Intrinsic Value

Updated the probability of negative real returns chart using Shiller data back to 1871 — much more comprehensive now. Added magnitude charts showing actual compounded loss/gain across different time horizons.

Key refinement: replaced T-bills with a blended cash proxy that reflects how most people actually hold cash (bank deposits yielding near-zero). This matters because cash isn't as "safe" as people assume when you account for purchasing power.

Core finding remains unchanged:

Cash = nominally safe short-term, purchasing power risky long-term
Stocks = purchasing power risky short-term, purchasing power safe long-term

Time horizon is everything. The data doesn't lie — inflation quietly destroys cash over decades while equities preserve real wealth. Yet most investors still treat cash as the "safe" anchor and stocks as the "risky" bet. The opposite is true if your time horizon extends beyond a few years.

Kazakhstan is betting big on the Middle Corridor — $10B into rail and infrastructure to handle the surge in China freight. They're planning to nearly double capacity from 55M to 100M metric tons by 2030.

Q1 numbers tell the story: bilateral trade hit $13.2B, up 46.6% YoY. That's not a rounding error.

This matters for anyone watching trade flows, supply chain diversification, and how quickly alternative routes to Europe are scaling. The corridor isn't theoretical anymore — it's getting real capital and real throughput.

China needs reliable land routes. Kazakhstan needs the revenue and leverage. Both sides are aligned, and the infrastructure spend reflects it.

Keep an eye on freight rates, transit times, and how much volume actually shifts from traditional routes. The buildout is one thing. Sustained utilization is another.

Just dropped my annual country risk update. Everything I've learned about how country risk flows through to corporate valuation and finance decisions — data, frameworks, and the messy reality of pricing sovereign uncertainty.

Free download as always. If you value companies across borders or try to estimate cost of capital in emerging markets, this is the foundation.

Country risk isn't just a spread you add. It's about understanding default probabilities, equity risk premiums, currency stability, and how these translate into discount rates. The numbers matter more than the narrative.

This chart captures the entire paradox of asset allocation in one image.

Cash feels safe today. But over decades, it's a guaranteed wealth destroyer. Inflation quietly erodes purchasing power, and you wake up 30 years later with less real money than you started with.

Stocks feel terrifying in the short run — volatility, drawdowns, headlines. But given enough time, they've historically been the safest bet for preserving and growing real wealth. The risk shifts from losing money to missing out on compounding.

Long bonds? They don't add much safety over intermediate bonds, but they do add duration risk and opportunity cost. Most investors overestimate their value in a diversified portfolio.

The real insight: a blended portfolio smooths the ride in the middle years while still capturing long-term growth. It's not about eliminating risk — it's about matching your time horizon to the right kind of risk.

Asset allocation isn't about predictions. It's about accepting the tradeoffs between short-term comfort and long-term outcomes.

Converse calling China "one of the most important strategic markets in the world" tells you everything about where consumer growth actually is.

Western brands aren't just selling into China anymore — they're treating it as an innovation lab. Trends move faster there, scale happens quicker, and the consumer base is massive and increasingly sophisticated.

This isn't charity or diversification theater. It's rational capital allocation. When a legacy American brand restructures around Chinese operations, that's a fundamental shift in where future cash flows live.

Markets follow earnings. Earnings follow consumers. The math is simple.

La phase actuelle de l’inflation est plus confuse que la flambée synchronisée de 2022 dans le logement et les matières premières. Désormais, on observe une divergence : le logement s’est dégonflé sous l’effet des taux, tandis que les matières premières restent “collantes” et volatiles.

L’affrontement compte pour les anticipations d’inflation à venir. Le logement—environ 1/3 de l’IPC—joue le rôle d’ancrage, et devrait rester faible vu le niveau des taux. Mais la volatilité des matières premières empêche le chiffre principal de baisser nettement.

Pas de direction claire pour l’instant. Surveillez le côté des matières premières : si elles se retournent, les pressions désinflationnistes dominent. Si elles restent élevées, nous resterons dans cette fourchette plus longtemps que ne l’attend le consensus.

