Mad Hedge Technology Alerts!
Tariffs on Chinese EVs skyrocketing by 400% are just another example of the federal government getting in the way once again as the current administration limps to the November starting line.
These levies are directed at everything central to producing EVs like the battery and the car itself.
I understand that the point is to protect EV companies at home, but tariffs don’t work and in almost every case, the end price to consumers rises painfully.
It’s not any better over the Atlantic so this frees us China to innovate and get ahead with government support.
The Chinese are playing the long game.
This review of Chinese tariffs was triggered by the administration before it, and it just smacks of inefficiency to me. It only took 4 years to finish the review as infighting took hold and the glacial pace finally ended with a decision.
In fact, Biden's $7.5 billion investment in EV charging has only produced 7 stations in two years, per Washington Post.
Where did the rest of the money go?
My guess is carrying out a raft of economic surveys isn’t cheap when there are no guard rails in price setting.
Maybe the thousands of consultants giving their 2 cents to keep that bureaucratic machine humming in Washington made a dent with another few billion invoices.
I’ll at least give it to the White House that they were able to produce 7 and not 1 or 2.
A billion dollars per EV charger is not good enough in 2024 while the Chinese forge ahead with their technological prowess.
The Chinese tariff rate on electric vehicles is expected to quadruple from roughly 25% to 100% plus an additional 2.5% duty would apply to all automobiles imported into the US.
The EU launched an EV subsidy investigation in October that may lead to additional tariffs by July as well.
The tariffs would likely have little immediate impact on Chinese firms since its world-beating EV manufacturers have steered clear of the US market due to tariffs.
Its solar companies mostly export to the US from third countries to avoid curbs, with US firms seeking higher tariffs on that trade, too.
The move comes after Biden last month proposed new 25% tariffs on Chinese steel and aluminum.
Protecting the American EV sub-sector feels like a situation in which China is outcompeting American EV companies and the government is directly reacting to that in an emotional way.
My guess is that it won’t work.
China will be able to circumnavigate these tariffs easily. It’s impossible to put the genie back in the bottle once it is out.
The only way American EVs will find a solution is to innovate itself away from the competition and that will be tough with the level of interruption by the Federal government.
Sooner or later, these better-made Chinese cars will find themselves in Europe and America on a grand scale.
If the government would get out of the way, tech companies would be forced to innovate or die.
A main strategy of stopping the Chinese from selling to you is a wack-a-mole strategy and the products will eventually arrive,
I am strongly bearish the American EV sub-sector at this point.
This is another tech sub-sector that has turned stale, similar to the streaming sub-sector where I just took profits in a bearish Roku trade.
Why doesn’t the admin go after the Chinese unrealized profits while they’re conjuring up some more tariffs? I wouldn’t put it past them.
Mad Hedge Technology Letter
May 8, 2024
Fiat Lux
Featured Trade:
(THE TECH STOCK HAS MORE ROOM TO RUN)
(ANDREESSEN HOROWITZ)
There is more room for stocks to extend themselves to the upside, which is great news for many who think we might be reaching the last gasp up in tech.
We aren’t there yet and the longest late-cycle bull market continues.
It certainly isn’t over - we received some timely commentary from one of the most prominent venture capital firms in technology, Andreessen Horowitz.
The company isn’t afraid to tell the truth.
Sometimes that means sticking in where it really hurts like a jab to the gut in an industry where most people get their feelings hurt quite easily.
I understand the bravado partly results from the mountains of success that have preceded them, but nonetheless, it is refreshing to hear from successful people who have their pulse on the tech sector.
Google might be among corporate America's favorite success stories, but some people aren't convinced Big Tech is operating as efficiently as it could be.
There is still a lot of frittering away in Mountain View, California or that is what Andreessen Horowitz has to say.
The venture capitalist firm said that most Google workers don’t really do anything.
What do I mean by that?
To do nothing “except complete a 10-minute task every now and again” is what they said.
Some workers used their weekdays to learn how to scuba dive or go for a Thai massage because there wasn’t much for them to do in the office.
Companies retaining a bloated headcount with people who don't actually help drive the company forward shows how profitable these companies are.
When push comes to shove and a recession slams us blindly, Google will know what to do with these workers.
The company later said a “bunch of people” in large corporations are working “BS jobs.”
“Anyone who works in a 10,000+ person or larger white-collar job company knows that a bunch of the people can probably be let go tomorrow and the company wouldn’t really feel the difference, maybe it’d even improve with fewer people inserting themselves into things.”
Much of the vendetta against tech workers isn’t all justified, but I do believe it is more about the top 10% carrying the load for the other 90%.
The top end of the talent pool is so brilliant, they are leading $2 trillion companies and that doesn’t happen with a bunch of morons, does it?
However, another trend I have noticed is that America could be running out of talent after exhausting India and China while work visas have never been harder to procure.
After getting rid of the bad workers, will there be those superstars that move the window and that is a big doubt moving forward.
Talking with people in the know, there is great uncertainty with the direction of big tech as nobody understands what will really succeed the smartphone.
The smartphone was that one vehicle of profit that all companies knew they had to make money from and now what is next?
Is it a virtual reality with all those goofy headsets giving people headaches?
Companies are pouring billions into figuring out what the next iPhone is and it’s more like throwing paint on the wall and seeing what sticks.
Luckily, the tech bull market should continue but many companies are facing existential threats due to lack of innovation and lack of top-end employee talent.
If innovation somehow takes a wild turn away from the AI path, many companies could blow up.
Until then, buy the dip in GOOGL until a black swan hits the industry or sub-sector. They have many ways to keep the stock from going down like their newly minted dividend which is a first in the company.
