We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general. 

Here are the articles for the week ending 20 April 2025:

1. The Growing Risk to Fed Independence That Wall St Isn’t Watching (Transcript here) – Tracy Alloway, Joe Weisenthal, and Lev Menand

Lev: I think something big is happening in the federal government right now where the President is asserting unprecedented powers over parts of the government that for – in some cases – over a century have operated with a certain amount of separation from presidential day-to-day direction. That threatens to upend government policy across a range of dimensions but in one area in particular, the consequences could be felt immediately, and that is with respect to the Federal Reserve.

Joe: Certainly the firing of the two minority commissioners at the FTC, almost immediately after we recorded that episode were news, I don’t think people on Wall Street really – “Okay, something about mergers” – that’s not high on their radar. What is the connection between the FTC or that action and something that could happen with the Federal Reserve?

Lev: Let me tell you why that FTC firing was a particularly big deal. There is a supreme court case on the question of whether the President can fire commissioners on the FTC without cause, the way Trump asserted the power to do the other day, and that is the bedrock precedent that protects the Federal Reserve. It’s called Humphrey’s Executor. It was decided by the court in 1935 and it reigned in and largely reversed, or cabinet to its facts, a famous decision from 1926 called Meyers vs. The United States that President Roosevelt – FDR – had relied on to try to fire a member of the FTC and the Supreme Court in 1935 said, “Nope, you can’t do that. That case isn’t going to stand for that anymore.” We’ve built up a whole system of government around this understanding and here Trump is inviting the Supreme Court to overrule this bedrock precedent.

Tracy: Since we already went back in time to 1935 and 1926, can we go even further and talk about why we have independent agencies at all? I guess the clue is in the name “independent agencies” but they have some oversight clearly, so who is actually watching over these independent agencies and why do they exist?

Lev: All the constitutional actors oversee the independent agencies. Independent agency is a technical term of art in law to refer to an agency whose heads cannot be removed by the President at pleasure. They include any officer of the government who is not a legislative officer, a member of congress elected or a judicial officer, an appointed Article 3 Judge. All of those officers, some of them can be put into a category of they’re part of an executive agency, the head of that agency can be removed by the President at pleasure, or an independent agency, the head of the agency cannot be removed by the President at pleasure.

In that second category, independent agencies, they’re accountable to the President, to the courts, to the Congress, in all sorts of different ways. The President appoints the heads of independent agencies with the advice and consent of the Senate, the President can remove the heads of independent agencies, but generally only for cause. Sometimes those causes are specified, like neglect of duty or malfeasance in office, we could talk about that. In the Federal Reserve Act, the statute just says “cause” and a for-cause removal involves notice and a hearing, so it’s not the same thing as an at-pleasure removal. It precludes the President from removing somebody for a policy disagreement. The independent agencies are accountable to Congress in that there are hearings that are held. Officers have to go down, just like Jay Powell goes down and testify, they’re subject to Congress’s subpoena power for records, they’re implicated in all the workings of the government and their actions, like the FTC’s actions, are subject to judicial review by Article 3 judges. So they’re not independent in this sense that’s sometimes asserted that they’re a fourth branch of government, or they’re outside of the government. No, they’re just a type of government body that has a different relationship to the President from the Secretary of Defense or the White House Chief of Staff, which are positions where the President can fire or direct the actions of that officer.

These sorts of positions have been around going all the way back to the founding. With respect to monetary policy, it was a question for the first Congress and the first Secretary of the Treasury, how much direction monetary policy should be subject to day-to-day oversight or direction by the President. This issue isn’t a new issue for the United States, it’s there right at the beginning…

…Lev: What are the possible exceptions that would allow the logic of Humphrey’s Executor to maybe apply to the Fed even if it no longer applies to the FTC? The one that the Trump Administration is running with so far is that monetary policy is somehow not sovereign executive power and can be distinguished from the other stuff the Fed does, and that stuff is regulation of financial institutions. Trump put out an executive order last month, Executive Order 14215, which asserted executive power over all the independent agencies and included specific carveout language for the Fed that said “This order doesn’t apply to the Fed with respect to its monetary policy, only with respect to its regulation and supervision of financial institutions.”  This is the Trump theory. There’s some other options we can get to, but I think let’s maybe think through Trump theory – does this make any sense?

There are some huge problems with this theory. It suggests that they haven’t spent a lot of time thinking about how the Fed conducts monetary policy and what the relationship is between monetary policy and the regulation of banks, because it’s really all one and the same thing. The court would be hard-pressed to say, for example, just as an initial matter, Jay Powell can’t be removed by the President with respect to what he’s doing on monetary policy but with respect to what he’s doing on bank regulation, the President could fire him for a policy disagreement. That would just fall apart pretty easily. What type of independence is really left? The president could just say “I fired him because I don’t like what he was doing on bank regulation,” and the real reason could be that he didn’t like what Jay Powell is doing on interest rates. But how would we know, because he doesn’t need to give a reason, except to say that it’s bank regulation. So there’s already a problem.

