Friday, December 31, 2021

Hide Your Checkbook: Knaves, Varlets, Scoundrels and Rogues of 2021

From FT Alphaville: 

Person of Interest 2021: The Longlist
An annual celebration of cancellation
Cathie Wood
Ark Invest

Diamond-handed insolvetech sibyl whose bold predictions have included, “the stocks I bought will go up” and “the stocks I bought that are going down will also in the future go up.” [Stonk market update — FT Alphaville] 


Tony Pialis
Alphawave IP
The most enthusiastic promoter of interdependent affairs to be exported by Canada since Ashley Madison.

Bill Hwang
Archegos Capital

The closest 2021 came to a systemically critical blow-up would have been avoided had even one person involved followed the general principles set out in the small print of spread betting adverts. [‘He never struck me as a big risk-taker’ — FT] 


they were working overtime down at ye olde varlet smithy

1415: Wine and the Agincourt campaign Pt II (what did 15th century wine taste like?)

Previously: "1415: Wine and the Agincourt campaign, Pt I (logistics and supply)". 

From The Drinks Business:

(NB: This series of articles was originally published in October 2015)

In the second part of our look at wine in the Agincourt campaign, we turn our attention to medieval viticulture, hypothesise on the taste of wine in the fifteenth century and how people then viewed fine wine.

 And if he be not fought withal, my lord,
Let us not live in France; let us quit all
And give our vineyards to a barbarous people.”

Charles d’Albret, Constable of France, Henry V, act 3, scene v.

The army struck out from Harfleur between the 6-9 October – the chronicles are conflicting on the exact date – and stuck to the coastal road.

Shipping the army to France for a siege had been a major undertaking, keeping an army full of sick men together on the march in steadily worsening autumn weather was another altogether. Supply once again was a key issue.

The record of Henry’s march through Normandy is not especially thrilling in itself but is interesting for us in that it shows the sheer extent of viticulture in France in the Middle Ages.

As Henry’s “ordinance”[1] for the campaign forbade the plundering of the countryside in “our lands in France”, each man was ordered to take a week’s worth of supplies with him to last the eight days it was expected they would take to reach Calais.

In some texts Henry supposedly heads off to Calais without a supply train in order to move faster across the French countryside. He might have been daring the French to do battle with him but simultaneously hoping he could out march them and avoid confrontation altogether given the state of his forces.

Then again, even if the whole thing was a daring bluff, a gamble, it seems odd that a commander who had previously been so apparently meticulous in regard to his logistics would cast aside the need for a wagon train entirely. And how else were the royal tent, crown jewels and holy relics to be transported? Not least the royal wine supply? The archers may have been forced to yomp, tab and march burdened down with kit but not so the nobles.

If we refer to the sums from part one, we will remember that each man had a ration of just under a gallon of wine a day. For eight days one man would therefore expect just under eight gallons. An army of some 6,000 would therefore require 47,947 gallons – 190 tuns of wine.

These and the other supplies and equipment would have been loaded onto bullock or oxen-driven carts which would have formed the central body of the army on its march.

Richard Barber in his book on the Crécy campaign of 1346 notes that a medieval army would have had one cart for every 20 combatants[2]. An army of 6,000 therefore would have needed 300 carts and probably taken more if it were able. Each cart was capable of carrying one ton of supplies approximately so 190 tuns would have taken up over half the army’s transportation. This seems too much although how much weight other supplies took up is difficult to quantify. As Henry expected a battle to be fought, his knights and men-at-arms travelled fully armoured rather than keeping their armour stored in barrels on the carts as was more usual and this would have saved a lot of space. The men themselves, particularly the 5,000 or so archers, would have carried a certain amount of equipment, food and drink on their person as soldiers have always done.

Let us not forget that wine and beer was more important to the medieval man than water so transportation of a large amount of wine would have been given some priority. As Barber again points out in reference to the 300 tuns Edward III took on campaign, “this was no luxury, but an essential part of the supplies.”[3]

One hundred and ninety tuns may be too much but if we downgrade that number to 100 (a third of Henry’s transport wagons), then Henry was still taking 25,200 gallons with him, enough to supply an army of 6,000 men with half a gallon a day each on the projected eight day march. Whatever the amount taken we may imagine that this was deducted from the stocks that had already been brought to France.

It was also no doubt hoped that additional supplies either from towns or the surrounding countryside might be obtained along the way – either given freely or leveraged by any means necessary.

“Other means” was largely what it turned out to be. Henry might have viewed Normandy as a simple extension of his domains in England or Ireland, but the Normans themselves were not, it seems, at all convinced.

Upon arriving at each large town on his route – and finding the gates closed against him – Henry therefore resorted to the rather contradictory expedient of threatening to burn down the town and pillage the surroundings unless bread and wine were turned over to him and his army.

This would be the pattern of the campaign. Henry would avoid the better fortified towns such as Dieppe but bully smaller ones such as Arques and Eu into handing over supplies or, more accurately, their “tribute”. In this early stage of the march the point of these demands was not so much to supplement the supplies the English had with them. We shall see later that the presentation of bread and wine to a victorious king had a clear biblical origin, which would have been immediately evident to the people of the fifteenth century, not least Henry who was an extremely religious man.

While the handing over of bread and wine did serve a limited practical purpose, as a demonstration of power and acknowledgement of divine blessing on his enterprise

it had a stronger double meaning – one of submission and homage on the part of his new “subjects”. Furthermore, to strengthen this theory remember that Arques and Eu were reached well before the initial rations would have begun running out so demanding food from those towns was almost certainly intended as a symbolic act on their part rather than essential to the replenishing of supplies.

Supplication may have been the inescapable final result but the French did not always go quietly.

As towns were approached or left, the garrisons (defiant or enraged) occasionally ventured forth to skirmish with the English van or rearguards. At Eu, as the English vanguard approached, the garrison rode out to meet them. A “very valiant man-at-arms” named Lancelot Pières couched his lance in a challenge which was answered by an English knight. In a scene straight out of an illuminated manuscript or “the pages of Froissart”[4] the two knights spurred their horses at each other and clashed with such force that witnesses swore they drove their lances through each other’s bodies. Crashing lifeless to the ground Lancelot had secured his place in the annals of chivalry but the identity of the equally bold and tragic Englishman remains sadly unknown.

This needless, even suicidal act to modern eyes nonetheless is exactly what one expects of the period and what knights expected of each other. To court danger and not flinch in the face of death even as you succumbed to a mortal stroke was praiseworthy to knightly eyes. They were a warrior class in an often violent age and death was sweet if well met. Yet it also contrasts neatly with a world increasingly on the cusp of a more modern era, where ostentatious displays of knightly posturing and braggadocio sat alongside an ever more powerful mercantile middle class, and their bureaucratic and legal institutions; where a lord could be charged for even two additional pitchers of wine. The fifteenth century was not quite the last hurrah of the chivalric ideal but it was getting close.

But these displays of gallantry aside many garrisons generally hunkered down behind their walls, complied with Henry’s demands and simply hoped his army would move swiftly on to bother somebody else and if the price of that was some wine and bread then so be it.

Natural wine paradise?

What is clear from the various sources though is that the wine they were handing over was locally produced which points to an agricultural landscape in medieval Normandy that included vines – something conspicuous by its absence now[5].

It should not surprise us terribly that a province such as Normandy had a wine industry in the fifteenth century – though “industry” is possibly too strong a word for it as mono-agriculture was not practised at this time.

