That old, way over-quoted saying, attributed to Keynes, keeps reverberating in my head lately. “The market can stay irrational longer than you can stay solvent”.
Almost three years ago, I put out a video mocking Saudi Arabia’s investing strategy, calling it plainly irrational and irresponsible, and destined to end in tears. Well, so far it looks like my prediction is a failure. In fact, this investing strategy may be the most successful thing that MBS has done, staving off financial disaster for his country, and in the process making himself just as valuable to US politicians as Saudi Arabia was back in the 20th century when we needed their oil.
This one was interesting. The fact that I need to produce longer videos kind of ambushed me here. I intended to focus on how the MBS-Khashoggi issue is a side-show to what our true priorities should be, but the need to correct my older video on Saudi investing kind of swallowed my scripting process, drawing in Gamestop and some media critique.
Today’s video hints at something I’ve been thinking about a lot lately. We all know China’s great internet firewall as a source of great repression. But China’s maintenance of a separate national internet has also left it weirdly independent of the US tech giants that rule the internet everywhere else.
China has worked hard to co-opt the newest of the Tech behemoths, Elon Musk, the founder of Tesla and SpaceX. General Motors and other foreign car companies battled for decades to build up their competitive position in China. Musk was building a massive factory in China under favorable terms before he sold his millionth (100,000th?) car. China was wise to try to get this guy on their side, but as today’s video explains, it’s unlikely to work out well for them in the long term…
I’d like to make more videos in this vein, thinking through the outside power of tech companies and what it means for geopolitics, but that depends on how this video does. If you like it, share it around…
I’m not kidding when I say I’ve been agonizing over Coronavirus for months. It’s really quite infuriating how hard it was to get good solid information. China looked terrifying. But all market and government sources in the US seemed pretty relaxed. A couple weeks back only the US government was relaxed, while media was waking up to the shock. It was only two weeks ago that the markets began to reflect what was happening. Now everybody is losing their shit, just as China seems to be recovering. It’s all a mess.
When it comes to history, I usually know as much or more than any journalist I am reading. That’s not the case with diseases and epidemiology. It seemed like everything I read contradicted the last thing I read, making it impossible for me to say anything definitive. Eventually I gave up on talking about the disease. It’s too late to warn folks, we are now at the crisis, which is what today’s video covers. I feel like I’ve kind of let the viewership down. I knew this was coming for a while now, but I’m only now adding to the panic pile with this video. Guess I should bone up on biology for the next plague.
With today’s video we go all in on discussing the US stock market. There’s this idea that stock markets are somehow rational, or serious. People who talk about it are always wearing suits, and we put a lot of effort into making all the details of interest rates, portfolio management, and valuations seem boring. The stock market is none of these things. In fact it’s nuts. By going through the history of the “Trump Bump”, I attempt to draw the curtain back a bit.
Unfortunately, watching the video, I think I screwed something up. It’s not that the story I put forward is wrong, it’s just that I left too much out. The video falls into the “Presidents impact everything” school of commentary. I hate that school. The differing views market makers took of Trump and Obama are tremendously important to this particular economic story, but that doesn’t mean that presidents are actually all that powerful. I really don’t want to create that impression, and I apologize if I did so with this video.
I feel like markets and economics have been an underpinning of what I’ve been talking about for quite some time now. It’s been a troubling thing for me. There’s always a lot of certainty when these issues come up in political discussions, but usually almost nothing backing up that certainty. The conditions we’re looking at are always changing, and the theories that people gravitate to are some of the least proven imaginable. Economics has pretensions to being a science. But the variables are immense, and there’s really only one result.
We have one world economy, and its performance at any given time is the only thing that we have to point to, to see whether our theories are working. There is no control group. Most of the figures we rely on to measure what’s going on are little better than rough estimates, and the political consensus rarely lasts a decade. I have high hopes for the profession of economics. People are doing amazing work in the field, and the move onto the internet that our species is currently undergoing provides the possibility of real measurement (and Orwellian nightmares). I’m confident that the future is bright, but I think we all need a lot more humility in talking about the economy. Which is why I made today’s video, and why I’ll be adding to the series in the coming weeks…
One of the most important aspects of development in Saudi Arabia, and in the Gulf more broadly, is the fact that it often doesn’t happen. The Gulf countries are mostly run by monarchs, and they all have pharaonic ambitions. They want to build monuments, cities, and other great works that illustrate their magnificence. If it’s something as simple as a museum or giving a foreign university a local campus it happens. But the great ambitions that mix local development, innovation, or anything else that requires real buy-in from the people of the country, either never happen, or happen in such a small way as to make the initial announcements look ridiculous.
When NEOM, the 500 billion USD sustainable city was announced, I couldn’t help but think of the UAE’s Masdar city. It was announced with similar fanfare back in 2006. It was going to be green, it was going to be amazing, there were going to be tons of people there! Parts of Masdar did end up being built, but most of the plan was scrapped, and the Guardian now describes it as in danger of becoming a ghost town. Masdar isn’t the only hi-tech wonderland city that never was. Saudi Arabia has one too. Anybody remember King Abdullah Technology City? It was the last king’s NEOM. It was still moving along, or at least reported to be so back in 2015.
And that’s the important bit here. All of this constant churn of projects seems to be done more for a foreign press audience than to create real change in Saudi Arabia. I don’t doubt the sincerity of any of the Saudi Royal reformers, I just doubt their ability. The world press gives them a free pass on all of this. Almost none of the articles reporting on NEOM mentioned King Abdullah city or Masdar. Actually, now that Abdullah is dead, his city seems to have disappeared from the news completely. It’s clear that it’s now longer a public relations priority, and I’d guess that the 100 billion that is supposed to build that city is now quickly moving on to MBS’s NEOM. This is not a good way to run anything. But the Saudis get a pass from the world press. Today’s video, on the ridiculousness of the Saudi Aramco IPO is an attempt to push back on that a bit.