market remains front of mind for the Fed.
WHAT TO BUY BEFORE TRUMP’S TARRIFS ARE ROLLED INTO PLACE
According to Trump’s policy promise, he plans to issue a 25% tariff on products from Canada and Mexico on his first day in office, as well as an additional 10% on top of the rates still in place from his first administration on Chinese imports.
The importers paying the tariffs will likely pass them on to consumers.
Many retailers are already preparing their customers for increased prices and encouraging them to shop now.
Of course, it’s unclear how much prices will increase and which specific items will be affected, but it would be a good idea to start thinking about any large purchases you might be planning. For instance, do you need to upgrade your iPad or your MacBook? My advice: Do it now.
These are some of the categories where prices are expected to increase.
Laptops and tablets
Videogame consoles
Smartphones
Apparel, footwear and accessories
AUSTRALIAN NEWS CORNER
The Reserve Bank of Australia keeps interest rates on hold at 4.35%. People hoping for an early Christmas gift from the RBA were let down once again. Now, the odds are that the RBA won’t start to cut interest rates until about April next year, so Australia still has some time to wait.
WORLD NEWS CORNER
Syrian regime falls. Assad flees to Russia. Full implications are still unfolding, but the hope is that the factions that make up the rebel force can work together to bring some semblance of stability to the country.
QI CORNER
SOMETHING TO THINK ABOUT
Cheers
Jacquie
Global Market Comments
December 11, 2024
Fiat Lux
Featured Trade:
(JANUARY 10 MIAMI FLORIDA STRATEGY LUNCHEON)
(THE BEST TESTIMONIAL EVER)