There is a consensus that the early Middle Ages were warmer than our current climate which those interested in such matters have rather prosaically dubbed the “Medieval Warm Period” (MWP). This theory might explain the much greater spread of viticulture in France at the time but it is disputed as it is sometimes used to support the argument that the Earth goes through cyclical warm and cool periods and this is rejected by those convinced it is manmade pollution that is causing global climate change.

In a warmer climate, whites from northern France may not have been as piercingly acidic as certain northern European wines, such as still Champagnes, are today as they would have had more exposure to warmer weather and longer to ripen on the vine.

But were medieval harvests later than they are now? By the 15th century this MWP was at an end and the grape harvest is a common motif used to illustrate September or October in manuscripts from this period and, as we shall see below, if Henry’s army was drinking new wine from the barrels and presses in the town of Boves around 18-19 October, then the harvest must have begun in mid to late September or early October – which is not really so different from today or even the last one to two hundred years.

Whatever the truth of it though, what is not in question is that vines were extensively planted all over France at this time chiefly because wine was such an integral part of life and the medieval diet.

Niceties such as “terroir” were not always (if at all) of prime importance to medieval vintners and consumers. Wine was there to be drunk as part of a healthy diet and was as much of a staple as bread....


Luxury Brand Moët Hennessy Moves Into Direct-to-Consumer Sales
As Champagne Sales Set Historic Record: "Champagne bubbles: the science"

"France Faces Power Blackouts In Next Cold Snap, Grid Operator Warns"

 The intro to a post on the Texas power grid failure last February (here at Climateer Investing, we recycle!):

A few days ago I mentioned one of the quirks of the European carbon markets, the lower the temperature goes the higher the price for a EUA (one tonne of CO2). Another quirk is that during very cold weather, caused by a high pressure area sitting over a region, the wind doesn't blow. Meaning the wind turbines don't turn. This has happened in Britain and in Texas as well, sometimes for days on end.

And there are other quirks, maybe I shouldn't call them quirks because it is basic engineering....

And today's headline story from ZeroHedge: 

France's electricity grid is coming under strain, and the next cold snap could be devastating for the country as energy-intensive manufacturers would experience reduced power, according to a new report published by French power grid operator Reseau de Transport d'Electricite (RTE). 

RTE said due to the lack of wind and nuclear power generation. The next cold snap would force it to cut electricity to energy-intensive companies to stabilize the grid. There's even the possibility widespread rolling blackouts could be implemented for two hours to mitigate grid collapse during peak energy demand. 

The good news is that weather forecasting models provided by Bloomberg don't show an imminent cold blast for the first half of January. 

"Based on the latest forecast for January, such meteorological events -- including a severe cold snap -- seem very unlikely for the start of the month, and less likely for the rest of the month," RTE said. "Hence, the risk of power cuts is essentially ruled out at least for the start of January."

Mild temperatures and a flotilla of liquefied natural gas tankers have been a temporary relief for Europe, sending Dutch TTF natural gas and power prices lower in the last week. 

France's grid remains under pressure but not as bad as last week when day-ahead power prices rose to the highest level since 2009 and have since halved. Prices remain at extremely high levels. 


Thursday, December 30, 2021

"The Unimportance of Practically Everything"

A repost from 2012:

I've previously mentioned that I had all but given up on the Harvard Business Review:
Does Anyone Actually Read the Harvard Business Review?

For years I though it was just me thinking that the HBR was only used by high-buck consultant's to stroke CEO's egos, telling them how smart the CEO was to hire said HBR-spouting consultant.
From Felix Salmon at Reuters...
Once in a while though...

In horse racing 60% of the purse goes to the winner, 20% to the 2nd place finisher and lesser amounts to 3rd through 5th. Does this mean the first place finisher is three times as good as 2nd? Of course not, it's usually fifths of a second that separate the two. In sealed-bid contracting 100% of the contract goes to the better (usually low) bidder while second place goes back to the office with nothing. Again, how much better was first over also-ran?

This division of the spoils isn't confined to business. In life the reward for being second is not much better than for being one of the pack.

From the Harvard Business Review:
A friend of mine is the Executive Director for an organization with global reach. He is intelligent and driven, but constantly distracted. At any given time he will have Twitter, Gmail, Facebook and multiple IM conversations going. The majority of them are useful in some way. Yet, in the back of his mind, he knows there are more important deliverables to get to. But the days slip by and he finds himself working all weekend to catch up. Staying up Sunday night until the early hours of Monday morning has become his modus operandi. He told me, while checking his Blackberry again, that it results in having no social life. It's so bad that he tried having his Executive Assistant pull all of the internet cables on his computer. But there were still too many ways to get online. When he was struggling to complete a particularly big project, his brother took away his Blackberry and left him at a motel with no internet access. Yet, even there, he still found a workaround within 10 minutes using his ancient Nokia phone to check his email. Eventually, after eight weeks of almost solitary confinement, he was able to get the project done.

Why do otherwise intelligent people find it so easy to be distracted from what really matters?

Social media did not create the problem of distraction, but it is clearly an amplifier. Indeed, a study [PDF] by Clifford Nass et al. at Stanford showed that heavy media multitaskers are more susceptible to interference from irrelevant environmental stimuli than light media multitaskers. Heavy multitasking may encourage even heavier multitasking because it leads to a "reduced ability to filter out interference." Could the part of our brain that is processing deeper cogitative thought actually be atrophying in the process?

None of this would matter if activity and reward were linearly related. But we live in a world where almost everything is worthless and a very few things are exceptionally valuable. This is a counterintuitive idea. After all, the idea that 50% of results come from 50% effort is appealing. It seems fair. Yet, research across many fields paints a very different picture.

As far back as the 1790s, Vilfredo Pareto observed this nonlinear pattern in Italy, where he found that 80% of the land was owned by 20% of the people. Much later, Joseph Moses Juran, one of the fathers of the quality movement, called the insight the "Pareto Principle" and applied it beyond economics. In The Quality Control Handbook, Juran called it "The Law of the Vital Few." His observation was that you could massively improve the quality of a product by resolving a tiny fraction of the problems. He found a willing audience in Japan, where the country had been producing low-cost, low-quality goods. By adopting the quality processes, the phrase "Made in Japan" gained a totally new meaning. And gradually, the quality revolution led to Japan's rise as a global economic power....MORE.

Apple Shifted To Chinese Suppliers To 'Cut Costs and Curry Favor With Beijing,' Report Finds (AAPL)

From 9to5Mac, December 30:

In-depth report details Apple’s shift to Chinese suppliers to ‘cut costs and curry favor with Beijing’

 While Apple has long been linked to Foxconn as its primary partner for product assembly, a new report from The Information goes in-depth on Apple’s newfound relationship with Chinese electronics manufacturers. The report explains that Apple has increased its reliance on Chinese partners, both as a way of cutting costs as well as to “curry favor with Beijing.” 

Today’s report from The Information comes on the heels of a separate report from the publication earlier this month in which it described a so-called secret deal between Apple CEO Tim Cook and Chinese government officials. Through this deal, Apple reportedly committed to investing more than $275 billion in China over five years.

The report details that Foxconn, which is headquartered in Taiwan, is on the verge of being unseated as Apple’s top supplier by Luxshare, which is headquartered in China:

Luxshare has the potential to unseat Foxconn as Apple’s top supplier. The Chinese company already exceeds Foxconn’s main publicly listed unit in terms of market capitalization, though Foxconn generated roughly $105 billion from Apple in 2020—more than 10 times Luxshare’s haul. But in terms of valuation, Luxshare has also eclipsed major Apple contractors such as Quanta Computer, Pegatron and Wistron, all of which are headquartered in Taiwan. Foxconn has become increasingly concerned about Luxshare’s meteoric rise, including its significantly higher net profit margin, going so far as to form a task force to study the company, Reuters previously reported. (Foxconn denied the report.)