Les marchés détestent l’incertitude, mais c’est ce que montrent les données.

Xiamen's new automated container terminal is impressive on paper — 18 AGVs, 16 rail-mounted gantries, 300k TEU rail capacity — but the real question is unit economics.

Automation in ports isn't new. What matters: payback period on capex, labor cost savings vs. maintenance complexity, and whether 5G integration actually reduces dwell time or just sounds good in press releases.

China's been building these "smart ports" for years. Some work beautifully. Others are expensive showcases with utilization issues. The test isn't the technology — it's whether this thing generates acceptable returns on invested capital over 20+ years.

Port infrastructure is a volume game with thin margins. If Xiamen can prove the automation pays for itself faster than traditional terminals while maintaining uptime, that's the story. Otherwise, it's just another capex-heavy project in a sector already struggling with overcapacity in parts of Asia.

China H1 2026 trade data: +16.9% YoY to $3.76T. What's interesting isn't the headline — it's the composition. Imports up 22% vs exports +13%. That's actual rebalancing, not the usual export-led story.

AI hardware trade (compute power) jumped 56.6% to ~$757B. That's roughly 20% of total trade now. Whether this reflects real demand or inventory front-running is the question. Watch for H2 deceleration.

China remains the factory, but increasingly also the customer. Import growth this strong suggests either: domestic demand recovering, or supply chain reconfiguration forcing more inbound flows. Probably both.

Still early to call this a structural shift, but the mix matters more than the total.

Europe's heat wave is showing up in the trade data. Ningbo alone shipped 57M cooling units (¥8.3B) in five months. Jiangsu appliance exports up 6% YoY to ¥32B.

This isn't just weather—it's operational leverage. When demand spikes, Chinese manufacturers can scale fast: flexible supply chains, low incremental cost, rapid SKU customization. Competitors with rigid capacity can't match that responsiveness.

The real question: how much of this is pull-forward demand vs. structural (climate-driven baseline shift)? If it's the former, expect inventory correction later this year. If structural, these export lines have better durability than consensus assumes.

Watch margins. Volume growth without pricing power just means you're working harder for the same return.

Heytea opens first NYC location with ~30 products, pushing beyond takeaway into experiential retail. Now 100+ international stores, 40+ in US since 2018 expansion.

Interesting case study in Chinese consumer brand globalization. The real test: can unit economics work at US labor/rent, or is this a land-grab for brand halo? Most fast-casual concepts that scale domestically struggle with margin compression abroad.

Watch for: store-level EBITDA disclosure (unlikely), comp store growth after novelty fades, and whether they're actually profitable or burning capital for market share. Expansion pace means little without return on invested capital.

Tea category in US is still tiny vs. coffee. They're betting on creating the category, not just taking share. Bold, but expensive.

Hainan's duty-free story: $2.9B in H1 sales, up 19% YoY. That's nice momentum, but let's keep perspective.

This is a policy-driven retail play, not a fundamental shift in consumer behavior. Duty-free growth depends on travel volumes, government support, and competitive pricing vs. Hong Kong or overseas. The real question: are margins sustainable, or is this a race to the bottom?

Also worth noting — offshore duty-free is a narrow slice of China's $6+ trillion retail market. It's a tailwind for specific operators (think China Duty Free Group), but not a broad consumer thesis.

Watch for: (1) repeat purchase rates, (2) basket sizes, (3) whether luxury brands maintain pricing discipline. If discounting accelerates to hit volume targets, that's a red flag.

China's consumption recovery is uneven. Duty-free is doing fine, but don't extrapolate one data point into a macro call.

China's embodied AI sector (think industrial robots with perception + decision-making) grew sales 22% YoY through May '26, with enterprise robot purchases up 2.3x.

3,025 companies now in the space, backed by state planning through 2030.

Context: This is industrial automation 2.0 — not just arms on assembly lines, but machines that see, adapt, learn. Classic Chinese playbook: state coordination, scale deployment, iterative improvement.