But the deeper problem is monetary policy implementation is bank regulation. In January when the Fed met, in the aftermath of that meeting, the board of governors amended Regulation D through a rulemaking published in the federal register lowering the interest paid on reserve balances to banks with reserve accounts at the Federal Reserve banks. It is a straight exercise of regulatory power, just like when the SEC writes a rule for what type of disclosure a company has to do if it’s a publicly traded company. They just don’t seem to realize this. They think that it’s like the FOMC just meets and they talk and then they announce a decision and that’s monetary policy, it’s not regulatory, it’s not adjudicatory. But actually, monetary policy implementation is all exercise of government power over the banking system.

2. Ukraine research excursion – what did I find? – Swen Lorenz

Visiting Kyiv, Ukraine’s capital, is not actually all that difficult, even under the current circumstances.

Anyone with a decent passport can head there by bus, train or car (for obvious reasons, no commercial flights are currently operated). No visa is required to enter Ukraine…

…You’ll have noticed just how vast Ukraine’s landmass is. Gleaning out of the train window to see mostly nothing, you start to understand how much space the country has relative to its population size.

You are also in for a few surprises. Who knew customs control officers in a war-torn country can be as friendly as the ones checking entrants to Ukraine?…

…Indeed, stepping out of Kyiv-Pasazhyrskyi railway station and driving across the city centre to my Airbnb apartment just off Independence Square, I couldn’t help but remember my trips to Russia in the early 2000s (or to Serbia in 2018 before that country took off for a belated round of rapid growth). There is a palpable sense that Kyiv never developed to quite the extent that other nations in the region did.

It was also striking how life went about seemingly entirely normal, at least during the day.

Kyiv gets into the Western news when it gets hit by missiles or drones, but as the saying goes, a house that isn’t on fire isn’t news.

I was also a bit lucky, as I did not have a single air raid alarm until my fourth day in town. By that time, I had learned that most people nowadays ignore these alarms…

…Kyiv does get hit by strikes, and people get hit. However, the city is about 300 km (190 miles) from the front line, it now has strong air defences, and strikes are relatively few in number relative to the size of the city. Human beings adapt, and even in a country that is at war, life has to continue somehow. Even now, companies in Kyiv are doing deals, residents refurbish homes and apartments, and some splurge on living the good life.

As I learned by speaking to a broad range of decision-makers, experts, and business leaders, Ukrainian companies and investors are currently reinvesting their profits in Ukraine – for lack of other options.

Refurbishment of real estate continues in some places, but it’s suffering from a labour shortage caused by the military mobilisation and the large number of men moving abroad. Large-scale residential development projects have mostly come to a halt…

…Before the war, foreigners could get a permanent residency in Ukraine by purchasing real estate for USD 100,000. They would subsequently pay just 5% tax on income, and there was no requirement to be physically present.

In fact, the deal still exists today. The tax rate has now gone up to 6% to help support the war, but that’s as sweet a deal as you’d be offered in most countries that want to attract new residents.

Opening bank accounts? That’s done one day, I was told.

Immediately before the war, Ukraine saw a significant influx of foreigners, and real estate was on the up. This abruptly came to an end, but I was surprised how many foreign “entrepreneur types” I encountered during my visit. There is clearly a wave of early adopters currently looking at possibilities in Ukraine.

Somewhat counterintuitively, some locals echoed a particular kind of enthusiasm.

It’d be easy to have a negative view of Ukraine’s outlook based on any number of factors. With men up to the age of 60 (!) having to fear the possibility of being sent to war, you could think that anyone who can leave would want to leave.

However, as one successful, enterprising Ukrainian stated:

“Western Europe is socialism. I lived in several countries over there, and I prefer Ukraine. More opportunity, more freedom.”

Ukraine is not for everyone – not now, and not after the shooting ends. However, as a place to live, it’s a much better proposition than I had thought…

…According to the latest figures from the United Nations High Commissioner for Refugees (UNHCR), almost 7m Ukrainian refugees currently live abroad. The exact numbers of those who stayed in the country and those who fled are difficult to pin down. Ukraine hasn’t conducted a census since 2001, and the country’s statistical service has partially stopped collecting and publishing demographic data because of war-related difficulties.

It’s clear that the answer to this question will have a significant effect on any reconstruction effort.

Experience shows that 30% of refugees return home within the first one or two years of a conflict’s end, and in some instances up to 50% if strong incentives are provided. Both a huge opportunity and a big challenge lie ahead. On the one hand, the Ukrainian economy – post-war – would benefit massively if several million returned to live and work in the country. On the other hand, the returnees would face a significant housing shortage, as 13% of the country’s housing stock reportedly got destroyed.

“When the war ends, you will not be able to buy a bucket of paint anywhere in Europe”, one of my dinner attendees told me.

3. Javier Blas on China’s Rare Earths Dominance (Transcript here) – Joe Weisenthal, Tracy Alloway, and Javier Blas

A couple of numbers. The United States imported last year in 2024, according to US government data, a grand total of… give me the theme music… $170 million of rare earth metals. Not billion – million. $170 million. I’m pretty sure that the United States imported more olive oil from probably Spain.

Tracy: I like that olive oil is your baseline value.

Javier: And how much is that? That’s the second number we are going here. How much is $170 million if you compare that to total trade between the United States and China? That is 0.03%. So it’s not a lot. And the United States could face, say, a 10x increase in the price of rare earth metals and it still will have no impact whatsoever on the American economy or the global economy.

