Mar 23, 2022 Howard Marks
On Regulation, written in March 2011, discussed the outlook for rulemaking stemming from the Global Financial Crisis. I said future developments were likely to be driven by the long-term pendulum-like swing in attitudes on that subject. Over time, those attitudes tend to fluctuate between “the markets best serve the country when they’re unfettered by rules” to “we need the government to protect us from participants’ misbehavior.”
2011年, 當時Marks寫到未來經濟領域運作會像鐘擺一樣, 在自由主義和保護主義(或凱因斯式政府干預) 之間來回擺盪
In The Role of Confidence, from August 2013, I discussed the way shifts in fundamentals are translated into market volatility by often-excessive swings in investor confidence
行為財務學, 這個我一定得補看
And in my 2018 book, Mastering the Market Cycle, I interrupted my discussion of the various cycles – in the economy, corporate profits, credit availability, etc. – to use the metaphor of a pendulum, not a cycle, to describe the swings of investor psychology.
Because psychology swings so often toward one extreme or the other – and spends relatively little time at the “happy medium” – I believe the pendulum is the best metaphor for understanding trends in anything affected by psychology. . . not just investing.
At a recent meeting of the Brookfield Asset Management board, a discussion of Ukraine triggered an association with another aspect of international affairs – offshoring – which I first discussed in the memo Economic Reality (May 2016). Thus the inspiration for this memo
Russian Energy
In 2019, Russia’s top four exports were crude petroleum, refined petroleum, petroleum gas, and coal briquettes. These totaled $223 billion, or 55% of Russia’s total exports of $407 billion, according to the Observatory of Economic Complexity.
As shown in the following table, Russia is exceptionally well positioned to wield influence over Europe through exports of energy commodities.
☝☝ 請看上圖第一列 Oil , 歐洲每日淨短缺11.4百萬桶, 俄羅斯每日淨剩餘7.6百萬, 中間差額3.8百萬桶
另外截至April 6, 歐盟仍未正式宣布禁運俄羅斯石油和天然氣
Over recent decades, as we all know, many industries moved a significant percentage of their production offshore – primarily to Asia – bringing down costs by utilizing cheaper labor. This process boosted economic growth in the emerging nations where the work was done, increased savings and competitiveness for manufacturers and importers, and provided low-priced goods to consumers. But the supply-chain disruption that resulted from the Covid-19 pandemic, combined with the shutdown of much of the world’s productive capacity, has shown the downside of that trend, as supply has been unable to keep pace with elevated demand in our highly stimulated economy.
At first glance, these two items – Europe’s energy dependence and supply-chain disruption – may seem to have little in common other than the fact that they both involve international considerations. But I think juxtaposing them is informative . . . and worthy of a memo.
How did
things get this way? According to
Shellenberger (see source above)
While Putin expanded Russia’s oil production, expanded natural gas production, and then doubled nuclear energy production to allow more exports of its precious gas, Europe, led by Germany, shut down its nuclear power plants, closed gas fields, and refused to develop more through advanced methods like fracking.
The numbers tell the story best. In 2016, 30 percent of the natural gas consumed by the European Union came from Russia. In 2018, that figure jumped to 40 percent. By 2020, it was nearly 44 percent, and by early 2021, it was nearly 47 percent.
The following chart makes the situation clear. In 1980, imports from Russia represented less than one-third of Europe’s oil and gas production. European production peaked about 20 years ago and has almost halved since then, ending up near where it was in 1980. In the same roughly 40-year period, imports from Russia have tripled, meaning they’re now roughly equal to Europe’s production.
At the turn of the 2000, Germany’s electricity was around 30 percent nuclear-powered. But Germany has been sacking its reliable, inexpensive nuclear plants. . . . By 2020, Germany had reduced its nuclear share from 30 percent to 11 percent. Then, on the last day of 2021, Germany shut down half of its remaining six nuclear reactors. The other three are slated for shutdown at the end of this year.
During a
briefing earlier this month, a U.S. senator told the nonpartisan political
organization No Labels, “The energy issue regarding ‘Putin’s war’ has four
components: energy, climate, security, and economics (both national and at the
household level).” Security
doesn’t seem to have received much consideration in the
deliberations that led to Germany’s energy dependency on Russia.
