Salah Demolishes Man U

Mohamad Salah scored three and assisted one as Liverpool gave Manchester United a 5-0 drubbing at Old Trafford yesterday. Salah is now top scorer in the EPL with 10 goals from 9 matches, three ahead of Jamie Vardy. He's also joint second in assists with 5. And scored in ten consecutive games, a Liverpool record. Will they extend his contract, now?!

The China Equity Paradox

In an earlier post we looked at Japan's boom & bust cycle. But just as Japan's economy was starting to falter, another Asian economy was taking its place. According to the World Bank the size of the Chinese economy in 1990 was just $847 billion, by the end of the century it was $2.2 trillion, and at the end of 2020 it was $11.8 trillion, the second biggest economy in the world after the U.S. Between 2000 and 2020, China's economy increased over 5.3x. Over the same period the U.S. economy grew just 2.0x. Yet the CSI 300 and its U.S. equivalent the S&P 500 had the same overall returns over that period, as shown below: 

While there are many factors and nuances behind why this may be so, one line of economic thinking believes the overarching reasons have to do with (i) relative strength of labor in China and (ii) higher corporate taxes (there vs here); with the former being by far the stronger driver. While median real wages in the U.S. has remained largely stagnant over the past two decades, wage increases in China has moved largely in lock-step with GDP growth. This brings us to the famous "elephant" chart from Branko Milanovic, a former lead economist at the World Bank and author of Global Inequality:A New Approach for the Age of Globalization,  covering the period between 1988 and 2008.

How labor and owners of capital fared generally over those two decades of globalization depended on where you were on the "elephant." Branko labels 3 points (A,B,C) as of particular importance. He explains that 9/10 people at point A are from Asian economies, mainly China and India. While 7/10 people at point B are from the older, mature OECD countries. Finally, point C consists of the global 1% or the biggest owners of capital, more than half of whom were in the U.S.

So, labor took in a larger share of corporate profits in China than in the U.S., where the lion's share of gains accrued to shareholders. So despite significantly higher growth in China, returns to equity were the same in both countries. Is it more complicated than that? Of course, but it is an interesting argument. Marx's revenge? 

Note, the above chart ended in 2008. It may very well be that China has moved closer to point B now more than a decade later. In which case, future equity returns could be better even as growth slows as the same labor-capital dynamics play out. But that's probably what the Communist Party is at pains to avoid.   

Banksy's Shredded Painting Sells for $25 Million

Banksy set a new personal record this week, with the British street artist’s self-destructing piece “Love is in the Bin” selling for a record $25.4 million at a Sotheby’s auction in London on Thursday. The sale comes almost three years ago to the day the piece became a viral sensation when the original work, “Girl With Balloon,” became “the first artwork in history to have been created live during an auction.” After selling for a then-record $1.4 million, the artwork was sliced when a hidden shredder was activated. Like this:

And increased the work's value by $24 million! Nice. It was a just the type of insubordinate and audacious act that would have made Thomas Crown proud. Oh, Sinnerman...

The Nobel Peace Prize Goes to Maria Ressa and Dmitry Muratov

The most high-profile (and controversial) Nobel Prize is the one for peace. The 2021 Peace Prize was awarded by the Nobel Assembly to journalists Maria Ressa and Dmitry Muratov "for their efforts to safeguard freedom of expression, which is a precondition for democracy and lasting peace." 

Ressa has been a journalist in Asia for more than 30 years. She is CEO and executive editor of the Philippines-based online news organization Rappler.com. She graduated from Princeton in 1986 with a bachelor of arts in English.

Muratov is a veteran Russian journalist and founding editor of the fiercely independent Novaya Gazeta newspaper known for hard-hitting investigative work. He attended Kuibyshev State University and served in the Soviet military, before working in journalism.

Apple Watch Meet Smart Toilet

A Stanford study finds that a disease-detecting “precision health” toilet can sense multiple signs of illness through automated urine and stool analysis.