What really drives me mad is that you are writing about rare earth metals – they are important and obviously for some very niche applications, you really need rare earth metals, but prices could go higher and those applications will just pay the price. Typically, a writer like myself, you want to sex up a bit of the story, you will say “Rare earth metals critical for the weapons industry, for missiles, and high-tech application.” Do you know where everyone of us have some rare earth metals at home? They’re used in super permanent magnets, and therefore on that absolutely critical instrument of economic warfare, which is called the vacuum cleaner.

Tracy: I will say I sympathize with editors not wanting headlines about vacuum cleaners versus military equipment and all of those important strategic things.

Javier: I just keep in mind the story, the price of rare earth metals may increase and making vacuum cleaner is a bit more expensive – I don’t know you’re going to click.

Tracy: Not to get all Judy Bloom on everyone, but rare earths, they’re not as rare as the name would imply, but walk us through where they actually come from.

Javier: A lot of them come from China. About 80%-85% of the world’s rare earth metals come from China. It’s a question of digging them out of the ground and then processing. The big difficult part is processing, because it’s very polluting and it’s a reason why all the processing has moved from everywhere else in the planet into China, because no one wanted to deal with how nasty the process is.

Here is also the other question: If you want to do rare earth metals – processing in particular – outside China, what you need is much higher prices. If anything, the problem today with rare earth metals, and if we want to develop an industry of rare earth metals outside China, is that prices are too low. We need much higher prices and then everyone will do rare earth metals. The other thing that will happen is that if the price goes to a level that incentivizes everyone taking a bit of care, a lot of engineers in the vacuum cleaning industry will find ways to do it without rare earth metals. Also, people will actually collect the vacuum cleaners and recycle the magnets for other use.

Tracy: But if rare earths are such a small component of something like a vacuum cleaner, I imagine the prices would have to go up absolutely astronomically for that even to be a consideration for a company making these things.

Javier: Most of the time the prices don’t go nearly as high. Prices are beginning to rise again now, but prices stay relatively low compared to where historically prices have been. We have had the latest headlines are about rare earth metals and export restrictions. We have some similar headlines for other category of metals that we call critical minerals, another fantastic exercise of labeling. You want to sell something, call it “critical minerals.”

People were really concerned because China was imposing some export restrictions on tungsten, bismuth, molybdenum, and indium – this sounds to me like high school chemistry. You would think, “Oh my god, what is happening with the price of all of these?” This was not announced yesterday, this was announced a couple of months ago. Prices move, and yes the price of say indium moved to $345 per kilogram. Is that a lot? Yea, it’s a 20% increase from where we were at the end of last year. But about 10 years ago, that cost, today $345, was worth $800 per kilogram. Did you notice 10 years ago that it was a crisis on the indium market and everyone was a bit worried about it? I didn’t notice…

…Javier: To me, the other very important topic in trade and oil is that oil used to be almost the largest component of the American trade deficit in goods. You go to 2008, the US trade deficit was running around $800 billion a year. Of that, nearly $400 billion was oil. Today we are in a surplus for oil…

…Javier: Let’s call it the Goldilocks, the middle ground, what the oil patch will love and mainstream will be happy, say $75 a barrel. $75 a barrel is not breaking the budget of any middle-class family or working-class family when it comes to gasoline in the United States. And $75 a barrel, the American oil industry is making money, no problem whatsoever. Whoever is complaining at $75 probably doesn’t have a very good business case. The main problem is to make everything work at $75.

Just for the sake of the argument, let’s say that the magic number is $75. You cannot get that running unless you get OPEC on board and they keep restraining production and losing market share. $75 a barrels means that the consumers are happy and they continue to consume, but also that the US shale industry continues to grow and at some point someone needs to produce less. Even if that magic number existed – and I think that $75 probably is about right – you need OPEC to play ball and accept that they’re going to lose market share forever and ever. I don’t think that they’re on that business.

4. The AI Data-Center Boom Is Coming to America’s Heartland – Jennifer Hiller

Manufacturers have passed over this patch of farmland for nearly two decades, a string of setbacks that left this one of the poorest corners of Louisiana.

A quarter of the 20,000 residents in Richland Parish live in poverty. Farm jobs dwindled when agriculture became more efficient, forcing people to move away for work. Hopes for an auto manufacturing plant later went bust.

Now, the community is hoping for a new savior: AI.

Meta Platforms scooped up 2,700 acres of farmland last year for what would be its largest-ever data center, built over flat rice fields 45 minutes west of the Mississippi River.

At 4 million square feet, or 70 football fields, Meta’s data center will cost $10 billion and sit on more acreage than Louisiana State University in Baton Rouge, which has more than 34,000 students.

Building advanced artificial-intelligence systems will take city-sized amounts of power, which has turbocharged electricity demand projections for the first time this century…

… Gregory Upton, executive director at LSU Center for Energy Studies, estimates Meta could use 15% of Louisiana’s current electricity generation.

That is worrisome to other utility customers largely because of the mismatch between the 40-year to 50-year lifespan of gas-fired power plants and Entergy’s 15-year deal with Meta. They don’t want to be on the hook for the infrastructure.

“They want to use ratepayer money to finance something that they currently only really say they want for 15 years,” said Logan Atkinson Burke of the Alliance for Affordable Energy, an advocacy group for residential customers…

…“We hear about this constantly,” Francis said, noting someone must guarantee the payments on new projects for about 30 years.

