Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I am so pleased to welcome back to the show
a guest who is not only my favorite chicken, but
my favorite foul of any sort at least to have
on the show. Doomberg is the green Chicken. Boomberg is
actually a group of folks, but I usually talk with
one particular member of that flock, and Doomberg has the
(00:24):
most successful and I think one of the absolutely most
interesting sub stacks in the finance category. And it's typically
about energy and resources and international competitiveness and stuff like that.
And Loomberg has been warning us the larger US for
some time regarding the.
Speaker 2 (00:48):
Dynamics of the.
Speaker 1 (00:50):
Trade relationship and other sorts of relationships between the US
and China, and we talked about it last time Doomberg
was on the show. But in a recent piece just
from a few days ago called Gloves Off, the subtitle
was why the events of last week changed everything, I
thought it would be really important to get the Chicken
back on the show.
Speaker 2 (01:10):
So do me.
Speaker 1 (01:10):
Thanks for making time for us. I know you're a
very busy chicken, and I appreciate your time.
Speaker 3 (01:15):
Ross always great to talk with the best in the business.
Looking forward to talking about China today.
Speaker 1 (01:20):
Okay, So last time you were on you gave us
the concept of escalation dominance. So the first thing I
want to do for people who missed that is just
very briefly define escalation dominance in the context that we're
talking about now.
Speaker 3 (01:35):
You bet, in any war or any competitive negotiation, it's
paramount to identify who has ultimate escalation dominance, who could
take it all the way, who can suffer more, who
is willing you know, what are you willing to do?
Speaker 1 (01:51):
So?
Speaker 3 (01:51):
For example, in the war in Ukraine, the US does
not have escalation dominance against Russia unless the US is
willing to use nuclear weapons. And in the trade war
with China, China has escalation dominance because of its monopoly
positions in certain critical raw materials, which I'm sure we'll
talk about next. But that's the main core concept. Who
can go all the way and who can't? And if
(02:13):
you can't, then you have to behave differently in a
negotiation than if you're the one with escalation dominance.
Speaker 1 (02:17):
All right, just one quick aside, and I realize you're
a very smart chicken, but not a psychic. Nevertheless, I
will ask you do you think Putin has escalation dominance?
Because there is a credible and I'm emphasizing the word
credible concern that he may use a nuclear weapon.
Speaker 3 (02:40):
No, I mean in conventional sense, the US can't outproduce
weapons at the pace that Russia is producing today. So
take nuclear off the board. Russia still has not gone
to full war with Ukraine. They characterize this as a
special military operation. They could do conscription, they could do
a call up. They're producing six seven hundred of these
hack drones every day. They have advanced missile technologies that
(03:04):
they could use that are not nuclear, including the Eurosinik.
And so when we say Russia has escalation dominance, it
can just outproduce an outcompete NATO because it's right there
on its border and they're such a large military industrial complex.
Speaker 1 (03:16):
Okay, and I don't know that I've read much from
you on this, and again a little off topic, but
the last thing on this, what did you make of
President Trump's decision after a lot of chatter, not to
give tomahawks to Ukraine, And how does that play into
the escalation dominance conversation in that conflict.
Speaker 3 (03:35):
Yeah, I think that was always a bit of theater
designed to buy Trump more time. Trump's under pressure, of
course from the Forever War Party in DC to escalate
the tomahawks would not have changed the war, but it
would have destroyed the relationship between Russia in the US,
primarily because tomahawks can't be fired into Russia without US
soldiers actually doing it, and everybody knows that, and so
(03:58):
it would be tanta mount to the US launching long
range missiles into Russia militarily effectively joining the war as
a direct combatant.
Speaker 4 (04:07):
And I don't think Trump was willing to do that.
Speaker 2 (04:09):
Folks, we're talking to Doomberg.
Speaker 1 (04:11):
You can go to Doomberg dot com, doo, M B
e RG dot com.
Speaker 2 (04:15):
If you go right now, you're.
Speaker 1 (04:16):
Going to see the two most recent articles are what
we're going to talk about next. They are very much
related to each other. One is called gloves Off and
one is called ninety percent of the Loss.
Speaker 3 (04:26):
So do me.
