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   Gold/Mining/EnergyBig Dog's Boom Boom Room

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To: JimisJim who wrote (199277)6/15/2019 12:26:46 PM
From: kidl
   of 205674
Ditto to your comments.

This part of your post looked after my morning smile requirement:
“Both China and Trump hold losing hands”

“The United States of Trump” … It’s coming! LOL

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To: JimisJim who wrote (199277)6/15/2019 12:42:22 PM
From: miraje
1 Recommendation   of 205674
There are no winners or losers in trade wars

Of course there can be winners and losers in tariff disputes, just as in military wars. To be on topic with this thread, OPEC's policy decisions, which could be considered as trade wars, creates winners and losers in global energy markets, as well as in investment decisions that are discussed here.

I have no wish to drag politics into this thread, but I am cognizant of the fact that trade, economics and politics are intertwined, energy issues being no exception.

When Big Dog was actively monitoring this board, he would put a stop to egregious and often off topic political postings. Perhaps an active moderator might be needed here again, if OT postings get out of control..

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To: miraje who wrote (199279)6/15/2019 1:55:21 PM
From: JimisJim
1 Recommendation   of 205674
Oh, I'm sorry, there likely will be some potential winners in the China/Trump trade wars: Argentina and Brazil stand to sell a lot more grain... South Korea and Taiwan are selling more electronics and making more of them as trading these between China and the US is falling... Vietnam is already "stealing" from both China and the US a lot of the sort of stuff that major international companies need doing or making... forget cars and trucks, Mexico is the 2nd largest exporter of computer gear to China and the US (as they trade less and less of that stuff themselves)...

Finally, I find this quote quite illuminating on the topic:

"Shifting supply chains is costly, and businesses try to avoid it. Many analysts predict that once new supply chains form they will tend to stick around, even if the U.S.-China dispute cools. Trade-war winners could enjoy long-term gains even after a truce.

Of course, counting on any such gains is risky. A trade war that torpedoes global growth or leads to a recession in the United States would likely sink all boats."


The one thing a majority of all political parties and macro-economists overwhelmingly agree on is that capitalism and world economies (including China and the US) work best when all or almost all global trade is free -- i.e., free trade is the lynchpin of capitalism and most developed nations' GDP.

OPEC was not a trade war... it was what we'd call an economic sanction, just like oil out of Iran. Note that OPEC was not "fighting" against any single nation, but the entire global GDP (and arguably themselves). In the end, OPEC became irrelevant and in that sense, they lost their war on the rest of the world -- many of its members are in economic shambles now and even the Saudis have lost bazillions as they supplement former energy sales income with cash from their sovereign funds...

Even when Big Dog was around sporadically, I doubt he ever mentioned "egregious and often off topic political postings" more than once a year when many of us would PM to police the board -- perhaps this board has outlived its usefulness if the only way to spark discussion and posts is to discuss these sorts of things... esp., considering Big Dog's last post here was to the effect he was moving on in life and leaving this board behind.

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To: JimisJim who wrote (199280)6/15/2019 3:38:57 PM
From: E_K_S
2 Recommendations   of 205674
If those new supply chains come back to the U.S. as a result of new high tech manufacturing, then U.S. and consumers are the winners.

Just look what US did w/ domestic shale oil and NG development. The US now is the leader in worldwide production just 10 years ago it was the Saudi's. The world trade is dynamic and always changing. Tariff's make those changes get done faster (via the implied tax) and typically to the benefit of the Country imposing those tariffs (look at Japan and the EU w/ their auto tariffs).

There will always be disruption in the markets. I personally see a Next Generation smart AI assisted manufacturing as the disruptive technology. Think of large scale 3D-printing and AI assisted automation. This is now being done at the new MN plant for AGCO. They use AI assisted software in their flexible custom tractor assembly. They still have workers but are much more efficient as tools, JIT inventory (delivered by automated robots), testing is all done by computer/robots and guided by the human assistant. Final tests are done by computer and they even fill all liquids (oil & lubricants), air etc by AI/computer machines.