The report explains that Apple’s move to shift more of its business to Chinese companies is part of Tim Cook fulfilling his $275 billion pledge to the Chinese government....


HT to and headline from SlashDot

Apple's Mr. Cook was one of the CEO's yammering away about voting rights last April.

There are no voting rights in China.

According to Axios:

"Apple believes that, thanks in part to the power of technology, it ought to be easier than ever for every eligible citizen to exercise their right to vote. We support efforts to ensure that our democracy’s future is more hopeful and inclusive than its past," CEO Tim Cook said in a statement.

Again, he is cutting deals with a country that does not allow its citizens a say in how they are governed.

And as noted yesterday regarding Google:
 *You could write that introduction for every story on 200-or-so multi-billion multinationals, BlackRock, Coke, JPMorgan, Facebook, and on and on and on. In fact, stealing an idea from Investment Hulk:....

ICYMI: "China Panic-Hoards Half Of World's Grain Supply Amid Threats Of Collapse"

On December 11 we posted "China snaps up large volumes of French, Ukrainian feed grain" with the comment:
I'm not sure what to make of this beyond the obvious, that China hasn't been able to feed itself for a while now. They are going into the markets large-by-large. 
Well, after cogitating on this for three weeks and more importantly, asking some bright people what is going on, I'm still not sure what has prompted the Chinese to go into hyper-hoarder mode but something is up. 
From ZeroHedge, December 28:

About two and a half years ago, we told readers China was panic hoarding food, which was several months before the virus pandemic began to spread worldwide; Beijing has managed to stockpile more than half of the world's maize and other grains that have resulted in rapid food inflation and triggered famine in some countries. 

In August 2019, we asked the question: 

Does China believe that we are on the verge of a major global crisis? The communist Chinese government has always been very big into planning, and it appears that they have decided that now is the time to hoard food, gold and other commodities.

Fast forward today, the answer is most likely "yes." China maintains "historically high levels" of beans and grains stockpiled at COFCO Group's (a major Chinese state-owned food processor) 310 storage facilities in the northeastern part of the country, according to Nikkei Asia

Qin Yuyun, head of grain reserves at the National Food and Strategic Reserves Administration, told reporters last month, "our wheat stockpiles can meet the demand for one and a half years. There is no problem whatsoever about the supply of food."

Data from the U.S. Department of Agriculture shows China has approximately 69% of the globe's maize reserves in the first half of the crop year 2022, 60% of its rice, and 51% of its wheat.

Since the Chinese plan multiple years out, we've pointed out how a series of disasters and weather events have likely led state officials to forecast a troublesome period of food shortages. China has already observed droughts, floods, and pests that have ruined harvests. More than 20 months of snarled supply chains due to COVID and La Nina weather patterns (second consecutive one) have also produced volatile conditions for food production. 

The one thing Beijing cannot have is discontent among its citizens triggered by food shortages and or soaring prices; that's why central planners spent $98.1 billion importing food in 2020, up 4.6 times from a decade earlier, according to the General Administration of Customs of China. For the first eight months of this year, China imported more food than in 2016. 

"Over the past five years, China's soybean, maize and wheat imports soared two- to twelvefold on aggressive purchases from the U.S., Brazil and other supplier nations. Imports of beef, pork, dairy and fruit jumped two- to fivefold," Nikkei Asia said. 

China's acquisition of the world's food supply has helped push food prices to decade highs. The U.N. Food and Agriculture Organization estimated the food price index is currently at a ten-year high....


"Memo to economists: inflation was caused by lockdown"

I mentioned yesterday that some people don't like Philip Pilkington. Here is one of the ways he riles them up.

From Unherd's The Post, November 23:

Why are the experts in denial about the obvious?
Inflation has reached the highest level since 2008. A single tomato in this picture costs as much today as a second-hand Range Rover. 
Photographer: Angel Garcia/Bloomberg via Getty Images

Financial journalists are in shock. They seem in awe of the return of inflation in 2021. The Financial Times runs a headline about “the unexpected surge in inflation” while The Economist informs us that the rise in inflation has “blindsided many economists”. Should readers be surprised by their surprise? Yes, they should.

Early on, economics students learn about the basic structure of the macroeconomy. On one side, students are told, is the supply capacity of the economy: the ‘supply side’. On the other, is the level of demand in the economy: the ‘demand side’.

You can think of the supply side as everything involved in the production and distribution of goods and services — from the factory to the transport grid to the supermarket. Conversely, you can think of the demand side as the amount of total spending in the economy at any given moment in time — that includes consumption spending by workers, government spending on goods and services and the purchase of new machines and buildings to create new factories and shops.

Inflation can occur in two ways. Firstly, demand can rise too high relative to supply. So, the government could ramp up spending massively — say, to fund a war — and the new spending could outstrip the capacity of the economy to deliver the goods. Prices would duly rise. Alternatively, supply could collapse. A drought in a poor country could wipe out half of the arable land for the year and there would be a food shortage. Again, prices would duly rise.

Consider what the lockdowns and vaccine mandates have done to the economy. On the one hand, they have interfered with the supply side. During social distancing, for example, pubs and restaurants could only operate at partial capacity; thus, they had to raise their prices to ensure continuous revenue. Vaccine mandates — even when only imposed at the company level — restrict the amount of people who can work in certain industries. This drives up wages and with them prices. One need not get into the chaos the public health measures have had on international shipping — restrictions have become so onerous that vessels find themselves keeping dead crewmates in freezers because they cannot bring the bodies through ports....


The FT's 404 Page

One of the commenters on the Twitter thread in yesterday's "Izabella Kaminska Has Questions" was Merryn Somerset Webb, editor-in-chief of MoneyWeek. Among the links in her Twitter profile is "" which redirects to the FT's 404 page. I had forgotten how funny that particular error message is:


The page you are trying to access does not exist.

This might be because you have entered the web address incorrectly or the page has moved.

We apologise for any inconvenience.

Why wasn't this page found?

We asked some leading economists.

Stagflation i
The cost of pages rose drastically, while the page production rate slowed down.
General economics
There was no market for it.
Liquidity traps
We injected some extra money into the technology team but there was little or no interest so they simply kept it, thus failing to stimulate the page economy.
Pareto inefficiency
There exists another page that will make everyone better off without making anyone worse off.
Supply and demand i
Demand increased and a shortage occurred.
Classical economics
There is no such page. We are not going to interfere.
Keynesian economics
Aggregate demand for this page did not necessarily equal the productive capacity of the website.
Malthusianism i
Unchecked, exponential page growth outstripped the pixel supply. There was a catastrophe, and now the population is at a lower, more sustainable level.....

....MUCH MORE, like Ravel's Bolero, it just keeps building and building.

Batteries: Northvolt's Swedish Gigafactory Comes to Life

 From UPI (also on blogroll at right), December 29:

Northvolt produces first lithium-ion battery in Sweden

The Swedish battery company Northvolt said Wednesday it has produced its first lithium-ion battery, in an effort to rival battery leaders like Tesla in the United States and others in Asia.

Northvolt officials said the battery was the first fully designed, developed and assembled at its "gigafactory" in Skelleftea, Sweden. The battery factory was valued in June by investors at $12 billion and employs more than 500 workers. 

