MCViewPoint

by Chris MacIntosh

A picture emerges of an aspirational Western industry captured lock, stock, and barrel by secretive, coal-loving Beijing. It’s a worry for the West’s economic development, never mind energy security and climate action. If solar is anything to go by, the great transition seems less based on data than a mixture of blind faith and vested interests.

Here’s a Reality Check on So-Called Green Energy… And It’s Not What You Think

China has the world over a barrel in more ways than we have been led to believe.

It isn’t so much that China has the biggest resources of these minerals. Rather it has the refining capacity to produce these materials. Note that most of these “lesser known base metals” don’t occur naturally on their own (like copper or tin), rather they occur concurrent with other minerals and are essentially a by-product of refining common base metals. Of course, refining minerals is a messy, polluting, and energy intensive business that few countries want to engage or allow. In doing so, they open themselves up to national security issues.

All rather interesting, but what I’d like to point out is that there exists the probability that this all becomes weaponised. Reducing or entirely eliminating supply of these critical resources to “non-friendly” nations is increasingly becoming a real threat. That in itself would entail significant supply disruptions, higher costs of production (much higher), and subsequent acceleration of stagflation.

The New vs the Old Economy

We thought we had it all before with the TMT bubble of 2000 (goodness, that is now 24 years ago). But history has been rewritten highlighting the extreme performance of one theme against another. Real assets are more out of favour compared to financial assets than at any time since the 1920s. Some random charts we found on the information superhighway providing illustrative view of what we’re saying.

Any relationship in the chart above to the one below?

OK, let’s put it another way. What if the US 10-year yield is 10% 10 years from now? How do you think real assets would have performed vs financial assets?

Just a reminder of how out of favour materials and energy are compared to the broader market. Granted this is over a year old, but not much has changed since then.

We recall a couple of years ago when Tesla had a greater market cap than the S&P 500 energy sector and Microsoft had bigger market cap than the S&P Materials and Energy sectors combined. Seems like not much has changed on a global scale.

Taking out Saudi Aramco, Microsoft, and Apple have about the same market cap as the global energy sector.

A Think Piece on Solar Panels

Finally someone who has dug deep into the assumptions:

You really have to read the article. It’s a humdinger. But first, a warning to the tree huggers who buy the concept that paying more taxes to multiple home owning, jet setting globalists in order to eliminate a gas that is 0.04% of the atmosphere and for which all plants are dependent upon. My friends and colleagues over at International Man said it well:

But back to the report. Check out these snippets:

See the rest here

Be seeing you