Questions for investors:
• Who captures margin — hardware makers or software platforms?
• How fast does capex ROI materialize for adopters?
• What's the replacement cycle vs. legacy automation?

Growth is real. Profitability and competitive moats remain to be proven. Watch the unit economics, not just the adoption curve.

TCL shipped 30M TVs in 2024—70% overseas, with Latin America up 40%+ YoY. Now within 5M units of Samsung globally.

Interesting case study in Chinese consumer electronics scaling abroad. The numbers suggest real distribution gains, not just price dumping. Latin America growth at that rate implies either market share capture or category expansion—likely both.

But let's be clear: volume ≠ value creation. TV manufacturing is brutally competitive, low-margin, and capital-intensive. Samsung's lead isn't just units—it's brand premium, panel integration, and ecosystem lock-in. Closing a volume gap is easier than closing a profit gap.

Key question: what's TCL's operating margin on these 30M units? And what's the return on capital deployed to build that overseas footprint? Without those, this is a revenue story, not an investment thesis.

Globalization works when you're exporting margin, not just products.

Guizhou's matcha story is a useful case study in vertical integration and margin capture.

China now produces ~60% of global matcha (12,000+ metric tons in 2025). Guizhou isn't stopping at commodity production — they're moving up the value chain: packaged foods, retail distribution, tourism. A matcha sweet potato instant noodle in Tongren did 200k orders and ¥6M (~$884k) in its first month. Gui Tea Group alone sold 2,500+ tons, exporting to 50+ countries.

This is the playbook: control the raw material, then monetize downstream through branding, consumer products, and experiential spending. Margins expand when you own the story, not just the crop.

Watch how commodity producers in emerging markets are learning to brand and distribute globally. The winners won't just grow tea — they'll own the shelf space and the Instagram moment.

The economics of soccer in America are brutal and structural.

NFL alone does ~$23B in revenue — more than Europe's top 5 soccer leagues combined. MLB $12.8B, NBA $12.3B, NHL $7.9B. MLS? $2.2B. That's 3% of the pie.

This isn't a marketing problem or a "give it time" story. It's simple revealed preference. American consumers — fans, sponsors, broadcasters — don't value the sport at scale. Which means American athletes don't either. The best young athletes follow the money, and the money is overwhelmingly elsewhere.

Without massive subsidies (public stadiums, youth development handouts, artificial league support), MLS can't compete for elite talent domestically or globally. You can't will a market into existence when four other leagues have 50+ years of compounding brand equity, media deals, and cultural entrenchment.

People love to talk about soccer's "growth" in the U.S. But growth off a tiny base is still a tiny base. The structural revenue gap isn't closing — if anything, it's widening as the NFL and NBA continue to monetize better than anyone on earth.

Soccer will remain a niche sport in America unless the economics fundamentally change. And right now, there's no plausible path for that to happen.

Novo Nordisk reaffirming commitment to China after 30+ years. SVP Cai Yan citing improved regulatory environment, clinical capabilities, and receptiveness to innovation.

The "here for another 100 years" line is corporate speak, but actions matter more. $NVO has been steadily investing through cycles — rare to see Western pharma double down when others pull back.

China's diabetes + obesity market is massive and underserved. If regulatory pathway stays predictable and pricing pressure manageable, this is rational capital allocation. Watch reimbursement negotiations and local competition closely.

Long-term optimism is easy to declare. Execution through policy shifts is what separates real commitment from PR.

China's animation derivatives market heading toward $96B by 2025. Worth watching not for the headline number, but for what's driving it: talent migration and process maturation.

Grey Rui Han's trajectory (Netflix's Blue Eye Samurai → Infinity Nikki) signals something structural. When Chinese storyboard artists and directors move fluidly between Western streaming platforms and domestic productions, you're seeing:

1) Standardization of production workflows
2) Cross-pollination of narrative techniques
3) Export capability beyond cheap labor

The "derivatives" label is misleading. This isn't just toys and merch. It's IP monetization across games, fashion, consumer products. The playbook: build story universes, then extract value through multiple channels.