Speaker 1 (04:27):
Let me go to the subtitle of gloves Off, which
you posted about five days ago, why the events of
last week changed everything?
Speaker 2 (04:36):
So what happened last week and what did it change?
Speaker 3 (04:39):
So what happened last week was exactly what you and
I were talking about in my last appearance and that
we were warning about, which is China weaponized its monopoly
control over rare earth metals and the critically important magnets
that are derived from them, and effectively, China, because of
certain back and forth between the US and China, essentially
(05:01):
claimed that any company that re exports rare earths, even
trace amounts that originated in China need China's permission to
do so, and that has vast consequences across the entire
developed world. There is no country, very few companies who
aren't in one way or another involved in this dragnet,
and that was chant amount to an economic nuclear weapon.
(05:25):
China made a major threat to use it, and it
is stating that it will forbid the US military, for example,
from getting its rare earths. And there's an enormous amount
of rare earths in advanced weaponry, but rare earths are everywhere.
If chry, like for example of China, just stopped exporting
all rare earths, every automotive assembly line in the western
(05:46):
world would be shut down in a matter of weeks.
This is what we call escalation dominance. And we predicted
immediately upon seeing the news that the US would have
to be to retreat and the point of gloves off
is to go into great detail as to why that is.
Speaker 2 (06:03):
Well, okay, so.
Speaker 1 (06:06):
How do you think and you've talked about this a
lot in the past, more than in this particular piece,
which about what's going on now, But how how did
we get into a position where not just the US,
but almost the entire world outside of China hardly produces
anything at least as a you know, a percentage of
(06:26):
the global demand of these absolutely critical materials.
Speaker 2 (06:31):
How did that happen?
Speaker 3 (06:33):
China was willing to pollute on a scale that the
Western world would find intolerable.
Speaker 4 (06:37):
We described this almost three years.
Speaker 3 (06:39):
Ago now and a piece called geopolitical warfare, which I
know we've talked about last time as well. And so
now what we're seeing is g China has ninety plus
percent control over these very difficult to purify metals, and
the rest of the world is caught with its pants down.
And so we just had the Prime Minister of Australia
in the White House I leave yesterday, and there's going
(06:59):
to be tens of billions of dollars spent to close
this gaping vulnerability.
Speaker 4 (07:05):
But everyone saw it, everyone could see it coming.
Speaker 3 (07:08):
China, you know, ruins its own environment to get anobly
control over stuff everyone else needs. And they didn't do
that without the intent to someday use the card if
they needed to, and they felt like they needed to. Now,
last thing I'll say is all short of just create
glots and we close gloves off by saying in five
years is going to be a glut of rare earth
metals as the world over invests to compensate with what
(07:31):
China has done. So this leverage that China has, this
escalation escalation dominance that China has now is temporary. The
US will get it back together, the West will get
its act together. There'll be enormous investments poured into this sector.
We're seeing rare earth stocks skyrocket. I'd be very wary
of that rally because glots eventually come.
Speaker 1 (07:49):
Yeah, you know, it's funny, just tangentially. I was talking
with a friend of mine about SMR stocks small modular
nuclear reactor and what I asked what I asked my
friend because you know, do me, you know, my background
is finance, right, So what I asked him was if
I bought every you know, and let's say equal dollar
amount of every single currently publicly traded SMR stock, and
(08:15):
maybe if I could get my hands on the private
ones too, at their current valuations, will I be up
or down money in twenty years if I bought them
at their current prices. Do you have a I don't
know if you even think that's an interesting question.
Speaker 3 (08:28):
Though, sure, I mean I think you have to wonder
if you'll be apnomally or in real terms. Yeah, that's
the only real question you might You might quote make
money but lose spending power.
Speaker 4 (08:38):
We don't tend to buy power producers or energy producers
or the.
Speaker 3 (08:42):
Commodities themselves, just because the long term real price of
all commodities is lower electricity as a commodity, and so
we would hesitate to buy the SMR companies, any company
that is leveraged to volume of energy produced, like midstreamers
or critical parts suppliers over royalty companies we find more
interesting in the sector. But we're not long any of
(09:04):
these stocks. We don't like to be long stuff that
we write about. Their du schools. So thought, of course,
you know, our school of thought is we don't have
a conflict of interest, and so the reader knows they're
getting our authentic views right.