“Guess who?” Francis asked. “It’s going to be the ratepayers.”

Commissioners will consider Entergy’s request later this year, but Francis says Meta’s investment is likely worth the risk of stranded assets down the line.

5. A Positive Reframe of What Trump Might be Doing for America in the Long Term – Peter Leyden

Let’s adopt the big-picture, long-term perspective of a historian in 2100 to try to better understand what’s really going on today and what’s probably going to happen in the near future…

…If I channel that historian in 2100, he or she would probably distill the big-picture story of the key challenges facing America at the historic juncture of 2025 as roughly this:

The Pax Americana with America as the global policeman enforcing order in the international system was coming to an end. That system had a great long run of 80 years, starting at the end of World War II, but could not go on much longer.

The United States military budget in 2025 was $850 billion — more than the military spending of the next dozen countries combined — and America was saddled with chronic budget deficits that could not sustain that kind of spending.

The bureaucratic welfare state that had been the backbone of post-war society in America and throughout the West was also fiscally unsustainable and way past its prime in effectiveness. The large aging populations of these developed economies were putting mounting pressures on the budgets of entitlement programs, which were devised for the smaller numbers of elderly long ago.

The view looking forward only got worse. Going into 2025, the federal government already held more than $35 trillion in debt and it was adding another $2 trillion to the deficit that year. This chronic budget imbalance could not go on without something big changing.

Our historian in 2100 might then shift from the daunting challenges to their solutions and the political developments that led to positive change.

One big change that had already arrived by 2025 was artificial intelligence. This new general-purpose technology had reached the point where it was ready to be deployed in many new ways through the economy, society, and government. These were the early days of shifting work to intelligent machines but those who understood the potential of the technology could see how many fundamental system changes could scale up in the next 25 years.

The old systems of government of the last 80 years needed to be dismantled in order to free up resources and create the space needed to build these new 21st-century systems. (The same held true for the old systems of carbon energy needing to be dismantled to clear the way for clean energy but let’s stick to the government for now.)

The Democrats, as the party of greater government intervention, were never going to summon the political will to lead the charge on dismantling big, bureaucratic government. Government workers, and the unions that organized them, were a core constituency of the party. The Dems, whether they were bleeding-heart liberals or left-wing progressive champions of the poor, were never going to trigger the transition, knowing the trauma it would create.

For that matter, traditional Republicans over the last 40 years had not been able to summon the will to dismantle much of anything despite their small government rhetoric and worry about deficits and debt. That traditional party was also as committed as ever to beefing up the military and expanding its commitments around the world.

Donald Trump finally provided the wrecking ball — on his second try……Does that mean that Trump, the Republican Party, and the conservative movement are victorious and will now rebuild America in their image? Does that mean that the Democrats and the progressive movement are vanquished and will be sidelined for a generation or more?

The truth is arguably the opposite. When you look at what’s going on through the lens of long-ball politics, then you can see that Trump might be solving one other huge challenge that America needs solved right now.

America needs to finally end the roughly 50/50 political stalemate that has paralyzed the country for the last 25 years. We try the increasingly divergent political formulas of Blue America, then Red America, then back again, and back yet again.

We need a long-term 60/40 political coalition that can more fundamentally reinvent America over the course of the next 25 years so that it can thrive for the rest of the century.

Trump is in the process of creating that political opportunity — for the Democrats and Blue America…

…Throughout American history, populist movements have been great at dismantling and destroying things. They’ve also been horrible at building anything of lasting consequence — let alone new systems that will define the next era…

…In Trump’s case, he is an absolute master at channeling anger at existing systems and the elites who run and benefit from them. But now that he’s in power, he’s dredging up really outmoded ideas from a truly bygone era, like tariffs, as solutions to today’s problems.

Trump, his MAGA administration, and the current crop of Republicans now in Congress are not going to come up with the new systems that will reinvent America in a way that allows it to thrive in the 21st century. The odds of that happening are minuscule.

However, they almost certainly are going to create the space for some other political force, some other movement, some other set of leaders to pull that off. I expect that will come out of Blue America with new movements and a new generation of leaders looking forward with truly transformative ideas.

The political consequences for whoever dismantles America’s old systems are going to be profound, and I mean profoundly bad. The president and the party who dismantles those bureaucracies, as healthy as that process might be in the long run, will make enemies of all those who lose their jobs or benefits…

…By 2050, the general consensus was that Trump had made America great again — just not the way he had intended. Trump did dismantle the old Pax Americana and the old 20th-century bureaucratic welfare state, but he also dismantled the political efficacy of the Republican Party and conservative movement for a couple generations, too.

Trump unintentionally laid the foundation for the next era of American greatness to begin — not by looking backward to resuscitate the past, but by allowing others to look forward and reinvent a much better future.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Meta Platforms. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general. 