Just one of the four factors – climate – appears to
have motivated the decision. Choosing to
count on a hostile neighbor for essential goods is like building a bank vault 銀行金庫 and contracting with the mob 暴動群眾 to supply it with guards. But that’s what happened.
Foreign Sourcing
If you think back a few hundred years, limitations on transportation required that production take place near the point of consumption. But after the advent of the railroad, it became possible to separate the locations of production and consumption by hundreds – or even thousands – of miles. This must have been an important element in the creation of national champions that eventually supplied whole countries with goods such as food and building materials that previously had to be manufactured near the local customers. This enabled goods to be produced in places where labor was most readily available or where benefits from specialization could be maximized. It was inevitable that these forces would affect countries around the world and – with the emergence of airfreight and containerization – result in rapidly growing cross-border trade.
敘述自工業革命後, 運輸科技讓資本主義可以挑選(原料-人力)成本最低廉的地方投入生產, 並讓每個國家(或區域)可以專業生產有競爭優勢的產品項, 進而興起國際貿易的熱絡發展
Shortly after
World War II, cheap labor and skill in assembling products permitted Japan to
rapidly become a major exporter of electronic goods and automobiles. The products were highly cost-competitive and
initially of low quality, but Japan soon developed some of the world’s most
desired brands. In the late 1950s,
Japanese auto companies exported just a few hundred cars a year to the U.S.,
the main selling point of which was low price.
But quality rose even as prices remained attractive, and by the early
1980s, the Reagan administration, in an attempt to protect the U.S. auto
industry, asked Japanese manufacturers to “voluntarily” limit
exports to the U.S. to 1.68 million cars per year.
The lure of low manufacturing costs caused producers to shift operations from Japan to other parts of Asia over time. A large-scale shift to China began in earnest around 1995. Subsequently, the production of low-value-added goods such as T-shirts and jeans shifted to Vietnam, Bangladesh and Pakistan. As each country benefited from the growth of manufacturing, the supply of labor got tighter, and workers became able to demand higher wages. Per-capita incomes and standards of living rose, expanding the middle class and strengthening domestic consumption. Higher wages in one country caused the mantle of lowest-cost manufacturer to pass to others. Wages may have risen locally, but as a consequence, the search for low-margin, low-skill work moved on to new low-cost venues.
整個輕工業生產(日常用品, 衣服, 鞋子)由1960s先由日本開始, 1970移轉至亞洲四小龍, 1990年移轉至中國大陸, 2005年移轉至越南-孟加拉 -巴基斯坦, 直到最近5年移轉至非洲
Asia’s ability to
produce goods inexpensively soon led U.S. companies to capitalize on Asia’s advantages
by (a) building factories abroad and (b) hiring Asian contractors to do
manufacturing for them. The reasons are
clear: vastly lower wages and fewer protections for workers, which permitted
long days and poor labor conditions that wouldn’t be
tolerated in the U.S. The result was
more jobs for non-U.S. workers, economic growth for the countries where the
manufacturing was done, increased competitiveness for U.S. importers, and
bargain-priced goods for American consumers.