Speaker 1 (09:13):
And that's been your position for as long as I've
been reading your work, which is right around when you
right around when you started. That's always been your position.
We're talking with Doomberg Doomberg dot com. Back to the
China rare Earth thing. How much of China's effort, successful
effort to dominate the rare earth space, do you think
(09:37):
was done with a specific intent of garnering leverage or
escalation dominance versus just this is a useful economic thing
and we want to make a bunch of it.
Speaker 4 (09:49):
No, one hundred percent the former.
Speaker 3 (09:52):
It's not the most profitable business, especially when you invest
too much in it like they have done. They have
too much capacity. They do this all the time. So
look at the solar industry, way too much capacity. Nobody's
making money. Look at the electric electronic vehicle, you know,
the EV industry in China, way too much capacity. I
write a that where China can make fifty million cars
a year and they only make thirty That means they
(10:12):
have a lot of room to take GM and Ford
and Chrysler's business. But it also means nobody in that
sector is making any money. They do this specifically for
national security, and by the way, one of the big
failures of Wall Street is its inability to properly price
national security risk. It's just not something that stockholders care about.
(10:34):
And so you get this hollowing out of US manufacturing,
regardless of the consequences to the Pentagon. And now we're
seeing that the Pentagon has to go back in and
dump a bunch of money and become shareholders and all
these stocks, which I think is the right way to go.
Give Trump full credit for recognizing the problem and trying
to do something about it.
Speaker 4 (10:51):
But we have a sequencing issue ross.
Speaker 3 (10:53):
We have to build our own supply chains back up
before we can enter into a trade war or a
hot war China.
Speaker 1 (11:01):
Right and during and in that interim period, which, as
you said before, you're estimating at five years, but the
error bars around that are probably pretty wide. But during that,
during that time period, they've got us by the short ones.
They've got escalation dominance the whole time.
Speaker 3 (11:16):
You're correct, And it's not just been rare earths. I mean,
this is something we've been flagging again since the beginning
of Doomberg.
Speaker 4 (11:22):
God have it.
Speaker 3 (11:23):
Look, we've interacted with the Chinese. I've end of China
many times. I used to do business in China. This
is all very clear to people from industry how they
go about doing this, and you just assume that there's somewhere,
you know, behind enough closed door, somebody has a plan
for all of this.
Speaker 4 (11:37):
But then you realize that they don't.
Speaker 3 (11:38):
And as you say, knowing that, then I think we
have to have a better approach to China. I think
you know this whole other piece we wrote about ninety
percent of the law, which shows just how little forethought
has gone into what's actually going on here.
Speaker 1 (11:52):
Right, Okay, so good timing on that, because I just
opened that tab right as you were saying it. So
what what is netspear if I'm even pronouncing it correctly?
And why should Americans care?
Speaker 4 (12:05):
Next?
Speaker 3 (12:05):
Speria is one of the more important companies you've never
heard of in the semiconductor world.
Speaker 4 (12:09):
There's the high end, you know, Nvidia, AI.
Speaker 3 (12:12):
Super chips, but then the base of the pyramid is
this vast array of relatively simple, discrete semiconductor devices that
are in everything. They're in your fridge, they're in all
over your car. And during COVID we had a shortage
of those, and you may remember you'd see F one
fifties stuffed in parking lots because the cars were assembled,
(12:33):
but they were just missing some important chips like for
the steering wheel or whatever. Nexperia is a market leader
in those chips. It's based in the Netherlands, is owned
by a Chinese company got caught up in this, you know,
the US trade war with China, and the Dutch seized
control of it from.
Speaker 4 (12:52):
The Chinese owners.
Speaker 3 (12:53):
There's only one problem with this ross the main factories
in China, and so the Chinese simply said, you can't
export these chips then, and now we're seeing a scramble
similar to what happened in COVID, and the automakers are
setting up war rooms and panic teams as we call them,
because there's only a couple of weeks supply of these
critical chips. Next, Spiria has something like forty percent share
(13:16):
in some of the important chips that automakers rely on.