Much of those tractors produced in MN are shipped into Europe & Germany (even w/ tariffs and farmers still buy those products).

The one thing you can not change really are the costs related to logistics/transportation delivered to the final end user. You cut those costs by manufacturing/assembly at the closest delivery point to the end user.

Now think ahead . . . what if you had super efficient automated AI manufacturing (using next generation 3D printing) located in facilities at/near each Amazon distribution center. Remember, all those 3D-printers are still linked to some intelligent network updated in the cloud.

There is no need to build/assemble in China and then ship across the world back to the U.S..

It's all changing and markets may/can create companies to change based on efficiencies and/or Governments can motivate that change by using taxes and tariffs (think of the proposed carbon tax).

Just like US shipping our recycling to China. China takes that cardboard and makes boxes that is shipped back to the U.S. and used by Amazon to deliver products to local customers. We really need to tax that recycling stream so it is recycled at the local level (that's like a tariff).

The EU has been using tariffs to promote local manufacturing for years (as has Japan).

I am very excited about the future of very smart AI/robotic manufacturing and the sooner the U.S. promotes & installs this inside the U.S. (for US consumers), the better the U.S. will be at exporting these technology manufacturing systems to other countries (remember manufactured products must be close to the end consumer).

The key for investors is (1) to recognize the disruptive changes and (2) to invest in those companies providing solutions. The US has many of those companies and the best engineers in the World to effect this change.

I love the US for that and we really need to make huge investments in our Human Capital (get rid of student debt). Maybe Congress/Senate can do a multi Trillion deal that promotes investment in our Human Capital so we can stay the leader in this AI/Manufacturing change.


"Give us a protective tariff and we will have the greatest nation on earth." Abraham Lincoln
"Experience has taught me that manufactures are now as necessary to our independence as to our comfort" Thomas Jefferson

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To: E_K_S who wrote (199281)6/15/2019 3:46:12 PM
From: JimisJim
1 Recommendation   of 205674
EKS, we've "known" each other a long time now... let's just agree to disagree -- neither of us will change our minds, looks like, so why continue discussing something we'll never resolve until it is far back in hindsight -- if I'm still alive.

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To: E_K_S who wrote (199281)6/15/2019 9:31:19 PM
From: Elroy Jetson
2 Recommendations   of 205674
Many of the supply chains are moving from China to Mexico, which we could say is "America-adjacent". Most maquilladores are located within 3 miles south of the American border. We can't ship our homes, restaurants, and hotels to Mexicali, so the gardeners, housekeepers, and chefs working illegally at our homes restaurants and Trump resorts come to America.

The fact that wages just 3 miles south of the US border are 53% less than the wages in rural China, explains why supply chains began to move from China to Mexico six years before Donald Trump was elected. -

Also for a lot of products, the faster turn-around time from Mexico is really important compared with 5 week container-ship time from China.

CNIME said that the average maquiladora wage is 70 pesos per day (Mexico $8.50 for a standard 12 hour work-day). -

Wages in urban China are now 20 Yuan per hour, ($2.89 per hour), while even in Liaoning, rural noutheastern China the minimum hourly wage is 10.50 Yuan / $1.52 per hour - or (China $18.24 for a 12 hour day).

In my opinion the primary problem we need to solve with China is enforcement of US and European intellectual property, and the disclosure of communist party subsidies to China's various businesses - so we can set appropriate countervailing tariffs. The Commerce Department's "Listed Entities" is a lot more effective than 25% tariffs, but even applying both I assume China won't agree.