這種海外製造移轉, 可以壓低生產成本( 薪資- 工廠水電費 - 土地租金), 以及省下一定的員工福利成本( 美國有相對強大工會, 超時工作, 短給福利退休給付, 工安意外, 無法在美國常常上演)
In addition, offshoring undoubtedly contributed substantially to the low level of inflation experienced in the U.S. over the last 40 years. One popular gauge of inflation, the Personal Consumption Expendiwtures (PCE) deflator, rose by only 1.8% per year from 1995 (importantly, the blast-off point for Chinese exports to the U.S.) through 2020. Inflation was considered tame at that level, and, in fact, many in business and government wished it were a bit higher. But a look inside the numbers is instructive:
另外, offshoring sourcing零組件訂單海外移轉所帶來的低成本效益, 直接幫助美國本土的通貨膨脹自1980s以後獲得相當成功的壓制( 因為1970s被玩到怕)
👆👆 此圖有一點值得注意, Services那一欄, 美國個人消費當中, 服務消費佔比55-60% 很高, 這會決定未來的通膨強度 請見下圖解釋, 進一步拆解服務性消費
第二個從屬項目是 housing, household, transportation and medical care. 我會挖到這邊細節, 原因出在房地產經濟( 房子建造, 房屋貸款, 房產經紀及周邊性服務 )佔比美國GDP超過50%, 從2021H2鬧得沸沸揚揚通膨議題, 假如美國房地產在這個時候又蓬勃增長, 只會讓通膨進一步增長, 資料調出來看, 截至4/6, 美國新屋銷售(房地產重要指標)自去年12月連續3月下滑, 紓解通膨壓力有幫助
It’s startling to note that the prices of durables fell by almost 40% over the 25 years in question. The availability of ever-cheaper goods like cars, appliances and furniture produced abroad was a major contributor to the benign U.S. inflation picture in this quarter-century. Likewise, although prices of non-durables didn’t actually come down, cheap imports of items like clothing helped keep the lid on prices overall. This was an important benefit of globalization for the net-importing nations.
On the other
hand, offshoring also led to the elimination of millions of U.S. jobs, the
hollowing out of the manufacturing regions and middle class of our country, and
most likely the weakening of private-sector labor unions.
Ford, for
example, reported in 1992 that 53 percent of its employees worked in the U.S.
and Canada. By 2009, its North American
workforce (by then Ford had expanded to Mexico) made up only 37 percent of
total payroll. (The Week, January 11,
2015) 此段講 1992 - 2009 期間美國製造業轉移海外, 造成國內製造業萎縮
Capitalism is
based on the desire to maximize income.
Globalization allows production to be performed where the costs are
lowest. The combination of these two
powerful forces has had a profound influence on the world over the last
half-century.
資本市場經濟的原動力是極大化利潤, 而全球化允許市場將生產擺放在(生產)成本最低的區域, 過去70年來, 整個世界經濟生產就是這樣運作
So, what’s the connection? U.S. companies’ foreign sourcing, in
particular with regard to semiconductors, differs from Europe’s energy
emergency in many ways. But both are
marked by inadequate supply of an essential good demanded by countries or
companies that permitted themselves to become reliant on others. And considering how critical electronics are
to U.S. national security – what today in terms of surveillance,
communications, analysis and transportation isn’t reliant on electronics? –
this vulnerability could, at some point, come back to bite the U.S. in the same
way that dependence on Russian energy resources has the European Union.
How did the world get into this position? How did Europe become so dependent on Russian exports of energy commodities, and how did such a high percentage of semiconductors and other goods destined for the U.S. come to be manufactured abroad? Just as Europe allowed its energy dependence to increase due to its desire to be more green, U.S. businesses came to rely increasingly on materials, components, and finished goods from abroad to remain price-competitive and deliver greater profits.
Key geopolitical developments in recent decades included
(a) the perception that the world was shrinking, due to improvements in transportation and communications
(b) the relative peace
of the world, stemming from:
- the dismantling of the Berlin Wall;
- the fall of the USSR;
- the low perceived threat from nuclear arms (thanks to the realization that their use would assure mutual destruction);
- the absence of conflicts that could escalate into a multi-national war;
- the shortness of memory, which permits people to believe benign 溫和的 conditions will remain so.
Together, these developments gave rise to a huge swing of the pendulum toward globalization and thus countries’ interdependence. Companies and countries found that massive benefits could be tapped by looking abroad for solutions, and it was easy to overlook or minimize potential pitfalls.
As a result, in recent decades, countries and companies have been able to opt for what seemed to be the cheapest and easiest solutions, and perhaps the greenest. Thus, the choices made included reliance on distant sources of supply and just-in-time ordering. A just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules)
The invasion of Ukraine has shown that Europe’s importation of oil and gas from Russia has left it vulnerable to a hostile, unprincipled nation (worse in this case – to such an individual) at the same time that winding down nuclear power generation has increased the region’s need for imported oil and gas. The practice of offshore procurement similarly makes countries and companies dependent on their positive relations with foreign nations and the efficacy of our transportation system. 全球化下的海外供應鏈(對歐美國家而言) 讓國與國之間在商業上更依賴互存, 一方面有賴於運輸物流業的發達
The recognition of these negative aspects of globalization has now caused the pendulum to swing back toward local sourcing. Rather than the cheapest, easiest and greenest sources, there’ll probably be more of a premium put on the safest and surest.