Of course, the Chinese makers won't have any issue because
the plants in their country, and so, you know, to
seize a company without even playing one dimensional chess very well, like'll,
they just put export controls on the chips, and now
the world is in panic again.
Speaker 1 (13:37):
There's an amazing quote in your piece ninety percent of
the law. And this is a quote from the South
China Morning Post. Next Spiia China, the local unit of
the Dutch chip maker, has told its employees to follow
orders from local management and ignore instructions from the Dutch
head office. And in other words, you're gonna do what
chijin Ping.
Speaker 2 (13:58):
Says, not what your company says.
Speaker 4 (14:00):
Because that's where the factor is.
Speaker 3 (14:01):
That's why you know, possession being ninety percent of the laws,
right is the title? And so again in sector after
sector true Western indifference.
Speaker 4 (14:10):
Let's say, let's be nice.
Speaker 3 (14:12):
China has accumulated geopolitical power by design, on purpose, and
so when Trump launched the tariff war, China was ready
with its own set of bullets. And you know, sometimes
people punch back and it hurts.
Speaker 1 (14:23):
Okay, last thing for you, do me, what is your
expectation for the US China relationship in this specific area.
I'm not talking about, you know, invading Taiwan and stuff,
but in this specific area, over the next six months.
Speaker 3 (14:39):
A deal will be cut and then the US is
going to spend hundreds of billions of dollars papering over
the mistakes of yesteryear.
Speaker 1 (14:49):
Do you think private industry will be spending that or
do you think this is going to have to be
government spending because private industry will think it's too risky
or not enough, the ROA or whatever.
Speaker 4 (15:01):
Great question.
Speaker 3 (15:02):
So you know, Trump spent touring the world and people
have been pledging all this money to invent in order
to circumvent the tariff threats. Qatar, you know, the Middle East,
Saudi Arabia, pick your favorite. That's where the money is
going to come to undo this. So you know, we
joke eternally. Remember when Trump came down the escalator and
he famously said, I'm going to build a wall in
Mexico's going to pay for it. Trump is now going
(15:24):
to say I'm building a rarerists factory and the Saudis
are going to pay for it, and that's what's coming.
Speaker 2 (15:29):
Wow. Yeah, that's a good line.
Speaker 1 (15:30):
But by the way I talk about those numbers, as
I talked about, I think I sent you actually an
email and a message about this book Apple in China,
and I had the author on the show yesterday and
what I said to him because he was talking about
Apple pledging to spend five hundred billion dollars and he
actually thinks a lot of that is stock buybacks and
dividends and nonsense that you wouldn't really think of in
(15:53):
the in the context in which it's being used. But
but the the idea, my idea is, these guys just
open up chat GPT and tell it give me a
random number between one hundred billion and a trillion, and
that's what we'll tell Trump.
Speaker 2 (16:06):
And then Trump buys it, and.
Speaker 1 (16:08):
He tells the world, look, they're going to do three hundred.
Speaker 2 (16:10):
And fifty billion dollars.
Speaker 1 (16:12):
And then all these execs are sitting around in the
conference room with little shot glasses of bourbon, toasting each
other and laughing saying he bought it again.
Speaker 2 (16:19):
Am I too cynical?
Speaker 4 (16:22):
Perhaps? With the US based executives.
Speaker 3 (16:23):
Great interview, by the way, but the people who depend
on the US military for their defense will be more
than willing to pay a little homage to the US
and probably get an investment return and part of it.
So if the US Navy is parked outside of your
oil field, you might want to, you know, pay for
(16:44):
a little protection of a protection racket.
Speaker 4 (16:47):
And that's one way to model what Trump is doing.
Speaker 1 (16:51):
Doomberg has the best most successful sub stack in the
finance category. It's mostly about energy and resources and global competitiveness,
and it's an incredible read and uh well worth your subscription.
I am a paying subscriber Doomberg dot com d O O,
M B E r G dot com.
Speaker 2 (17:11):
All right, get back to pecking around.
Speaker 1 (17:13):
I hope you find some good bits of corn in
wherever you're eating today.
Speaker 4 (17:17):
Always a pleasure, Ross, talk you so much.