Historically, China excelled at manufacturing scale but struggled with original IP creation. If this cohort of cross-cultural creators can crack global storytelling while maintaining cost advantages, the margin profile of Chinese entertainment companies could shift meaningfully.

Still early. Most Chinese animation studios trade at frothy multiples on hope, not earnings. But the talent infrastructure is real. Watch for which studios can actually convert creative capability into sustainable cash flow over the next 3-5 years.

La Banque mondiale note que la croissance de la Chine se maintient au cours du S1 2026 — les investissements en technologies de pointe et les exportations portent l’essentiel, tandis que les mesures de politique publique amortissent les chocs énergétiques. Mais la demande intérieure reste faible au T2.

Programme classique : quand les consommateurs ne veulent pas dépenser, s’appuyer sur la politique industrielle et sur les marchés extérieurs. Cela fonctionne… jusqu’à ce que ça ne fonctionne plus. La vraie question n’est pas la résilience aujourd’hui — c’est de savoir si ce mix est durable quand le reste du monde ralentit ou quand les marchés d’exportation ripostent.

La Chine applique cette stratégie depuis des années. L’investissement dans les technologies de pointe semble excellent sur le papier, mais les rendements comptent. Si vous développez des capacités plus vite que ce que la demande justifie, vous ne faites que devancer la croissance et accumuler des problèmes de surcapacité.

La faiblesse de la demande intérieure au T2 en est le signal. C’est là que vit l’économie réelle pour la majorité des gens. La résilience portée par les exportations est un chiffre d’accroche, pas un socle.

La cotation Nasdaq de 29 milliards de dollars de SK Hynix attire de nouveau l’attention sur les puces mémoire. Gartner estime que les ventes mondiales de semi-conducteurs atteindront 1,32 T$ d’ici 2026 — soit une hausse de 64 % d’une année sur l’autre — tirée principalement par la demande liée aux infrastructures de l’IA.

Les acteurs chinois de la mémoire ont bondi lundi après la nouvelle. CXMT et Yangtze Memory se rapprochent toutes deux d’introductions en Bourse, ce qui vous indique que Pékin est déterminé à renforcer la capacité nationale.

Quelques observations :

1) La mémoire est depuis toujours cyclique et très capitalistique. Capex élevé, marges serrées, retournements brutaux. La demande en IA pourrait prolonger la phase haussière, mais elle n’élimine pas le cycle.

2) La prévision de Gartner (+64 %) suppose que les dépenses en IA restent élevées et que les hyperscalers continuent de commander. Si cela ralentit, les prix de la mémoire s’effondrent très vite. Nous avons déjà vu ce film.

3) Les acteurs chinois accusent encore un retard de 2 à 3 nœuds technologiques par rapport à Samsung et SK Hynix. Pour rattraper, il faut non seulement des capitaux, mais aussi des gains de rendement et la confiance des clients — et cela prend des années.

4) Le timing des IPO compte. Si CXMT et Yangtze se listent près d’un pic de cycle, les investisseurs précoces risquent d’être brûlés dès que la prochaine phase de repli arrive.

La mémoire est une infrastructure essentielle, et le fait que la Chine réduise l’écart est stratégiquement important. Mais les valorisations doivent refléter le risque lié au cycle et la réalité concurrentielle. Ne confondez pas une bonne histoire avec un bon prix d’entrée.

AB InBev's World Cup playbook in China: 15-minute delivery, 1-liter shareables, and brewery-direct freshness. Classic CPG strategy—turn emotional peaks into purchase occasions.

Four decades with FIFA gives them distribution muscle, but the real test is margin. Instant retail is expensive infrastructure. Does incremental volume during a tournament offset the cost of speed?

Beer is a low-margin, high-volume game. Premiumization (Budweiser over local lagers) matters more than gimmicks. If they're building permanent instant-delivery infrastructure for temporary demand spikes, watch the ROIC.

China beer market is mature, fragmented, price-sensitive. AB InBev has scale but not pricing power. World Cup buzz fades. The question: does this create a durable consumption habit, or just borrow sales from next quarter?