Cold War 2: A New Era of Tension between the US and China.
Cold War 2: A New Era of Tension between the US and China.
Also, BBBY to the Moon?
Here is what we will be getting into today:
A Changed Relationship: The US and China Enter a New Era of Competition and Confrontation.
Bed Bath & Beyond on the Brink: Desperate Measures to Stay Afloat.
The Decline of Nuclear Power in the UK, the Consequences of Neglect.
The Inverted Yield Curve, Macro Data, and the Future of the US Economy in 2023.
Let’s Dive In!
Newsletter: Noahpinion
Title: You are now living through Cold War 2.
Link: https://noahpinion.substack.com/p/you-are-now-living-through-cold-war
Here are the key highlights:
The Spy Balloon of 2023 was a turning point in the relationship between the United States and China, signifying the beginning of Cold War 2.
The Chinese government tried to downplay the significance of the event, but it was clear to everyone that this was a major escalation. The U.S. government responded by cancelling a planned trip to China, and there has been a growing trend of confrontational rhetoric and actions from both sides since then.
There are voices on both sides calling for a return to the engagement strategy that prevailed in the 1980s and early 2010s, but it is clear that the relationship between the two countries has changed irrevocably. The finance industry will be a major driver of this change, as investment capital flows into China despite the risks.
It is clear that the days of cooperation between the United States and China are over, and that Cold War 2 is now underway. The United States and China are locked in a new competition for global dominance, and tensions are running high.
China's recent overtures to the international community are nothing more than a façade, designed to lull the world into a false sense of security. Meanwhile, behind the scenes, China is continuing to build up its military forces and prepare for action against Taiwan. The United States must be vigilant and prepared for the challenges of the new Cold War, or risk being left behind.
Website: Wolf Street
Title: After Spiking 92% Today, 350% in a Month, Bed Bath & Beyond Stock Collapses Afterhours on Share Offering That’ll Dilute the Bejesus out of the Meme-Stock Crowd
Link: https://wolfstreet.com/2023/02/06/after-spiking-92-today-350-in-a-month-bed-bath-beyond-shares-collapsed-afterhours-on-share-offering-thatll-dilute-the-bejesus-out-of-the-meme-stock-crowd/
Here are the key highlights:
Bed Bath & Beyond is a company that is in dire straits. The company is struggling to keep up with its debts and has been forced to take desperate measures in order to stay afloat. They have announced a plan to sell a large number of shares in order to raise over $1 billion, which will significantly dilute the ownership of existing shareholders. If BBBY is unable to sell the new shares, it will likely have to file for bankruptcy protection.
The company has been warning of this possibility for some time now. The situation is made worse by the fact that the company has been losing money hand over fist. For the past two years, it has been burning through cash at an alarming rate.
This is due in part to its huge share buyback program, which has cost the company billions of dollars. In Nov 21, the company announced that it burned through $1 billion in borrowed funds on share buybacks. The total amount of cumulative share buybacks since ‘06 was reported to be $11.6 billion.
The company could have used this $11.6 billion to invest in ecommerce operations, perform store remodeling, close down unprofitable stores, and avoid the debt that now straddles the bottom line. They could have kept a healthy cash balance to weather the ongoing brick-and-mortar industry decline and prepare for future economic crises.
Despite these potential benefits, the company chose to engage in share buybacks instead. The company's share price has been volatile lately, as investors try to figure out what its future holds.
Website: OilPrice
Title: The True Cost Of Ignoring Nuclear Energy In The UK
Link: https://oilprice.com/Alternative-Energy/Nuclear-Power/The-True-Cost-Of-Ignoring-Nuclear-Energy-In-The-UK.html
Here are the key highlights:
The UK is facing significant challenges in meeting energy demands and an increased risk of blackouts due to the neglect of its nuclear industry and the lack of government support for the sector. The recent move to coal power units highlights the neglect of the nuclear industry and the urgent need to address the energy crisis and revive the sector. Many experts have called for a revival of the nuclear industry, with a focus on building a pipeline of projects to secure energy supply and meet UK's energy demands.
The consequences of the UK's stalling in its nuclear ambitions were highlighted during a recent energy crisis, when the National Grid was forced to pay households to reduce their energy usage to avoid blackouts.
Engineering advisor Dame Sue Ion warned MPs about the consequences of the government's inability to support nuclear power and emphasized the need for a commitment to a fleet of nuclear power plants to give investors confidence in government policy. The government needs to take a more proactive approach.
Alistair Evans, Government and Corporate Affairs Director for Rolls-Royce, recently addressed MPs regarding the company's proposal for small, modular reactors (SMRs) with a consortium of investors. He stated that the government's commitment to transforming the nuclear sector is meaningless without a proper plan in place.
The only nuclear plant currently under construction in the UK is Hinkley Point C, expected to be completed in 2027 at a cost of 26 billion, but is currently two years behind schedule and 45% over budget.
The UK's ageing nuclear fleet is set for decommissioning, making the revival of the nuclear sector a pressing issue, as nuclear power currently only represents 15% of the UK's energy mix.
Newsletter: Institutional Economics
Title: The US recession that isn’t: the contrarian take on 2023.
Link: https://stephenkirchner.substack.com/p/the-us-recession-that-isnt-the-contrarian
Here are the key highlights:
The 2023 US recession is a widely held view among economists, which is unusual. This consensus has led to expectations of further monetary easing by the Fed and affected the global outlook.
Some skepticism exists as recessions are difficult to predict and the forecast of a recession is essentially a forecast of a central bank policy error. While a recession may help the Fed reach its inflation goals, strong economic growth with moderating inflation is possible if supply can keep up with demand.
The US is in a stronger position compared to other economies like the UK and New Zealand where a downturn is the official forecast. The Bank of England and Reserve Bank of New Zealand view a recession as necessary for controlling inflation, which is also partly driven by market pricing.
The Fed is still committed to avoiding a recession while the Bank of England's monetary policy strategy could be seen as leading to a downturn.
The inverted yield curve is a strong indicator of a US recession, but positive macro data suggests moderating demand and a stepped-up supply-side. The consensus view of a US recession is becoming a well-established idea, but a no-recession stance remains attractive.
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