Speaker 2 (17:18):
Okay, thank you
I am so pleased to welcome back to the show
a guest who is not only my favorite chicken, but
my favorite foul of any sort at least to have
on the show. Doomberg is the green Chicken. Boomberg is
actually a group of folks, but I usually talk with
one particular member of that flock, and Doomberg has the
(00:24):
most successful and I think one of the absolutely most
interesting sub stacks in the finance category. And it's typically
about energy and resources and international competitiveness and stuff like that.
And Loomberg has been warning us the larger US for
some time regarding the.
Speaker 2 (00:48):
Dynamics of the.
Speaker 1 (00:50):
Trade relationship and other sorts of relationships between the US
and China, and we talked about it last time Doomberg
was on the show. But in a recent piece just
from a few days ago called Gloves Off, the subtitle
was why the events of last week changed everything, I
thought it would be really important to get the Chicken
back on the show.
Speaker 2 (01:10):
So do me.
Speaker 1 (01:10):
Thanks for making time for us. I know you're a
very busy chicken, and I appreciate your time.
Speaker 3 (01:15):
Ross always great to talk with the best in the business.
Looking forward to talking about China today.
Speaker 1 (01:20):
Okay, So last time you were on you gave us
the concept of escalation dominance. So the first thing I
want to do for people who missed that is just
very briefly define escalation dominance in the context that we're
talking about now.
Speaker 3 (01:35):
You bet, in any war or any competitive negotiation, it's
paramount to identify who has ultimate escalation dominance, who could
take it all the way, who can suffer more, who
is willing you know, what are you willing to do?
Speaker 1 (01:51):
So?
Speaker 3 (01:51):
For example, in the war in Ukraine, the US does
not have escalation dominance against Russia unless the US is
willing to use nuclear weapons. And in the trade war
with China, China has escalation dominance because of its monopoly
positions in certain critical raw materials, which I'm sure we'll
talk about next. But that's the main core concept. Who
can go all the way and who can't? And if
(02:13):
you can't, then you have to behave differently in a
negotiation than if you're the one with escalation dominance.
Speaker 1 (02:17):
All right, just one quick aside, and I realize you're
a very smart chicken, but not a psychic. Nevertheless, I
will ask you do you think Putin has escalation dominance?
Because there is a credible and I'm emphasizing the word
credible concern that he may use a nuclear weapon.
Speaker 3 (02:40):
No, I mean in conventional sense, the US can't outproduce
weapons at the pace that Russia is producing today. So
take nuclear off the board. Russia still has not gone
to full war with Ukraine. They characterize this as a
special military operation. They could do conscription, they could do
a call up. They're producing six seven hundred of these
hack drones every day. They have advanced missile technologies that
(03:04):
they could use that are not nuclear, including the Eurosinik.
And so when we say Russia has escalation dominance, it
can just outproduce an outcompete NATO because it's right there
on its border and they're such a large military industrial complex.
Speaker 1 (03:16):
Okay, and I don't know that I've read much from
you on this, and again a little off topic, but
the last thing on this, what did you make of
President Trump's decision after a lot of chatter, not to
give tomahawks to Ukraine, And how does that play into
the escalation dominance conversation in that conflict.
Speaker 3 (03:35):
Yeah, I think that was always a bit of theater
designed to buy Trump more time. Trump's under pressure, of
course from the Forever War Party in DC to escalate
the tomahawks would not have changed the war, but it
would have destroyed the relationship between Russia in the US,
primarily because tomahawks can't be fired into Russia without US
soldiers actually doing it, and everybody knows that, and so
(03:58):
it would be tanta mount to the US launching long
range missiles into Russia militarily effectively joining the war as
a direct combatant.
Speaker 4 (04:07):
And I don't think Trump was willing to do that.
Speaker 2 (04:09):
Folks, we're talking to Doomberg.
Speaker 1 (04:11):
You can go to Doomberg dot com, doo, M B
e RG dot com.
Speaker 2 (04:15):
If you go right now, you're.
Speaker 1 (04:16):
Going to see the two most recent articles are what
we're going to talk about next. They are very much
related to each other. One is called gloves Off and
one is called ninety percent of the Loss.
Speaker 3 (04:26):
So do me.
