National Security

Here’s a list of recent national security measures some countries have taken:

• Indonesia changes its mind more often that a crack addict regarding its commodity exports, at one point it bans the export of coal, then the next month it allows it, then it decides to ban the export of CPO, and then flip flops with the type of CPO to be exported, and …..
• Malaysia has just decided to ban the export of chickens to Singapore.
• Russia/Ukraine is still ongoing which has led to multiple issues with the wheat/flour market, aspects of which have yet to really hit the businesses until 2H when the harvest is usually supposed to occur.
• Fertiliser prices have increased a lot and several farmed product prices have not (personally I have experience w/ mango n longan farming – we aren’t seeing price increases to offset the increase in fertiliser prices)
• India has recently announced measures limiting its sugar exports to 10m tonnes effective from Jun 1 through Oct 31, 2022
• What’s next? Oil export bans? Oil isn’t coming down anytime soon, unless there is a huge demand shock globally. Perhaps people are re-learning (since 2007/8) that oil is actually used in every product and we have that the ESG mandates have been absolutely ridiculously implemented. Who doesn’t want to save the world? Great marketing. Utter bs implementation. Enjoy oil at 150-200 and then we’ll see real havoc.

Others:

• China’s ridiculous zero-covid policy, wasn’t this the country that apparently built 10’s of hospitals when the wuflu first started to save mankind?

But at the end of the day, this is what is making investing incredibly fun and active at the moment, volatility is fantastic and I am thoroughly enjoying it.  Further when you’re in markets which are retail dominated, these are even more volatile, retail typically pushes names (sub large caps) far too high and too low, and normally when a mid cap enters into large cap territory then the funds pile in exacerbating any move, and vice versa on the way down. This is such a wonderful time to be an investor. One week you can find a basket of names that give you plenty of upside for the next 6-12 months and then the next week for whatever reason, the prices are realised. (ok I’m exaggerating a bit on the timeframe but you get my point)

The Big Boys are getting Bigger

STARK plans to acquire 100% stake in LEONI Kabel GmbH (Germany based) and LEONIsche Holding Inc (US based), referred to together as “LEONI”. From the brokers “One of the leading automotive cable manufacturers in European and US markets, supplying its products to various of well-known carmakers in the regions and some Chinese EV makers. Its products range from traditional cables for ICE cars, fast-growing cables for EV applications, and charging cables for E-mobility platforms.”

STARK is just going for the entire cable chain.

BDMS

From the brokers “BDMS announced to the SET that it is setting up a company, BDMS Silver Company Limited, with a registered capital THB5b to develop the BDMS Silver Wellness & Residence project. the new company (or BDMS) will lease a plot of land from the Crown Property Bureau to house this project.  This is a 13 rai plot of land on Langsuan Road, in the heart of Bangkok. The leasehold will be 30 years and renewable of another 30 years. “

Another crown jewel for the plc so to speak. Now…notice that you’re not reading news about the big players in Thailand accumulating assets targeted for the low-mid income earners.

Howard Marks Latest Memo

https://www.oaktreecapital.com/docs/default-source/memos/bull-market-rhymes.pdf

My fav snippet

In On the Couch (January 2016), I wrote, “in the real world, things generally fluctuate between ‘prettygood’ and ‘not so hot.’ But in the world of investing, perception often swings from ‘flawless’ to‘hopeless.’” The way things are seriously overdone in the markets is one of the key characteristics ofinvestor behavior. During bull markets, investors conclude that difficult, unlikely, and unprecedentedthings are sure to work. But in less ebullient times, favorable economic news and “earnings beats” fail to inspire buying, and rising prices no longer make life painful for people who are underinvested. Thus, westop seeing the willing suspension of disbelief, and psychology flips to negativism

Bangkok gave a good ol’ middle finger to the military and friends

I would’ve preferred Chadchart as PM, but given the political situation in Thailand for the past 5 years he prudently stayed away and decided to only go for BKK governor and he won in a landslide. Now my dream for this country is that he does an amazing job 4 years as bkk governor and then becomes PM for 8. Thailand would go to the next level. But now I’d suggest you’d read Dr. T’s opinion as its always far more incisive than mine. https://www.bangkokpost.com/opinion/opinion/2316510/chadcharts-effect-on-thai-politics

“No doubt the going will get tough for Mr Chadchart. If he wants to do the job right, he will have to tackle corruption, fight against the BMA’s bureaucratic inertia, and confront big business that has been exploiting Bangkok’s consumers. When anti-establishment street protests calling for reforms of the royal institution returns, the new governor will be hard-pressed to stay out of the fray. There will be hard and dark violations of basic rights and freedoms that will come into his purview.