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To: JimisJim who wrote (199280)6/16/2019 12:10:33 AM
From: t4texas
   of 205674
are you aware us soybeans are being sold to the bean crushers in brazil, and the us beans have more protein in them than the brazilian beans? that is because the soil in the soy bean growing areas of brazil is not as good as the us soil. the crushed beans from the us are being shipped to china. soybean volume for feed for pigs in china is way down anyway, due to the devastating african swine fever that is reducing the pigs by 25 to 35% (maybe more). i would say if things don't get better in the pork area in china(and they won't), the chinese, who have to have their pork will cause the government to buy a lot of us pork.

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To: t4texas who wrote (199284)6/16/2019 9:02:37 AM
From: Elroy Jetson
1 Recommendation   of 205674
Agricultural products from the US land raw materials like steel from China are pretty fungible.

The immense firms Cargill and Louis Dreyfus buy and process soybeans in both America and Brazil, so it's inevitable American soybeans continue to flow to China.

The diversion just means more costs, and thus lower prices for US farmers.

The largest American pork grower and processor, Smithfield Foods, based in Smithfield, Virginia was bought by WH Group of China in 2013 for $5 billion and has huge operations in Mexico as well.

If Smithfield can't sell US pork in China due to tariffs, they will be selling them the pork from their Mexican farms, along with Mexico's largest pork producer, Granjas Carroll. -

Trump eliminated steel and aluminum tariffs on Canada provided they institute tracing to avoid these metals from China from being sold in the US as Canadian, but like soybeans and pork, it won't be possible to completeley eliminate this.

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To: E_K_S who wrote (199281)6/16/2019 10:09:21 AM
From: robert b furman
   of 205674

Great post - I agree completely on your vision.

With AI cheap labor becomes displaced.

Robots work 24/7/365 - people want time off.


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To: Elroy Jetson who wrote (199283)6/16/2019 12:45:01 PM
From: E_K_S
   of 205674
My guess is that manufacturing (employee) wages will be a smaller part of the cost of production in the future so it will not be a significant factor in the value chain (as it it now or in the past).

The value proposition decision will be to make those products as close to the end consumer as possible (w/i miles not in other Countries) as transportation/logistic expenses will be the largest component in the value chain. It is critical we invest now in our human resources as the new labor force will need to know how to build/manage and maintain these next generation manufacturing technologies.

As an example, look at oil exploration/drilling and or mining where more technology is used to find and extract the resource. I have followed many mining companies and they are investing large amounts of capital in automation, specifically smart autonomous mining equipment and it's working. Driverless Trucks/Cars and delivery vehicles are all in stages of development. Kroger has test sites (in AZ) for autonomous delivery of groceries and prepared meals.

The big political 'bomb' that must be addressed are all the 'unfunded' pension liabilities at the Federal, State and local levels and how that will be financed in the future. Interactive map of pension liability by state.. (Looks like Alaska, California and Illinois the worst at $25k per person unfunded. Tennessee appears to be the lowest by far (actually not a surprise to me but the gap with the rest of the pack was)

Unless pension funds around the nation continue to earn 7% or more per year on their investments, it’s likely that taxpayers will be on the hook for trillions of dollars of promises to government unions. These promises have been made by politicians past and present, resulting in pressure to increase taxes and cut government services. (Negative interest rates will just make the problem worse)

I do agree w/ your view on enforcement of intellectual property for China but also for every country/business/individual that does not license and/or follow the copyright rules.

Tariffs are but one way to enforce compliance. Even my example of local recycling where we send containers full of our garbage to China and get boxes in return really s/d be processed locally and/or by the manufacturer providing in-store collection. Local/State and Federal policies could promote better recycling through taxes and/or manufacturing guidelines.

We live in interesting times and change is good.

FWIW, I do not agree w/ a Carbon Tax but do like the general discussion (by all groups) on solutions to use our resources more efficiently.

Have you noticed the big investments that Exxon has made in Solar. So the market forces are working.

I continue to look for investment opportunities in companies that are developing (profitable) solutions to many of these social/environmental manufacturing problems. But sometimes you need broad action through Executive Order(s) to effect change.

Good Investing


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