Speaker 1 (04:27):
Let me go to the subtitle of gloves Off, which
you posted about five days ago, why the events of
last week changed everything?
Speaker 2 (04:36):
So what happened last week and what did it change?
Speaker 3 (04:39):
So what happened last week was exactly what you and
I were talking about in my last appearance and that
we were warning about, which is China weaponized its monopoly
control over rare earth metals and the critically important magnets
that are derived from them, and effectively, China, because of
certain back and forth between the US and China, essentially
(05:01):
claimed that any company that re exports rare earths, even
trace amounts that originated in China need China's permission to
do so, and that has vast consequences across the entire
developed world. There is no country, very few companies who
aren't in one way or another involved in this dragnet,
and that was chant amount to an economic nuclear weapon.
(05:25):
China made a major threat to use it, and it
is stating that it will forbid the US military, for example,
from getting its rare earths. And there's an enormous amount
of rare earths in advanced weaponry, but rare earths are everywhere.
If chry, like for example of China, just stopped exporting
all rare earths, every automotive assembly line in the western
(05:46):
world would be shut down in a matter of weeks.
This is what we call escalation dominance. And we predicted
immediately upon seeing the news that the US would have
to be to retreat and the point of gloves off
is to go into great detail as to why that is.
Speaker 2 (06:03):
Well, okay, so.
Speaker 1 (06:06):
How do you think and you've talked about this a
lot in the past, more than in this particular piece,
which about what's going on now, But how how did
we get into a position where not just the US,
but almost the entire world outside of China hardly produces
anything at least as a you know, a percentage of
(06:26):
the global demand of these absolutely critical materials.
Speaker 2 (06:31):
How did that happen?
Speaker 3 (06:33):
China was willing to pollute on a scale that the
Western world would find intolerable.
Speaker 4 (06:37):
We described this almost three years.
Speaker 3 (06:39):
Ago now and a piece called geopolitical warfare, which I
know we've talked about last time as well. And so
now what we're seeing is g China has ninety plus
percent control over these very difficult to purify metals, and
the rest of the world is caught with its pants down.
And so we just had the Prime Minister of Australia
in the White House I leave yesterday, and there's going
(06:59):
to be tens of billions of dollars spent to close
this gaping vulnerability.
Speaker 4 (07:05):
But everyone saw it, everyone could see it coming.
Speaker 3 (07:08):
China, you know, ruins its own environment to get anobly
control over stuff everyone else needs. And they didn't do
that without the intent to someday use the card if
they needed to, and they felt like they needed to. Now,
last thing I'll say is all short of just create
glots and we close gloves off by saying in five
years is going to be a glut of rare earth
metals as the world over invests to compensate with what
(07:31):
China has done. So this leverage that China has, this
escalation escalation dominance that China has now is temporary. The
US will get it back together, the West will get
its act together. There'll be enormous investments poured into this sector.
We're seeing rare earth stocks skyrocket. I'd be very wary
of that rally because glots eventually come.
Speaker 1 (07:49):
Yeah, you know, it's funny, just tangentially. I was talking
with a friend of mine about SMR stocks small modular
nuclear reactor and what I asked what I asked my
friend because you know, do me, you know, my background
is finance, right, So what I asked him was if
I bought every you know, and let's say equal dollar
amount of every single currently publicly traded SMR stock, and
(08:15):
maybe if I could get my hands on the private
ones too, at their current valuations, will I be up
or down money in twenty years if I bought them
at their current prices. Do you have a I don't
know if you even think that's an interesting question.
Speaker 3 (08:28):
Though, sure, I mean I think you have to wonder
if you'll be apnomally or in real terms. Yeah, that's
the only real question you might You might quote make
money but lose spending power.
Speaker 4 (08:38):
We don't tend to buy power producers or energy producers
or the.
Speaker 3 (08:42):
Commodities themselves, just because the long term real price of
all commodities is lower electricity as a commodity, and so
we would hesitate to buy the SMR companies, any company
that is leveraged to volume of energy produced, like midstreamers
or critical parts suppliers over royalty companies we find more
interesting in the sector. But we're not long any of
(09:04):
these stocks. We don't like to be long stuff that
we write about. Their du schools. So thought, of course,
you know, our school of thought is we don't have
a conflict of interest, and so the reader knows they're
getting our authentic views right.