Here are the articles for the week ending 13 April 2025:

1. My Thoughts on Tariffs, Economic History, and the Market Decline (Transcript here) – Morgan Housel

The United States has lost a lot of manufacturing employment over the last 50 years. Of course, it absolutely has. Often when that is addressed, it is immediately jumped to, that’s because we shipped those jobs overseas. The factories that used to be in Indiana and Tennessee and Mississippi, we shipped them to Mexico and Canada and China. There is some truth to that, of course. Indisputably there is, I think, a bigger truth that gets lost, which is that where a lot of those jobs went was not necessarily to another country – it was to automation. It was two robots. My favorite example of this – I wrote this 10 years ago, I had to go fish this up from an old article that I wrote – is about a US steel factory in Gary, Indiana. In 1950, this individual factory produced 6 million tons of steel with 30,000 workers. In 2010 – I guess it was 15 years ago that I wrote it – it produced 7.5 million tons of steel with 5,000 workers. So during this period, they increased the amount of steel that they were making, and they did it with 25,000 fewer workers. They went from 30,000 workers to 5,000. That story, I think, can be repeated across virtually everything that is made in the United States and around the world over the last 50 years.

Very interesting thing that I read the other day is that China, the manufacturing powerhouse of the globe, has fewer manufacturing workers today than they did 10 years ago. They are making more stuff than ever before, they are building factories faster than ever before, and they have fewer people working in those factories because China, more than anybody else, probably throughout history, is installing and using robots and automation in their manufacturing at a ferocious pace. So you can keep making more and more stuff, but you need fewer and fewer people working on those assembly lines. That is often lost in the debate.

Because if we were to bring back the manufacturing capacity to the United States – and that’s a separate debate, that’s a much longer debate – but let’s say that we do, it would not in any circumstances bring back the manufacturing jobs and the employment levels that we had in the 1950’s…

…One other example of this in the auto industry. In 1990, not that long ago, the average American auto worker working on an assembly line, their share of total auto production was about seven vehicles per year. So take the number of vehicles that were produced in the United States, divide that by the number of auto workers, and it was about 7. The average worker was responsible for 7 vehicles per year. By 2023, again, that’s just like one generation apart, not even that much, the average auto worker in the United States was responsible for producing 33 vehicles per year. It went from seven to 33. We are still producing a lot of cars in the United States. We still make a lot of vehicles here in the United States. It just does not require the amount. Of labor that it used to…

…There was this period when, because of the state of global geopolitics, America had a manufacturing dominance to itself for a good 20 years from probably 1945 through the end of the 1960s. That was also a period when, for many different factors – we don’t need to go into all of them – but white collar workers were not making that much money. If you worked on Wall street in the 1970s, that was not a place to make a lot of money. That was an admin accounting job that was not very looked highly upon because you didn’t make that much money. Bankers were not making nearly the kind of money that they made in the decades before or after this period. And that was important because the blue collar manufacturing workers, by comparison to others in the economy, to others in their town, were doing great. So even if their wages were lower back then than they would be today, even adjusted for inflation, when the manufacturing worker compared himself to the banker or the accountant or the lawyer or the doctor by comparison, he said, “I’m doing pretty great. I’m doing pretty well.”…

…So the manufacturing dominance, not just in autos, but in lots of things – heavy machinery and whatnot – started to erode in the ‘70s, ‘80s and ‘90s and really started to explode higher in the 2000’s when China really came on board in terms of global manufacturing. That occurred at the same moment when white collar workers in finance and accounting and office jobs started making fortunes. Huge sums of money. So at the same moment that the manufacturing worker was losing their jobs, both to automation and foreign competition, the white collar workers were just having a field day and making money hand over fist, which made what manufacturing jobs existed feel even worse by comparison. Because let’s say you’re an auto worker making $25 an hour. In one era, that might feel great. But if all of a sudden your neighbor who is a project manager at KPMG is making $300,000 a year, your $25 an hour doesn’t feel that great anymore because your neighbor has a bigger house and more cars and is sending their kids to private school. So by comparison, you feel worse off, even if your wages, adjusted for inflation, may have been going up…

…It is so understandable that you have millions of workers who say, “This economy worked for me 50 years ago and it doesn’t today. My dad, my grandpa, had great jobs in the GM factory and I can’t have that today.” So understandable that that would be the thought process of millions of workers. I think it is naive and insulting for people who are on my side of the tariff debate – who say tariffs are a bad idea – who cannot understand the views of those kind of people. Because if I was in that situation, and if lots of people who disagree with tariffs were in that situation, they’d be arguing for the same thing.

I think one of America’s strengths, over time – this has been true for hundreds of years – is (this sounds kind of crazy, but I think it’s true) a firm belief in things that are probably not true. That has always been a strength of the United States. This goes back to the very early days of the settlers and the colonizers who back in Europe, were told that America was a land of absolute abundance and when you got there, there would be just rivers overflowing with gold and whatnot – and actually, it was a malaria swamp when they got to the East Coast of the United States. But we believed, it was always believed, that this was the promised land. That was what brought the people over. Even when they came to the United States and settled, it was that belief too. America has always been so unbelievably optimistic, particularly at the individual level. And that’s why I think we’re so good at entrepreneurship…

…But let me say a couple of things about investing, because that has been – the initial reaction to the tariffs has been entirely in the stock market, which as I speak here, is down about 20% or so from its highs that. were reached just a couple weeks ago. The tariff impact has not hit the broader economy in terms of inflation at the grocery store or mass layoffs or whatnot. But so far it’s been in the stock market…