"Today is a great milestone for Northvolt, which the team has worked very hard to achieve," Peter Carlsson, CEO and co-founder of Northvolt said in a statement....



"Can Northvolt solve Europe’s impending electric car battery problem?"

Northvolt has some big investors. 

August 2020
June 2019 
Batteries: Volkswagen Leads €886 Million Investment in Northvolt
September 2017 
More on Northvolt, ABB and the 'World's Greenest Battery'
September 2017 
ABB Teams up with Northvolt on Europe's Biggest Battery Plant
March 2017 
"An Ex-Tesla Exec’s $4.2 Billion Battery Battle With Musk"

Wednesday, December 29, 2021

China and Japan: Thinking About President Xi and Prince Kanenaga

The long history of Chinese arrogance.
For 100 years, from the Chinese/Mongol attempts to conquer Japan in 1274 and 1281 to the demands of the founder of the Ming Dynasty from 1369 to 1382 that Japan pay tribute.

A repost from December 2018.

Sometimes when thinking about what President Xi is up to Chairman Mao comes to mind. I mean with posts like:

Mao obviously comes to a lot of minds.
And then when President Trump tweets: "Relations with China have taken a BIG leap forward!" it's inescapable. or as they say in Hollywood, "A little too on the nose?"

There is however another Chinese emperor leader that should also come to mind, Ming Dynasty founder Emperor Hongwu.
Upon gaining control in 1368, Hongwu ('Vastly Martial') began demanding tribute from all the surrounding lands, including Japan.

We mentioned this obliquely in 2014's Oil and China's Territorial Ambitions: "The World Is the World's World". Here is a better, more scholarly reference via Oxford Journals' Chinese Journal of International Politics, Summer 2012:
...The threat of military force was evident in Ming China’s effort to bring Japan into the tribute system. Japan’s Prince Kanenaga imprisoned and executed a number of the Chinese envoys that Emperor Hongwu had sent in 1369 to demand tribute, apparently angered at the condescending tone of the diplomatic letter denoting Chinese superiority. When the Ming court threatened invasion, the Japanese reminded it of the Mongols’ failed attempts in 1281 to conquer Japan. A letter Kanenaga sent in 1382 explicitly denied the legitimacy of Chinese dominance: ‘Now the world is the world’s world; it does not belong to a single ruler … . I hear that China has troops able to fight a war, but my small country also has plans of defence … . How could we kneel to and acknowledge Chinese overlordship!’88  ...

Jus' sayin' Mr. President Xi, jus' sayin'. 

And that 2014 post:

Oil and China's Territorial Ambitions: "The World Is the World's World"
....The part of the headline in quotation marks is not to be found in the story, rather it is from a 1382 letter sent by Japan’s Prince Kanenaga to the Hongwu Emperor of China, founder of the Ming Dynasty, explicitly denying the legitimacy of Chinese dominance:

Heaven and earth are vast, they are not monopolized by one ruler.
The universe is great and wide, and the various countries are created each to have a share in its rule.
Now the world is the world's world; it does not belong to a single person.
For some reason I've never been able to get that quote out of my head but I promise that is as esoteric as I'll ever get.
Here's a ref. via Oxford Journals.

UPDATE: The Oxford Journals link to The Chinese Journal of International Politics is now gated with a stub entry.
If interested here is "Chinese Hegemony: Grand Strategy and International Institutions in East" with the quote and some background on what Prince Kanenaga was dealing with.
Quite an inspiring guy.

Luxury Brand Moët Hennessy Moves Into Direct-to-Consumer Sales

The original headline was "Luxury Champagne Brand..." but I've never thought of Moët as luxe, a good serviceable wine but like Cordon Rouge, the booze you break out when your guest list is a hundred or more couples. But that's probably just me.

From Yahoo Finance:

Anu Rao, Moët Hennessy USA VP of Communications, talks about the French parent company's move into DTC sales, champagne sales as the new year approaches, and the best way to enjoy a glass of bubbly.

Video Transcript

ADAM SHAPIRO: There is no better way to tell the people you love, whether they be family or friends, especially on New Year's Eve, than with a fine bottle of French champagne. And among the best champagnes out there, Moé. Moet, excuse me. I always pronounce it incorrectly.

We want to bring Anu Rao in right now, Moet Hennessy's USA vice president. It's good to have you here. Vice president of communication. And when we talk about Moet, Americans, when we talk about champagne, there is something special about having French champagne on New Year's Eve. But now we're having all these headlines about, you can't get French champagne. That's just not the case. Or are you seeing big demand for it this year?

ANU RAO: Oh my gosh. Well, first of all, thank you for having me. Love being here talking champagne. Now, listen, I mean, I think every industry, as we know, is having some challenges with supply, et cetera. But no, there is an absolute demand, and there's, of course, the opportunity to go get a wonderful French champagne. There's nothing like that pop of the bottle to signify the 2022 year coming in, which I think everyone is just waiting to start a positive new year next year.

So yeah, no, absolutely go out and get your Moet, or your Veuve Clicquot. You can trade up to some Krug or some Ruinart. These are all products that are readily available. So yeah, absolutely, Adam. I hope you're doing all right.

ADAM SHAPIRO: Within your brand household, isn't Dom Perignon-- I won't pronounce that correctly. I speak Spanish, not French. Isn't that one of the offerings? Although I don't know if I have the budget for it.

ANU RAO: Absolutely. Dom Perignon is fantastic. It is one of our best. It is aged anywhere from eight to 10 years. It's fantastic. And we actually just launched a wonderful site called Our Cellar, which is a site that is literally opening our cellars to people to get our products directly from the maker. So check it out. You can even customize some of our bottles for your friends and family. It's a wonderful thing for the holiday season. But yeah, Dom Perignon is absolutely one of our shining stars, for sure.

ADAM SHAPIRO: So walk me through. Help us understand, those of us who aspire to patrician palates, but have plebeian wallets. What's the good starting brand if we don't know champagne?

ANU RAO: This is a great question. We have products for, truthfully, every wallet and price point. You know, we have a wonderful California sparkling wine called Chandon, which is fantastic. We just launched a new product, the Chandon Garden Spritz, which is a spritz in a bottle. And essentially, that's a $20 bottle of sparkling wine, and it's absolutely fantastic. Made with the same traditions and methods as the rest of our champagnes, just made in California.

And then we've got Moet. If you're really looking to pop up that bottle of Moet on a New Year's Eve, but don't have the budget, there's the minis, which are absolutely fantastic. They're beautiful. They have two glasses of bubbly in them, and you can get that for your friends and yourself. So there's many different options within the portfolio, from a sparkling, bubbly perspective.

ADAM SHAPIRO: Do you find that those of us in the States are more inclined to go to a California sparkling wine? It's not champagne. It's the same kind of drink, but you can't call it champagne. Or do we really have that bias for the original French stuff?

ANU RAO: You know, honestly, I think when it comes to New Year's Eve, I'm going to have to say I think we have that bias. And I think we just want to go for that celebratory, wonderful, special night to really celebrate the year. And like I said, toast the new year. And those French bottles are super popular, and just are a wonderful way to really do that....


Oh, I see. The headline was referring to all the LVMH brands not just the Moët & Chandon.

As to Ms Rao, she seems a quintessential champagne salesperson: bubbly and moving into the upsell to Krug and Ruinart by the end of the first paragraph.

A word of explanation for my borderline supercilious tone. From a 2014 post, Alternative Investments With Liquidity: "Fine Wines, Best Value":

When I was a young hotshot I decided I would sample every representative wine of one type or another.