Conceived by a group of Stanford University scientists, led by Sanjiv Gambhir, professor and chair of radiology at Stanford Medical School, the "smart" toilet is an ordinary commode fitted with motion sensing technology to deploy different tests that can detect a range of disease markers in stool and urine, including colorectal or urologic cancers. Samples are captured on video and then processed "by a set of algorithms that can distinguish normal urodynamics (flow rate, stream time and total volume, among other parameters) and stool consistencies from those that are unhealthy." The toilet can also deploy uranalysis strips to measure features such as white blood cell count, blood contamination, and protein levels that can be used to identify a range of infections, and even kidney disease and bladder cancer. The toilet automatically stores data extracted from any sample to a secure, cloud-based system, which in the future could potentially be integrated into physicians' record-keeping system for easy access.

The reports notes that the smart toilet "falls into a category of technology known as continuous health monitoring, which encompasses wearables like smart watches...Gambhir envisions the smart toilet as part of the average home bathroom." And since everyone uses the toilet, it enhances its value as disease-detecting devise. If 40% of the world's population has access to flush toilets that's a potential customer base of at least 2.8 billion people.

But in most homes more than one person typically uses the same toilet. How the does "smart" toilet differentiate between users? Well, it has a built-in identification system. As Gambhir notes, “the whole point is to provide precise, individualized health feedback, so we needed to make sure the toilet could discern between users.” But how exactly does it do that? Initially, Gambhir's team used a flush lever with a fingerprint scanner, but soon realized, however, that wasn't enough. "What if one person uses the toilet, but someone else flushes it? Or what if the toilet is of the auto-flush variety?" To solve the problem the team added a small scanner that images your...butthole. It turns out, like fingerprints, everyone also has a unique anal print. A combination of finger and anal prints should make it nearly impossible to results get mixed up. But don't worry, no one, including your doctor will see the scans. They will be simple used a recognition marker by the system to match users to their data. Bottom's up! 

Then and Now: Japan Edition

A generation ago, Japan ruled the financial world and Americans were panicking about Japan Inc. taking over the U.S. Hollywood made movies about it; books were written about it, some that were even turned into movies; pop stars even sang about it. The mania reached its apogee when Mitsubishi purchased the iconic Rockefeller Center. And why not? The Japanese economy and its financial markets had experienced an astonishing and unprecedented 40-year growth, that seemed destined to continue. Ah, but how times have changed. 

In 1989, Japan accounted for 45% of the global stock market by market cap, with the benchmark Nikkei 225 Index growing 900% just between 1982 and 1989; the real estate value of just one single park in Tokyo was worth more than all of the real estate in the state of California combined! Seven of the world's top ten companies were Japanese conglomerates. 

Fast forward today...The five FAAMG stocks are worth 20% more than the entire Nikkei 225. It's again the U.S. that dominates global equity markets, accounting for 56% of market share by market cap; Japan just 7%. Seven of the ten biggest companies are American. No Japanese company is even in the top 10 or even top 30. 

Another interesting change...back in the 1980s, 8/10 biggest companies were either Financials (5) or Energy (3). Today, on two are: Saudi Aramco (Energy) and Berkshire (Financials). Five (AAPL, MSFT, GOOG, FB and TCN) are Technology and three (AMZN, TSLA and ALBA) are Consumer Discretionary. Shows the impact of falling rates. And that change is constant.                             

Men are from Mars, Women are from Venus...

The metaphor is apt in more ways than author John Gray probably thought when he titled his best-selling book. Room temperature has long been a common cause of arguments among couples, may even the most common. Now scientists at Tel Aviv University have discovered that female members of species are naturally drawn to warmer temperatures and men cooler temperatures because of an in-built 'evolutionary difference'...leading to physical distance between them at certain times of the year. Co-authors Dr. Eran Levin and Dr. Tali Magory Cohen hypothesize that differences in the heat-sensitive mechanisms of women and men evolved "to keep offspring away from aggressive males and to reduce competition for food."  

Oh, and going to back to our titular analogy, Mars has a surface temperature of -81 F, while Venus has a normal temperature of 847 F. Makes sense...