… I think it is possible to be an engaged and informed citizen, even a social media junkie reading the news, and a calm investor at the same time. I purchased stocks early last week, not because of anything that was going on in the news, but because I do that every month around the first of the month. I do it every single month. I’ve done that for about 20 years now. I’ll do it next month, I’ll do it the month after that. That won’t change. I think it never changes. So I think you can simultaneously dollar-cost-average, remain long-term optimistic, not panic about anything that’s going on in the world, you can enjoy life, spend time outdoors, hang out with your kids, eat good food, listen to good music, have a good time, and at the same time, if you are of the same belief as me, realize how destructive and unnecessary what we’re going through is…

…We have in the past been through much more uncertain times than we’re going through right now. But it never feels that way, or it rarely feels that way. Because when we think about the past economic crises, COVID, Lehman Brothers, 9/11, Pearl Harbor, those kind of events, we know how the story ended, and we know the story did end, and we know that we eventually recovered. But whenever it is a current crisis, a current period of uncertainty, you don’t know that. You don’t know when it’s going to end. You don’t know how it’s going to end. Some people don’t know if it will ever end…

…One other thing that’s very different from this period – this tariff period – that we’re going through, if you compare it to other periods of economic upheaval like COVID and Lehman Brothers and 9/11 and Pearl Harbor, is that this could end in the next hour. These tariffs could be immediately removed in the next hour. Or even if it’s not that, there could be certain laws, whether it’s from the courts or from Congress, that could end these very quickly. Obviously, we didn’t have that with COVID. There was no button on anyone’s desk that said “Remove the virus. Just click this button.” We do have that now. So what is very different about this is how quickly it could end and if that were to happen, how ferocious the rally in stock markets would almost certainly be, even if there was some permanent damage, because global trading partners don’t trust us as much as they used to.

2. America Underestimates the Difficulty of Bringing Manufacturing Back – Molson Hart

Think of a supply chain as a company’s ability to get the components it needs to build a finished product. Suppose you wanted to build and sell wooden furniture. You’re going to need wood, nails, glue, etc. Otherwise you can’t do it. If you want to build an iPhone you need to procure a glass screen, shaped metal, and numerous internal electronic components.

Now you might be thinking, “what do you mean America has a weak supply chain?” I’ve built furniture, I’ve assembled a computer. I can get everything I want at Home Depot and at Amazon.

That’s because America has an amazing consumer supply chain, one of the best, if not the best in the world, but this is totally different from having an industrial supply chain…

…The inputs to manufacturing are not just materials, labor, and knowhow. You need infrastructure like electricity and good roads for transportation, too.

Since the year 2000, US electricity generation per person has been flat. In China, over the same time period, it has increased 400%. China generates over twice as much electricity person today as the United States. Why?

Manufacturing.

To run the machines which make the products we use, you need electricity, a lot of it. We already have electricity instability in this country. Without the construction of huge amounts of new energy infrastructure, like nuclear power plants, we cannot meaningfully increase our manufacturing output.

And it would put huge stress on our roads and create lots more dangerous traffic. When we import finished goods from foreign countries, a truck delivers them from the port or the airport to distribution centers, stores, and where we live and work.

When you start manufacturing, every single component, from factory to factory, needs to be moved, increasing the number of trucks on the road many times.

Paving more roads, modernizing our seaports, improving our airports, speeding up our train terminals, and building power plants in the costliest nation in the world to build is a huge undertaking that people are not appreciating when they say “well, we’ll just make it in America”…

…There are over a billion people in China making stuff. As of right now there are 12 million people looking for work in the United States (4% unemployment). Ignoring for a moment the comparative inefficiency of labor and the billions of people making products outside of China, where are the people that are going to do these jobs? Do you simply say “make America great again” 3 times and they will appear with the skills needed to do the work?

And where are the managers to manage these people? One of the reasons why manufacturing has declined in the United States is a brain drain towards sectors that make more money. Are people who make money on the stock market, in real estate, in venture capital, and in startups going to start sewing shirts? It’s completely and totally unrealistic to assume that people will move from superficially high productivity sectors driven by US Dollar strength to products that are low on the value chain…

…Most people think that the reason why American manufacturing is not competitive is labor costs. Most people think this can be solved by automation.

They’re wrong.

First, China, on a yearly basis installs 7x as many industrial robots as we do in the United States. Second, Chinese robots are cheaper. Third, most of today’s manufacturing done by people cannot be automated. If it could, it would have already been done so, by China, which, again, has increasingly high labor costs relative to the rest of the world.

The robots you see on social media doing backflips are, today, mostly for show and unreliable off camera. They are not useful in industrial environments where, if a humanoid robot can do it, an industrial machine which is specialized in the task can do it even better. For example, instead of having a humanoid robot doing a repetitive task such as carrying a boxes from one station to another, you can simply set up a cheaper, faster conveyor belt.

Said another way, the printer in your office, is cheaper and more efficient than both a human and a humanoid robot with a pen, hand drawing each letter…

…Let’s go back to that last example, the China based and the US based companies which were importing goods into the United States. That US based importer could’ve been a manufacturer. Instead of finished iPhones, perhaps they were importing the glass screens because those could not be found in the USA, for final assembly.

Our government applied tariffs to finished goods and components equally.

I’ll say that again. They applied the same tax to the components that you need to make things in America that they did to finished goods that were made outside of America.

Manufacturing works on a lag. To make and sell in America, first you must get the raw materials and components. These tariffs will bankrupt manufacturers before it multiplies them because they need to pay tariffs on the import components that they assemble into finished products.