I had decided on Bordeaux and told a very connected sommelier/procurer of my intent. He advised I definitely not go with Bordeaux as I "would have cirrhosis before I was a quarter of the way through" the 1500 wineries, each with multiple labels. Even if I limited the experiment to certain châteaux, the multitude of vintages would probably mean I'd end as just another poor alcoholic with an educated palate.
So we decided on the Champagne instead.

Anyone serious about this stuff should probably read "'Dimson et al: "The impact of aging on wine prices and the performance of wine as a long-term investment'" wherein, as a special bonus I recount the sommelier's favorite wine joke. (you've probably heard it but it is so bad it's good)

Thanks to that sommelier I have managed to avoid turning my liver into a very expensive wine-infused foie gras.

Google's Waymo To Use Chinese Geely Robotaxi Body. This Should Send Shivers Into Western OEMs

Yes, yes, it's Alphabet's Waymo but Alphabet is a stupid name.

And speaking of stupid, last week I was asked about elections in China. I had to explain they don't have elections in China. Hong Kong recently held elections for the city's legislature, a throwback to the city-state's British-colonial history,  but the Chinese Communist Party only allowed candidates they had vetted to run. Pro-Beijing candidates won in a landslide. As to the rest of China, they don't have elections.

Oddly enough, Google's senior vice-president of global affairs Kent Walker spoke out on changes to Georgia's election laws last April: "...We're concerned about efforts to restrict voting at a local level..."

CBS News, whose parent Viacom also spoke out on the Georgia law compiled a list of the major changes in the Georgia legislation. It appears the most onerous is a new requirement to include your Georgia state ID number on your absentee ballot form and/or the last four digits of your social security number.

Again, voting is not allowed in China
And not a peep out of the GOOG.*

To trot out our sometimes tagline: "The Less Virtue, The More Signaling."

From Forbes, December 28:

Waymo announced today it will integrate its technology into a robotaxi base from Chinese manufacturer Geely. Geely owns Volvo and this vehicle was designed in Sweden, it will be under the Geely Zeekr brand and most likely be manufactured in China. China has been, for several years now, the leading car manufacturing country in the world but its cars are not seen very often in western countries and particularly not in the USA.

Up to this point, western OEMs have not faced much competition from Chinese makers. Chinese cars are not made to fit US Federal Motor Vehicles Safety Standards and can’t be sold in the USA. Chinese brands have no reputation, or even have a negative reputation compared to top western brands — that’s even true in China though it’s been changing there.

Brand is important. Surveys suggest that the nameplate on a car is the top factor in a consumer’s choice of what car to buy. (They say it’s safety when you ask them, but actual buying choices are based on several other things, including brand, performance, cost, luxury and several others.) Maintaining good reputations for their brands has been essential to keeping market position for all major global brands.

This is why the shift to robotaxi is frightening to car OEMs. Customers don’t care a lot about the brand of the car that picks them up. While you might choose between Uber UBER -0.2%, Uber Select or Uber Black to set the level of car, you don’t care whether your Uber Select is a Lexus PLXS +1% or a Mercedes. You don’t care much at all what your Uber is. So while people might not be ready to buy a Geely or SAIC car in the USA, they won’t care about this when taking a ride. The brand they might care about is Waymo, and that brand will be on this vehicle.

It gets even worse for the OEMs. One way the top brands have gotten their reputations is by making quality, highly reliable cars. Chinese manufacturers are new to the game. They make lower cost cars but may not have yet reached the quality levels of a BMW, Mercedes or Toyota. When people buy cars, they care a lot about whether the car is going to break down or not. When your car breaks down, even if it’s under warranty, it’s a major burden. You can get stranded. You have to arrange to get the car to the shop. You’re possibly out a car while it’s in the shop or have to arrange a loaner. On top of all that is the cost of the repair if it’s not under warranty. It’s a bad day and people pay a lot to get cars from the brands that break down less often....

*You could write that introduction for every story on 200-or-so multi-billion multinationals, BlackRock, Coke, JPMorgan, Facebook, and on and on and on. In fact, stealing an idea from Investment Hulk:

I think he stole the pic from StockCats, but the thought is unique to him (well him and a couple billion other people)

Just for grins and giggles: Warren Buffett signed a declaration against discriminatory voting rules that ran across two pages of the New York Times and Washington Post in April. The declaration begins:

We Stand For Democracy
A government of the people by the people for the people

Berkshire Hathaway's 2009 investment in China's largest electric vehicle company, BYD, for $232 million was valued in the last annual report at $5.9 billion. That one was Charlie Munger's idea.

Here's our contemporaneous post:

Berkshire Takes 9.9% Stake in China Electric-car Maker BYD (BRK.A; 1211 [Hong Kong])

China has been very good to Mr. Buffet. But there are zero voting rights in China.

So much for A government of the peeps, by the peeps etc.

Izabella Kaminska Has Questions

Two quick points up front: The difference between journalists and other types of writers is vast, much, much greater than the difference between gift and grift.

Or something.

From the outgoing editor of FT Alphaville:

MUCH MORE (thread)

Pilkington et al.: "Credit-Driven Asset Price Inflation"

As part of the know your customer checklist, after the "As your financial counselor, I need to determine you risk tolerance, wanna cut the cards for $10,000?" question I asked one very wealthy gentleman if he had any margin accounts and his answer stuck with me: "no, I can get an uncollateralized signature loan cheaper than the money the brokers are offering."

Among the truths that can be teased out of that answer - and there are many - is a premier source of wealth inequality. Jus' sayin'.

From Verdad Advisers (verdad is the Spanish word for truth):

How cheap money is driving overvaluation risk in public equity, PE, and housing

By: Philip Pilkington with Daniel Rasmussen & Greg Obenshain

Credit is the lifeblood of our economy. From consumer purchases financed on credit cards to home purchases funded by mortgages to equity investments made on margin and private equity funded by private credit, credit is a key driver of both prices and volumes. When debt is cheap and easily available, asset prices tend to rise; rising asset prices in turn make loans look safer, fueling yet more credit availability and more purchases.

Today, credit is extremely cheap and extremely accessible, and that is driving rising asset prices in three key markets: public equity markets, private equity markets, and housing markets. In each of these markets, rising asset prices are accompanied by decreasing loan-to-value ratios, falling debt costs relative to income, and, most strikingly, asset prices that look extremely high relative to history.

The Scylla and Charybdis of investing are bankruptcy risk and overvaluation risk, and when credit fuels rising valuations, investors should be doubly concerned. To navigate between these two dangers, investors need to be fully cognizant of the risks posed by rising asset prices and monitor credit markets avidly to look for signs of any change in credit conditions that might lead to a reversal.

In what follows, our goal is not to predict the next crash in any of these markets, or even to highlight definite bubble activity. Rather, we aim to highlight risks that we believe investors should be mindful of and understand that, by being invested in current markets, they are implicitly underwriting.

Public Equity Markets

The extremely low cost of borrowing has three primary impacts on equity markets.

First, companies issue more and more debt, swapping equity for debt and leveraging up corporate balance sheets.

Figure 1: Corporate Debt and Equity Issuance
Source: Federal Reserve, GMO

Second, unable to earn returns in credit markets or on cash balances, investors shift a larger portion of their investable assets into stocks.

Figure 2: Aggregate Financial Asset Allocation Among Household, Mutual Funds, Pension Funds, and Foreign Investors....