Speaker 1 (09:13):
And that's been your position for as long as I've
been reading your work, which is right around when you
right around when you started. That's always been your position.
We're talking with Doomberg Doomberg dot com. Back to the
China rare Earth thing. How much of China's effort, successful
effort to dominate the rare earth space, do you think
(09:37):
was done with a specific intent of garnering leverage or
escalation dominance versus just this is a useful economic thing
and we want to make a bunch of it.
Speaker 4 (09:49):
No, one hundred percent the former.
Speaker 3 (09:52):
It's not the most profitable business, especially when you invest
too much in it like they have done. They have
too much capacity. They do this all the time. So
look at the solar industry, way too much capacity. Nobody's
making money. Look at the electric electronic vehicle, you know,
the EV industry in China, way too much capacity. I
write a that where China can make fifty million cars
a year and they only make thirty That means they
(10:12):
have a lot of room to take GM and Ford
and Chrysler's business. But it also means nobody in that
sector is making any money. They do this specifically for
national security, and by the way, one of the big
failures of Wall Street is its inability to properly price
national security risk. It's just not something that stockholders care about.
(10:34):
And so you get this hollowing out of US manufacturing,
regardless of the consequences to the Pentagon. And now we're
seeing that the Pentagon has to go back in and
dump a bunch of money and become shareholders and all
these stocks, which I think is the right way to go.
Give Trump full credit for recognizing the problem and trying
to do something about it.
Speaker 4 (10:51):
But we have a sequencing issue ross.
Speaker 3 (10:53):
We have to build our own supply chains back up
before we can enter into a trade war or a
hot war China.
Speaker 1 (11:01):
Right and during and in that interim period, which, as
you said before, you're estimating at five years, but the
error bars around that are probably pretty wide. But during that,
during that time period, they've got us by the short ones.
They've got escalation dominance the whole time.
Speaker 3 (11:16):
You're correct, And it's not just been rare earths. I mean,
this is something we've been flagging again since the beginning
of Doomberg.
Speaker 4 (11:22):
God have it.
Speaker 3 (11:23):
Look, we've interacted with the Chinese. I've end of China
many times. I used to do business in China. This
is all very clear to people from industry how they
go about doing this, and you just assume that there's somewhere,
you know, behind enough closed door, somebody has a plan
for all of this.
Speaker 4 (11:37):
But then you realize that they don't.
Speaker 3 (11:38):
And as you say, knowing that, then I think we
have to have a better approach to China. I think
you know this whole other piece we wrote about ninety
percent of the law, which shows just how little forethought
has gone into what's actually going on here.
Speaker 1 (11:52):
Right, Okay, so good timing on that, because I just
opened that tab right as you were saying it. So
what what is netspear if I'm even pronouncing it correctly?
And why should Americans care?
Speaker 4 (12:05):
Next?
Speaker 3 (12:05):
Speria is one of the more important companies you've never
heard of in the semiconductor world.
Speaker 4 (12:09):
There's the high end, you know, Nvidia, AI.
Speaker 3 (12:12):
Super chips, but then the base of the pyramid is
this vast array of relatively simple, discrete semiconductor devices that
are in everything. They're in your fridge, they're in all
over your car. And during COVID we had a shortage
of those, and you may remember you'd see F one
fifties stuffed in parking lots because the cars were assembled,
(12:33):
but they were just missing some important chips like for
the steering wheel or whatever. Nexperia is a market leader
in those chips. It's based in the Netherlands, is owned
by a Chinese company got caught up in this, you know,
the US trade war with China, and the Dutch seized
control of it from.
Speaker 4 (12:52):
The Chinese owners.
Speaker 3 (12:53):
There's only one problem with this ross the main factories
in China, and so the Chinese simply said, you can't
export these chips then, and now we're seeing a scramble
similar to what happened in COVID, and the automakers are
setting up war rooms and panic teams as we call them,
because there's only a couple of weeks supply of these
critical chips. Next, Spiria has something like forty percent share
(13:16):
in some of the important chips that automakers rely on.