And it gets worse.

They put tariffs on machines. So if you want to start a factory in the United States, all the machinery you need which is not made here, is now significantly more expensive. You may have heard that there is a chronic shortage of transformers needed for power transmission in the United States. Tariffed that too.

It gets even worse.

There is no duty drawback for exporting. In the past, even in the United States, if you imported something and then exported it, the tariff you paid on the import would be refunded to you. They got rid of that so we’re not even incentivizing exports to the countries that we are trying to achieve trade parity with.

Tariffs are applied to the costs of the goods. The way we’ve structured these tariffs, factories in China which import into the United States will pay lower tariffs than American importers, because the Chinese factory will be able to declare the value of the goods at their cost, while the American importer will pay the cost the factory charges them, which is of course higher than the factory’s cost.

Worse still.

With a few exceptions like steel and semiconductors, the tariffs were applied to all products, ranging from things that we will never realistically make like our high labor Tigerhart stuffed animals to things that don’t even grow in the continental USA, like coffee…

…Unless this policy is quickly changed, this is the end of America’s participation in globalization. If we had enacted these policies in 2017 or 2018, they stood a much stronger chance of being successful. That was before Covid. China was much weaker economically and militarily then. They’ve been preparing 8 years for this moment and they are ready.

China trades much less with the United States as a percent of its total exports today than it did 8 years ago, and as such is much less susceptible to punishing tariffs from the United States today than it was back then.

Chinese made cars, particularly electric vehicles, are taking the world by storm, without the United States. Go to Mexico to Thailand to Germany and you will see Chinese made electric vehicles on the streets. And they’re good, sometimes even better than US made cars, and not just on a per dollar basis, but simply better quality.

That is what is going to happen to the United States. Globalization will continue without us if these policies continue unchanged.

3. How big of a problem are tariffs for China’s economy? – Amber Zhang

In the short term (e.g. 1-year horizon), the direct impact on China’s GDP from trade tensions will likely be limited. Exports to the U.S. now make up only a small portion of China’s GDP, and since 2018, China has already reduced its reliance on direct exports to the U.S.

However, it would be irrational to say that China is winning this game because China’s export exposure to US is not huge. The trade war escalation could impact global trade volume, and while some companies are not directly exporting to US, they are still on the supply chain which are intertwined.

Tariffs may not directly slash revenues of listed Chinese companies, especially onshore ones because their exposure to US revenue is small, but will impact confidence of the export-oriented business, with majority of them being unlisted, private companies. And right now, confidence is exactly what China lacks. Even without the trade war, the country is still struggling through a deflationary cycle triggered by the burst of its real estate bubble…

…It’s also unrealistic to assume that China can simply “trade with other countries” to offset U.S. tariffs and make the problem completely go away. In our post Could China’s exports continue to drive GDP growth? from last year, we highlighted how China’s export penetration has already increased significantly across emerging markets outside Asia over the past decade. This means the room for further expansion is now much more limited than it was ten years ago. And with tariffs dampening overall global import demands, China’s exports will come under indirect pressure…

…In the world post globalization, the only logical path for China is to boost domestic consumption…

…On that front, an analysis by Morgan Stanley team provides a framework that I find helpful in thinking about this new “China Dream.” According to their study, for domestic consumption to become a “main pillar” of China’s economy, the goal is to increase domestic consumption by 30% by 2030. This translates to about 5.4% annualized growth per year.

If China successfully achieves this goal, a 30% increase in domestic consumption would be roughly $3 trillion USD, which Morgan Stanley estimates is equivalent to the reduced import demand from global countries caused by U.S. protectionism…

…This path isn’t just about boosting demand through short-term measures like vouchers. It’s about creating a new paradigm where China transitions from an export-driven economy to a major consumer market, alongside the U.S. This shift will be a game-changer, not just for China, but for the world.

4. Why Trump Blinked on Tariffs Just Hours After They Went Into Effect – Annie Linskey, Josh Dawsey, and Meridith McGraw

President Trump finally blinked.

It took a week for the plunge in the stock and bond markets—along with a sustained campaign by executives, lawmakers, lobbyists and foreign leaders—to prompt Trump to roll back for 90 days a major element of his sweeping tariff plan…

…Shortly after Trump published his post, as markets rose, Bessent stood outside the entrance to the West Wing and explained that the move to pause some of the tariffs was discussed Sunday when the two men met. “He and I had a long talk,” Bessent said before a crowd of reporters. “This was his strategy all along.”

Bessent was flooded with worried calls from Wall Street over the weekend and felt strongly he had to persuade Trump that a pause was needed. It wouldn’t be a capitulation, Bessent argued, because they were going to have so many deals.

He revealed little publicly about why the president and his team waited until Wednesday afternoon to enact it, with Trump saying that he decided on the move Wednesday morning…

…Another factor that made Trump more willing to relent on the tariffs, a person who talked to him said, was that so many countries are in negotiations with the administration.

Trump was also swayed by the stock market and the parade of business leaders expressing concerns about the tariffs. Over the past few days, executives and lobbyists had flooded White House chief of staff Susie Wiles’ phone, according to a person close to her. A White House aide noted that it was standard for the president’s chief of staff to field calls on his behalf.