Some people don't like Pilkington but we find him to be interesting, even provocative. Some previous links:
Economics: "The Miracle of General Equilibrium"
The writer, Philip Pilkington, is one of the sharper knives in the econ drawer.
As long-suffering readers know, I don't have time for a lot of the public intellectual economists, life's too short for political and policy preferences gussied up in fancy-dress math. There are a handful of names I make time for, Nordhaus and Shiller among the heavyweights and Timothy Taylor* and Pilkington among the lesser (but brighter than I) lights.

Pilkington's book The Reformation in Economics, aims directly at the heart of the question, "How much of economics is ideological?" He hangs his academic hat at Kingston University and grubs his living as a member of the Grantham Mayo Van Otterloo Asset Allocation team....

"Social Structure And The Determination Of Interest Rates"
GMO: The Deep Causes of Secular Stagnation and the Rise of Populism

Here's a snippet from one of his papers, "How Far Can We Push This Thing":

....The other way that inflation might get caught in the system is if workers bid up their wages to maintain their purchasing power in the face of inflation. Imagine that wages and inflation are both growing at 2% a year and so real wages are constant. Now imagine that, due to an increase in the fiscal deficit, inflation rises to 4% in a given year. If workers then try to raise their wages to 4% growth in that year then it is conceivable that businesses will raise their prices in order to pay these new higher wages. This could result in a wage-price spiral where the higher rate of inflation gets caught in the system.

For this to happen, however, workers must have sufficient bargaining power to demand that
businesses raise their wages. If they do not have enough bargaining power, then they will not be able to defend their real wages against the price increases and so will have to just accept the real wage cut that they receive5. While such a system is not ideal for workers, it does entail very low risk that once-off price increases will translate into permanently higher rates of inflation.....

He basically argues that, barring wage-price spirals, inflation is a one-off, which of course is a tautology but it is interesting to see how he develops his thesis. 

And it will be interesting to see if the new-found worker autonomy and power is real, or at least real enough to demand wage increases in excess of inflation.

Chips: "Italy, Intel intensify talks over $9 billion chip factory, sources say"

But no one will build another chip fab in California ever again.

From Reuters:

Intel and Italy are intensifying talks over investments expected to be worth around 8 billion euros ($9 billion) to build an advanced semiconductor packaging plant, two sources close to the matter told Reuters.

A deal of this size would secure Italy about 10% of the 80 billion euros the U.S. company is looking to spend over the next decade in Europe on cutting-edge manufacturing capacity to help avoid future shortages of semiconductor chips.

Sources had previously told Reuters that the investment size was in a 4 billion to 8 billion euro range.

As part of this plan Germany, the European Union's largest economy, is in the lead to land Intel Corp's planned European 'megafab' plant, although France remains in the running, Reuters reported in October.

Intel said it is "having constructive investment conversations with government leaders in multiple EU countries" but declined to comment specifically on talks with Italian officials....


Intel itself said they would never again build in California, something we've looked at over the years.

Here's a post from 2019:
Do You Want To Know Why Intel Said They Would Never Build Another Factory In California?

It's partly the regulation, we've looked at that over the years, links below and it's partly the cost of electricity, ditto on the looks and links. California has the highest electricity prices in the contiguous United States.
And now they seem to have something of an intermittancy problem as well.....

On top of all that, as a guy commented regarding the net inflow of people emigrating to Texas:

"Whether they are coming from Hong Kong or from California, people want to escape the political tyranny of one-party states."

That's harsh. I'll see if I can find the cite.

Tuesday, December 28, 2021

Chips: Taiwan, Japan Eye 'All Round Cooperation'

Three from Reuters. First up, via MSN, December 20:

Taiwan govt OKs Taiwan Semiconductor's new chip plant in Japan

And via US News & World Report, December 24, the headline story:

Taiwan and Japan's ruling parties agreed on Friday to have "all round cooperation" on semiconductors and to hold regular talks, Taiwanese lawmakers said, after what are de facto discussions between the two governments.

Although Chinese-claimed Taiwan and Japan do not have formal diplomatic ties, they have close unofficial relations and both share concerns about China, especially its increased military activities near the two.

The talks, attended by two senior lawmakers each from Taiwan's Democratic Progressive Party (DPP) and Japan's Liberal Democratic Party (LDP), took place online, and follow initial consultations in late August.

DPP lawmaker Chiu Chih-wei told reporters that chips were not just an issue for Japanese industry, which like the rest of the world has faced semiconductor shortages, but also an issue of security in the face of China.

"Both sides agreed that in the future there will be even more cooperation on chip supply chains, there will be a complete framework, a system, to have all round cooperation on semiconductors and other industries the two countries put importance on," he said.

Japanese officials said they had agreed with the Taiwan side that both they as well as the United States needed to cooperate to build resilient supply chains in areas such as semiconductors.

"We need to do our utmost in tackling the shortage of semiconductors at the moment, but realms of cooperation should expand as we go forward," Akimasa Ishikawa, a Liberal Democratic Party lawmaker who participated in the meeting, told reporters. "One of the major challenges will be how the three countries join hands in response to China's high-tech investments."

Taiwan Semiconductor Manufacturing Co Ltd said last month it would build a $7 billion chip plant in Japan with Sony Group. TSMC, a major Apple supplier, produces some of the world's most advanced semiconductors.....


Finally, a Reuters deep dive via Nasdaq, December 27:  

SPECIAL REPORT-Taiwan chip industry emerges as battlefront in U.S.-China showdown
On the front line of the superpower struggle between the United States and China, Taiwan has fashioned a defensive masterstroke. It has become indispensable to both sides.

In dominating the fabrication of the most advanced semiconductors, the giant Taiwan Semiconductor Manufacturing Company Ltd (TSMC) 2330.TW has captured a technology that's crucial to the cutting-edge digital devices and weapons of today and tomorrow. TSMC accounts for more than 90% of global output of these chips, according to industry estimates.

Both superpowers now find themselves deeply dependent on the small island at the center of their increasingly tense rivalry.

For Washington, allowing an increasingly powerful China to overrun TSMC's foundries in a conflict would threaten U.S. military and technological leadership. However, if Beijing invades, there is no guarantee it could seize the prized foundries intact. They could easily become a casualty of the fighting, severing the supply of chips to China's vast electronics industry. Even if the foundries survived a Chinese takeover, they would almost certainly be cut off from a global supply chain essential to their output.

Both America and China want to break their dependency. Washington has persuaded TSMC to open a U.S. foundry that will make advanced semiconductors and is preparing to spend billions rebuilding its domestic chip-making industry. Beijing, too, is spending big, but its chip industry lags a decade or so behind Taiwan's in many key areas. Analysts say that gap is expected to widen in the years ahead.

So valuable are these foundries to the global economy that some here refer to Taiwan's chip sector as a "silicon shield" that deters a Chinese attack and ensures American support....


Some previous attempts at explaining how important these actions are:

January 16, 2020
As Concern Grows Over China’s Invasion Threat To Taiwan the U.S. Military Wants TSMC To Move Some Chip Capacity
And some thought I'd gone mad talking of chips and China and the island formerly known as Formosa (at least to the Portuguese).
p.s. can I start attending the Thursday soirées again? Please....

