Juggling Dynamite

Destructive financial incentives have wasted years of free cash on gimmicks like buybacks to boost share prices rather than productive long-term focused investment.  Then when high leverage implodes, as it always does eventually, the companies look to governments for bailouts.  We need to change course.  This segment offers some insight.

Car companies across the globe have had to idle production and workers because of a shortage of semiconductors, often referred to as microchips or just chips. They’re the tiny operating brains inside just about any modern device, like smartphones, hospital ventilators or fighter jets. The pandemic has sent chip demand soaring unexpectedly, as we bought computers and electronics to work, study, and play from home. But while more and more chips are needed in the U.S., fewer and fewer are manufactured here.

Intel is the biggest American chipmaker. Its most advanced fabrication plant, or fab for short, is located outside Phoenix, Arizona. New CEO, Pat Gelsinger, invited us on a tour to see how incredibly complex the manufacturing process is.

Here is a direct video link.

Stock markets and Treasury bonds are pricing two diametrically opposed investment outlooks from here. They can’t both be right.  For a lucid discussion on where probabilities lie see The Battle Royale: Stocks vs. Bonds (which is right?).

Productivity growth depends on capital expenditures, education, employee training, and new technologies. There are few signs spending in these areas is occurring at any greater rate than it has in the past decade. Worse, COVID-related stimulus and related spending point to a surge in non-productive debt and consumption. The additional non-productive debt burden will further hamper productivity growth.

My only complaint here is that Micheal, like most commentators, talks about “bonds” without making the distinction that he is talking about government bonds, not corporate bonds (that trade with the equity cycle).

Two of my favourite authors and thinkers…

Daniel Kahneman and Yuval Noah Harari in: ‘Global Trends Shaping Humankind’, a conversation moderated by Kara Swisher.  This session was a part of the 2021 Nexus Online Summit, organized by the American Friends of The Hebrew University. Here is a direct video link.