Moreover, the governor-elect will have to operate under the glare of plenty of critics and detractors in the military-backed conservative establishment who will surely want to see him fail, particularly Prime Minister Prayut Chan-o-cha himself, because Mr Chadchart’s success would expose their sheer incompetence and ineptitude shown after seizing and holding power without doing much for Thailand’s future.”

An unpublished letter.

I wrote this back in on the 23 March, rambling as I like to do, shared it with a few close friends, but decided to shelve it due to the tone being not overly positive. 2 months on, let’s share it, see how it holds up over time.

Do note, I’m not pro-Ukraine/Putin whatever, I view wars as utterly stupid events dictated by a mad few whereas the majority of the population suffer tremendously, and that goes for both the Ukrainian Citizens and the average Russian soldier that probably won’t be going home.

War wealth and opportunities 

Allow us to be callous, the situation between the Ukraine, Russia, NATO, the US etc has been positive for several of our core holdings as commodity prices continue to increase. This combined with the high probability scenario that the bifurcation of the world continues post covid will lead to further disruptions and price volatility in both the supply chain industry and the commodity industry. These disruptions will then further exacerbate the negative environment on companies, individuals and people that are already struggling to make ends meet in the current economic climate which will benefit our holdings in asset management companies in Thailand, those that purchase Non-Performing Loans from financial institutions or non-financial institutions that legally charge exorbitant interest rates (odd that in a low rate environment companies can still charge 15-30% p.a.), again companies that we own benefit from this.

Several industries are now faced with rising costs, elongated delivery periods, financial institutions that are unwilling to extend credit and the inability to pass these costs to customers. Naturally the larger players in the industry are going to benefit due to relationships, stronger “credit relationships” and the ability to raise capital – generally those that are listed on the markets. This again benefits the names that we hold that will likely take market share from smaller unlisted competitors.

Portions of society will then have to find happiness in a digital world as the real world doesn’t provide it, digital worlds and games are going to prosper – again another holding we have.

For another segment of society, traveling will begin, with holidays and business travels continuing to increase thereby resulting in positive outlooks for the luxury hotel and resort companies that we hold and the airline industry suppliers will continue to recover along with this trend. 

What do we think about current events? 

Putin is a convenient scapegoat for governments that enforced lockdowns upon their societies whilst now being shown to break their own rules and regulations, to divert the attention of the masses. 

Covid fear appears to have disappeared again as protests are allowed on the streets against Russia’s invasion of the Ukraine. But protesting against government mandates or restrictions were not permitted in the Western World. Or in Thailand against the government and the monarchical system. 

On social media, the same strategy appears to be playing out against those that question the narrative or to spin a tale for the masses. Apparent heroes or victims from Ukraine are making the news, the image of the injured old lady – now proven to be from 2018, is another example of this. 

What about the facts that the US and NATO had broken the written and verbal promises given to the former USSR and are now apparently surprised that a scared bear constantly pushed into the corner begins to bite back. 

Is Putin an opportunist? Absolutely, he took advantage of the western world weakness in 2008 (GFC) and 2014 (launch of QE) with Georgia and Crimea (source?). 

Why hasn’t the world figured out yet the source of Covid? And why is China continuing to get a free pass? 

How happy is the US Fed to see this play out so that they don’t have to raise interest rates? Great for us, stocks up. Great for the continuing wealth divide in societies. 

What will happen if this situation elongates? Ukraine is one of the world’s largest wheat exporters (40%), Europe relies on Russian Gas to stay warm due to their ridiculous policies to go green. The cost to the average consumer is only going to increase for basic food and energy. And now if governments decide to increase taxes to make up for the covid spending policies, this will only continue to worsen consumer affordability. Again, all positive for the companies that we hold.