July 3 2019's "China to Narrow Chip Gap With Taiwan Invasion"

Did I say invade? I meant trade.
I must have been thinking of China's Defense Minister last month saying "China must be and will be reunited".
With the Taiwanese elections coming up it's probably as good a time as any for Beijing to make some sort of move. Probably not invasion though. China will want to test its military somewhere, our guess is Vietnam, before tackling Taiwan. So probably some sort of fifth column action, cyber, electrical grid etc. And the people to do it are already on the island, I mean if the Chinese could get one of their spies into Dianne Feinstein's office while she was Chair of the Senate Intelligence Committee (2009 - 2015), the guy was her San Francisco office manager, not, as reported, the chauffeur, if they could do that there is no doubt they have assets in Teipei.
So where was I?

Chips. For all their technological wizardry the Chinese are still having trouble making chips. Some of our links on that after the jump....
And August 28, 2019
Chips: How China Is Still Paying the Price For Squandering Its Chance To Build a Home-grown Semiconductor Industry 
Should China ever invade Taiwan the TSMC fabs would be quite a prize.
We've looked at this oddity a few times, some links below....
Intel is known in some circles as Chipzilla but, truth be told, the appellation might more accurately belong to TSMC.
And some focused more on Chinese chips:
If interested see also April 2021's : 

You can see Japan's quandary if you follow the islands down to Okinawa and beyond:

Asia Pacific Journal Japan Focus (more after the jump)


"EU Natural Gas Prices Tumble For Fifth Straight Day"

 From OilPrice, December 28:

  • 20 tankers with U.S. LNG are traveling to Europe, and another 14 are headed in the same general direction awaiting further orders
  • According to analysts, the U.S. cargoes will not make a lasting difference due to volume constraints
  • Prices have been on a steady decline even though Gazprom has continued to shun booking export capacity on the Yamal-Europe pipeline for the eighth day in a row

A flotilla of U.S. liquefied natural gas carriers heading for Europe has brought relief to European gas buyers, pushing gas prices considerably lower. According to Bloomberg data, cited by Russia’s Sputnik, LNG cargos traveling from the U.S. to Europe rose by a third over the Christmas weekend.

20 tankers with U.S. LNG are traveling to Europe, and another 14 are headed in the same general direction awaiting further orders as desperate Europe became willing to pay a higher premium than buyers in Asia amid a persistent gas crunch that has seen prices break a series of records and forced some countries to reopen retired coal power plants.

According to analysts, the U.S. cargoes will not make a lasting difference due to volume constraints, yet the very news of the cargoes heading to Europe has already had an effect on European gas prices, especially as it coincided with forecasts of milder weather....


Chartology: Approaching Gap Fills on Small Caps and Non U.S. (IWM; EFA)

From Slope of Hope, Dec 28:

November Gap Closure

Six days of this childishly-named Santa Claus Rally have accomplished the remarkable achievement of almost perfectly sealing the Thanksgiving price gap on the small caps. Whether or not it gets perfectly sealed (or, indeed, violated) remains to be seen. As I’m typing this, however, the small caps certainly seem to be catching their breath, at a minimum. The precise value of the price gap is 227.85, less than a percentage point from today’s peak.

A similar situation can be seen in my still-beloved EFA, the overseas markets. Of course, gaps aren’t as meaningful on foreign markets as pure U.S. markets, because their prices are based on different exchange times. All the same, we’re at the midway point, and I don’t think there’s any gas left in this tank.

Also at Slope of Hope:

NFT Profiles 

On the small-caps we prefer the Russell 2000 futures over the ETF but they track each other pretty closely.

If interested in the non-U.S. ETF, here is BlackRock's iShares MSCI EAFE ETF page.

Schemers, Dreamers and Cons In The Truffle Trade

From hedgefunder (Elliot Management) Paul Singer's Washington Free Beacon, so all pronouncements come with a "grain of salt" caveat. He may have some sort of Italian/French truffle pair trade going on.
With one leg being long Truffe noir de Perigord....

Or something.

The subject line of Shake Shack's email was unequivocal: "TRUFFLES FOR ALL." The Danny Meyer fine-casual chain was touting its latest seasonal offering, the Black Truffle Burger, with 100-percent Angus beef, melted Gruyère, crispy shallots, "and our real black truffle sauce, not fake ‘flavoring,'" for a mere $8.89.

This prompts two questions: How do we distinguish between real and fake truffle flavoring? And how can such a high-end commodity be had for cheap? Everywhere you look, there are truffles to be had: "Add a little luxury to your life guilt free," Live Love Pop's truffle salt popcorn assures us, while Kettle Brand potato chips touts a Truffle & Sea Salt variety as its "Bougiest chip yet."

To help us make sense of all this, Rowan Jacobsen has written Truffle Hound: On the Trail of the World's Most Seductive Scent with Dreamers, Schemers, and Some Extraordinary Dogs. With just one sniff of an Italian white truffle, he was hooked. "My world exploded," writes the James Beard Award-winning author. And although he says "no words can do justice" in describing the scent, he does give it a try: "It was more like catching a glimpse of a satyr prancing across the dining room floor while playing its flute and flashing its hindquarters at you." That's one way to put it.

What has Jacobsen so transfixed is an organism akin to a mushroom, "fruiting bodies of subterranean fungi that live their lives in the soil as rootlike filaments attached to tree roots." Except that truffles remain underground, thus requiring the assistance of a pig or a dog, whose sense of smell far exceeds a human's. Dogs are preferable because pigs tend to devour what they find. As the author notes, "Stories abound of nine-fingered truffle hunters."

It may be worth the loss of a finger. In 2007, a 3.3-pound white truffle was sold for $330,000 (to a casino mogul from Macau). And while most truffles go for less, even at $3,000 a pound it's nothing to sneeze at.

It's also best not to overhandle the truffle lest a piece break off, which can cost a seller hundreds of dollars in value. What Jacobsen learns is that although their scent is intoxicating, truffles are sold almost solely based on looks. "Nobody buys truffles based on smell," he writes. "Everyone wants smooth, round, golfball-sized truffles that they can shave tableside into perfect wafers for their big-spending clients."....


"The Race to Find ‘Green’ Helium" (figure it out, make yourself a billionaire)

This is a pretty big deal and the truth of the matter is, the race is to find 'any' helium. Some links below.

From Wired, December 16: 

Helium is a critical—and finite—resource. The future of our most indispensable technologies depends on a new supply.