Of course, the Chinese makers won't have any issue because
the plants in their country, and so, you know, to
seize a company without even playing one dimensional chess very well, like'll,
they just put export controls on the chips, and now
the world is in panic again.
Speaker 1 (13:37):
There's an amazing quote in your piece ninety percent of
the law. And this is a quote from the South
China Morning Post. Next Spiia China, the local unit of
the Dutch chip maker, has told its employees to follow
orders from local management and ignore instructions from the Dutch
head office. And in other words, you're gonna do what
chijin Ping.
Speaker 2 (13:58):
Says, not what your company says.
Speaker 4 (14:00):
Because that's where the factor is.
Speaker 3 (14:01):
That's why you know, possession being ninety percent of the laws,
right is the title? And so again in sector after
sector true Western indifference.
Speaker 4 (14:10):
Let's say, let's be nice.
Speaker 3 (14:12):
China has accumulated geopolitical power by design, on purpose, and
so when Trump launched the tariff war, China was ready
with its own set of bullets. And you know, sometimes
people punch back and it hurts.
Speaker 1 (14:23):
Okay, last thing for you, do me, what is your
expectation for the US China relationship in this specific area.
I'm not talking about, you know, invading Taiwan and stuff,
but in this specific area, over the next six months.
Speaker 3 (14:39):
A deal will be cut and then the US is
going to spend hundreds of billions of dollars papering over
the mistakes of yesteryear.
Speaker 1 (14:49):
Do you think private industry will be spending that or
do you think this is going to have to be
government spending because private industry will think it's too risky
or not enough, the ROA or whatever.
Speaker 4 (15:01):
Great question.
Speaker 3 (15:02):
So you know, Trump spent touring the world and people
have been pledging all this money to invent in order
to circumvent the tariff threats. Qatar, you know, the Middle East,
Saudi Arabia, pick your favorite. That's where the money is
going to come to undo this. So you know, we
joke eternally. Remember when Trump came down the escalator and
he famously said, I'm going to build a wall in
Mexico's going to pay for it. Trump is now going
(15:24):
to say I'm building a rarerists factory and the Saudis
are going to pay for it, and that's what's coming.
Speaker 2 (15:29):
Wow. Yeah, that's a good line.
Speaker 1 (15:30):
But by the way I talk about those numbers, as
I talked about, I think I sent you actually an
email and a message about this book Apple in China,
and I had the author on the show yesterday and
what I said to him because he was talking about
Apple pledging to spend five hundred billion dollars and he
actually thinks a lot of that is stock buybacks and
dividends and nonsense that you wouldn't really think of in
(15:53):
the in the context in which it's being used. But
but the the idea, my idea is, these guys just
open up chat GPT and tell it give me a
random number between one hundred billion and a trillion, and
that's what we'll tell Trump.
Speaker 2 (16:06):
And then Trump buys it, and.
Speaker 1 (16:08):
He tells the world, look, they're going to do three hundred.
Speaker 2 (16:10):
And fifty billion dollars.
Speaker 1 (16:12):
And then all these execs are sitting around in the
conference room with little shot glasses of bourbon, toasting each
other and laughing saying he bought it again.
Speaker 2 (16:19):
Am I too cynical?
Speaker 4 (16:22):
Perhaps? With the US based executives.
Speaker 3 (16:23):
Great interview, by the way, but the people who depend
on the US military for their defense will be more
than willing to pay a little homage to the US
and probably get an investment return and part of it.
So if the US Navy is parked outside of your
oil field, you might want to, you know, pay for
(16:44):
a little protection of a protection racket.
Speaker 4 (16:47):
And that's one way to model what Trump is doing.
Speaker 1 (16:51):
Doomberg has the best most successful sub stack in the
finance category. It's mostly about energy and resources and global competitiveness,
and it's an incredible read and uh well worth your subscription.
I am a paying subscriber Doomberg dot com d O O,
M B E r G dot com.
Speaker 2 (17:11):
All right, get back to pecking around.
Speaker 1 (17:13):
I hope you find some good bits of corn in
wherever you're eating today.
Speaker 4 (17:17):
Always a pleasure, Ross, talk you so much.
Speaker 2 (17:18):
Okay, thank you
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