近年來全球化造成的負面影響, 導致經濟市場的鐘擺迴盪到國家保護主義( 為了確保供應鏈不被中斷, 歐美大企業開始傾向尋找當地的供應商), 這很可能增加整個產業生產成本 (歐美已開發國家, 工資- 生產要素價格CPI高 )
For example, both U.S. and non-U.S. companies have announced that they intend to build new foundries to produce semiconductors in the U.S. And I imagine many U.S. importers of materials, components and finished goods are looking for sources closer to home. Similarly, it’s now less likely that Germany will follow through on its plan to turn off its three remaining nuclear reactors on December 31 (我的CCJ 萬歲✌) and more likely that it will reactivate the three it retired at the end of 2021 (perhaps, with the rest of Europe, recalibrate the balance between energy imports and domestic energy production).
雖然川普下台, 民主黨溫和派 拜登上任, 但從2018年開始中美貿易戰 ( 許多美國公司, 台商製造業撤出中國, 台積電及其供應鏈赴美設廠)引起亞太供應鏈轉移, 仍延續至今
直擊台積美國廠》率供應鏈大遷移！沙漠中日夜趕工100%複製南科廠
If the pendulum continues to move for a
while in the direction I foresee, there will be ramifications 窘境 for
investors. Globalization has been a boon
for worldwide GDP, the nations whose economies it has lifted, and the companies
that reduced costs by buying abroad. The
swing away will be less favorable in those regards, but it may (a) improve
importers’ security, (b) increase the competitiveness of onshore producers and
the number of domestic manufacturing jobs, and (c) create investment
opportunities in the transition.
暗指向當地供應商採購-增加成本當地這樣做可能影響歐美企業中長期獲利 (抬價會惡化通膨), 這些都是目前投資者不願意見到的
For how long will the pendulum swing away
from globalization and toward onshoring?
The answer depends in part on how the current situations are resolved
and in part on which force wins: the need for dependability and security or the
desire for cheap sourcing.
整個市場演進會花多久時間, 從全球化的成本利益最優化配置,轉變成選擇國內的安全性供應鏈, 取決於商業決策者到底想成本優先考量, 還是安全 穩地性高的上游供應
In complex fields like economics and
geopolitics, there are few easy decisions – just choices, many of them very
difficult. There are too many moving
parts, too many unknowns, and too many pros and cons whose merits can’t be
weighed quantitatively. What sits on
either side of the scale doesn’t necessarily change much, but the pendulum
swings radically in terms of how those things are viewed and weighted in the
decision.
市場鐘擺擺盪的速度取決於市場參與者( 企業-消費者- 銀行- Fed- 投資者) 如何看待當前這股巨大趨勢, 以及做商業-消費 -放款-利率 -投資決策, 如何把 Local sourcing 這項因素考量進來
Here’s what I wrote in On Regulation
concerning the swing of the pendulum toward and away from regulation of the
financial markets:
It’s my belief that because both free markets and regulation are imperfect – and because of the strength of people’s political and philosophical biases – we will never settle permanently on either a completely free market or a thoroughly regulated system. Any position will prove merely temporary, and the pendulum will continue to swing toward one end of the spectrum and then back toward the other.
If you substitute the words “offshoring”
and “domestic sourcing” for “free markets” and “regulation,” then this passage
just as accurately describes the choice between the cheapest sourcing and the
most secure sourcing. This absence of
perfect, permanent solutions is characteristic of pendulums – it’s why they
swing. And after many decades of
globalization and cost minimization, I think we’re about to find investment
opportunities in the swing toward reliable supply.
Marks 認為未來幾年全球投資機會, 出現在整個經濟市場擺盪至國內保護主義 - 更穩定, 且安全的零組件供應
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