Deep within the grasslands of southwestern Tanzania, seven men were gathered on a gravel patch the size of a tennis court. They wore white helmets and yellow, oil-smudged overalls, giving the impression of melting popsicles in the night’s dry heat. Next to them was the reason they’d flown in from around the world: their drill rig, a 35-ton, 50-foot-high mast that pierced the sky. For three weeks, the drill had been drudging through layers of thick, gloopy clay, but now, at a depth of 1,800 feet, it had found an expanse of porous red sandstone and was picking up speed. While two men scrutinized the rig’s progress on a set of dials, the others gathered lengths of stainless steel pipe from a nearby storage trailer. Hazem Trigui, a scientist who worked the night shift, watched from the smoking area, puffing on a cigarette.
It was July 2021, the beginning of the drill team’s second month in the Rukwa Basin, a sparsely populated agricultural plain nearly the size of Fiji. The team wasn’t after gold or crude oil or natural gas; they were looking for helium, a noble gas being released in huge quantities by the ancient granitic rock beneath them. Helium is abundant—the second-most-abundant element in the universe—but on Earth it is rare. Because it is the smallest and the second-lightest element, it’s a master escape artist, slipping out of whatever container it’s in, even our atmosphere. Helium is also very useful. It has the lowest boiling point and freezing point of any other known substance. And unlike hydrogen, its lighter and more abundant neighbor on the periodic table, it doesn’t go boom at the slightest provocation. All these characteristics have made it a critical resource in much of the technology that modern society relies on, from the semiconductor chips in computers and mobile phones to fiber-optic cables, MRI scanners, and rockets. There is no space race or high-speed internet without it.
Helium forms within Earth’s crust through radioactive decay, a process so slow that on a human timescale it’s considered a finite resource. (A block of uranium the size of a candy bar would take roughly 500 million years to produce enough helium to fill a party balloon.) For more than a century, it has been mined as a minor byproduct of natural gas extraction. But in the decades to come, as the world moves away from hydrocarbons and demand for helium grows in step with the aerospace, computing, and medical industries, there’s a looming possibility of a major shortage.
The Rukwa Basin is one potentially significant new source of helium. Here, the helium is “green”—naturally mixed with nitrogen, which can be safely vented into the atmosphere. The future of a stable helium supply is likely to depend on non-hydrocarbon sources like this, and now there’s a race to find them.
The team of drillers had been sent by Helium One, a startup founded in 2015. Of the 30 or so companies exploring for helium deposits around the world, Helium One’s mission has the greatest potential to hit it big. That’s because the company believes the Rukwa Basin may be the site of one of the largest accumulations of helium the world has ever known—with a market value of as much as $50 billion, enough to satisfy global demand for around two decades. Helium exploration is such a nascent industry that there is no blueprint exploration strategy, so the chance of success is low, and the gas is especially hard to mine because of its containment problem. But the project has the potential to bring stability to the world’s helium supply and define how and where the world looks for helium deposits.
As the purr of the rig’s diesel engine reverberated around the drill site, Trigui returned to his mobile laboratory, a dusty portacabin filled with microscopes and rock samples. Checking the data on his computer, he saw something he’d been waiting for since his arrival in Rukwa: The gas spectrometer was detecting a spike in helium levels in the rock they were drilling through. This is what’s known as a “gas show.” Trigui kicked open the cabin door and walked over to the sump, where mud pumped up from the drill face was pooling. It was bubbling like a jacuzzi.
“It’s here,” he said to himself. “The helium is here!”
Trigui took a video of the bubbling mud on his phone and excitedly messaged his colleagues back at camp. Over another cigarette break, he chatted with the drill team; nobody had seen anything like this before. They believed they’d unearthed the world’s first major deposit of “green” helium, and the first sizable helium deposit at all since 1967.
The bubbles continued to surface until 2 am, as the drill bore down another 30 feet. Then, suddenly, it lost all torque. The engine changed tone from a low drone to a high-pitched hum. The drillers looked on, bewildered.
The drill bit—a 6-inch-thick spiral of stainless steel and tungsten—is connected to the motor by a series of steel pipes that screw together to form what’s called a string. One of the joints in the string had sheared off. The team had no choice but to pull it out of the hole, leaving 300 feet of pipe, and the bit, still down there.
As the sun rose, David Minchin, Helium One’s CEO, awoke at camp. Not yet aware of the setback, he saw Trigui’s helium data on his computer screen and immediately thought, This will be the best day of my life. He threw on trousers, leapt out of his tent, and called out a cheerful “Good morning!” to Randy Donald, the drill site supervisor.
“You haven’t heard?” Donald said.
“Heard what?” Minchin replied.
“It’s not good. It’s really not good.”
In the 1950s, a geologist named T. C. James travelled extensively in what is now called Tanzania. As the chief mining geologist in the British-administered Geological Survey Department of Tanganyika, it was his job to develop a better understanding for the country’s geology by identifying such things as arable land and mineral deposits. On one of these trips, James sampled a gas-bearing thermal spring near the tiny village of Itumbula, in the Rukwa Basin, that had intrigued the local people for centuries.
James’ findings told him that these gases were extremely rich in helium, but he thought nothing of it. At the time, helium was readily available. The National Helium Reserve, a giant geological helium storage unit created by the United States government in 1925 by recovering helium from gas fields in the Texas Panhandle, was approaching its peak. With billions of cubic feet of crude helium stored, and demand for it still to mature, there was no reason to pursue the gas in a remote location lacking the basic infrastructure—roads, power, running water—required to develop a project.
By 1996, however, the reserve was in debt. Congress instructed its operator, the Bureau of Land Management (BLM), to halt production and offer for sale the entirety of the stockpile at a price that would recover the costs of developing it. The effect of this was to artificially depress market prices and financially disincentivize anyone from exploring for helium, so until recently it has only been found incidentally, by petroleum companies scouting rock formations for hydrocarbons. For decades, then, as much as 80 percent of the world’s helium has originated from only around 10 natural gas facilities in the United States, Qatar, and Algeria.
Today, the global supply chain for helium is fragile, and that makes the gas a volatile commodity, which in turn can hamper scientific research and industrial production. While I was writing this story, Algeria’s Skikda Plant and the National Helium Reserve temporarily dropped offline, shutting down around 25 percent of the global supply. Cliff Cain, president of a consultancy group for industrial gas, told me his clients were forced to suddenly scale back their manufacturing, and scientists had to delay research dependent on helium. In 2012, a more serious shortage famously forced Tokyo Disneyland to suspend the sale of their Mickey Mouse–shaped balloons. End users don’t have reserves to dip into, because helium is extremely difficult and expensive to store.
Next year, the BLM is expected to finally complete its sell-off of the National Helium Reserve. After that, prices are likely to soar and the US government will have to source helium from the private sector. (The other major source of helium in the US, ExxonMobil’s LaBarge field in Wyoming, may be vulnerable to environmental policy because the gas composition is 65 percent carbon dioxide.) Without new, large-scale sources of helium, it’s a probability that increasing global demand will rely on Qatar, whose antagonistic neighbors have previously blocked exports, and Russia, where new production is slowly coming online. In the short term, Russia’s production is likely to produce a temporary oversupply of helium—but when natural gas production winds down, demand for helium is sure to catch up. “We’re walking into a world where the West has no control over one of the most valuable strategic commodities,” Cain says.
The impending helium shortage has long been anticipated. Ten years ago, while BLM was running down the reserve, demand for helium was climbing sharply. The private producers Congress expected to be online were delayed or never appeared, and prices shot up. As it became possible to drill for helium profitably, an assortment of explorers, entrepreneurs, and wildcatters—those who drill exploratory wells outside of existing gas fields—sensed an opportunity to earn a buck....

Some previous posts: 

Qatar: Helium shortage looms
The helium shortage is always coming, to date we don't have many substitutes for the element, but the arrival of the crisis keeps getting delayed...

"Venting about the Helium Market"
We too have been enchanted by the light one, most recently in "News You Can Use: 'Learn How to Build a Nuclear Fusor'"....

We've been tracking the helium biz for a while.
Helium prices balloon as supplies run out
Every couple years we run a story similar to this. Because of the physics and chemistry helium is one of the few irreplaceable elements. But...and that's a big but...if you want to make the big money go for the isotope, Helium 3 rather than straight up He, you'll make a fortune in the electricity biz.

"... America’s Helium Crisis"

“Chances are you’ve heard little or nothing from your constituents about helium over the past 15 years,” 
-Walter Nelson, director of helium sourcing at Air Products and Chemicals


"GE, Siemens Plead with Lawmakers to Preserve Federal Helium Reserve"

April 2013

Chemistry: Periodically, We Tell Element Jokes
Funnier than three helium atoms: HeHeHe.

Helium Problem Solved
The article says helium is derived from natural gas. This is incorrect. As one of the noble gases He doesn't react with much of anything so more correctly helium can be found in proximity to methane.

Pedantic much? Yeah, that was me.