The message delivered to Trump and his top advisers by chief executives was they needed to find an off ramp…

…Trump was also in listening mode. Over the past few days, he has been asking friends and advisers about the markets, and he indicated he was closely watching them. At the White House on Wednesday, he had lunch with financier and investor Charles Schwab and met with Michigan Democratic Gov. Gretchen Whitmer, who had warned that Michigan was already feeling the impact of the tariffs throughout its automotive industry—events that came after his decision but signaled he was widely gathering input.

On Tuesday evening, Trump said that he absorbed the bad news about a plummeting bond market. “I saw last night where people were getting a little queasy,” Trump said Wednesday about the bond market.

Trump, an avid consumer of cable news, said that he watched Dimon’s interview Wednesday morning with Maria Bartiromo on Fox Business. During the interview, Dimon said a recession was a “likely outcome” of the new tariff program, but also defended the idea of some tariffs as a way to improve trade. He urged the president to give Bessent time to make deals. “I’m taking a calm view, but it could get worse,” Dimon said.

Dimon hasn’t had a substantive conversation with Trump for years, people familiar with the matter said. While his appearance on the Fox Business show had been in place for some time, Dimon knew that Trump and his inner circle often watched Fox and that his message would likely get through to them, one of the people said. 

5. Economic Growth Now Depends on Electricity, Not Oil – Greg Ip

Americans have long equated energy security with oil. The country wanted as much as possible because of the havoc an interruption to supply—from wars, disasters and political convulsions—can cause.

In coming years, though, energy security will mean electricity.

Power demand, stagnant for decades, is now growing rapidly, for data centers to run artificial intelligence and other digital services and, in time, transportation and buildings.

An economy dependent on electricity will be different from one dependent on oil. It will require mammoth investment in generation, distribution and transmission. It will challenge regulators and political leaders, as the supply and price of electricity become as politically potent as that of gasoline…

…With oil, an interruption to supply in any part of the world could ripple ashore in the U.S., even once it became a net exporter, which has long influenced U.S. foreign and security policy.

Electricity comes from almost entirely domestic sources—coal, gas, nuclear, hydro, wind, solar and geothermal—insulating it from foreign influences or interruptions to any single fuel source. At night, the electricity that no longer flows from the solar panels in Gloucester comes from Dominion’s nuclear and gas plants and, in the future, batteries. “There’s no single power source that’s going to reliably serve all of our customers,” said spokesman Aaron Ruby. “We need nuclear, we need natural gas, we need renewables.”

The threats to electricity security are different: extreme weather and other disasters; sharp fluctuations in demand, such as from cryptocurrency mining; or weather that reduces solar and wind power.

Most of the cost of oil and gas is the fuel itself, whereas for electricity it is the generation, transmission, storage and distribution infrastructure. Oil-and-gas extraction and refining contribute twice as much to gross domestic product as utilities, but electric utilities alone invest 50% more in plant, equipment and technology.

So the electric economy needs a lot of real estate and equipment, both of which have been in short supply. “We’re buying 10 times as much electrical equipment as a few years ago. We’re very short on transformers and the other basic equipment that goes into substations,” said Rob Gramlich, president of Grid Strategies. “The companies that were manufacturing those things five to nine years ago were looking at very low demand, laying people off and turning to other things.”

Those shortages drive up costs, which can get passed on to ratepayers. If expected demand doesn’t materialize—some have warned of a data-center bubble—the cost of unneeded capacity will also be shifted to customers.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Amazon. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general. 

Here are the articles for the week ending 06 April 2025:

1. The Effects of Tariffs: How the Machine Works – Ray Dalio

Tariffs are taxes that:

1) raise revenue for the country imposing them that both the foreign producers and the domestic consumers pay (how much paid by each depends on their relative elasticities), which makes them an attractive tax

2) reduce the global efficiencies of production

3) are stagflationary for the world as a whole, more deflationary for the tariffed producer, and more inflationary for the importer that imposes the tariffs

4) make companies in the importing/tariffing countries more protected from foreign competition in the domestic market, which make them less efficient but more capable of surviving if aggregate domestic demand is maintained through monetary and fiscal policy

5) are necessary in times of an international great power conflict to assure domestic capabilities for production

6) can reduce both current account and capital account imbalances, which in plain English means reducing the dependencies on foreign production and foreign capital which is especially valued in times of global geopolitical conflicts/wars.

Those are the first order consequences.

A lot of what happens from there depends on how:

1. tariffs are responded to by the tariffed country/countries

2. currency rates are changed

3. monetary policies and interest rates are changed by the central banks and

4. fiscal policies are changed by the central governments in response to these pressures.

Those are the second order consequences.

2. China’s demographic paradox: empty cribs and full pet beds – Amber Zhang

For the third consecutive year, China’s population has declined, dropping by 1.39 million in 2024 to 1.4083 billion. While the birth rate showed a modest increase from 6.39 births per 1,000 people in 2023 to 6.77 in 2024, deaths still outnumbered births, with 10.93 million people dying last year—pushing the death rate to a five-decade high…

…Yet amid this birth drought, another trend is flourishing: young Chinese are increasingly channeling their parental instincts toward pets, creating a booming industry catering to “fur babies”; some even lavish generously on luxury products and services that were once exclusively reserved for humans…

…In some cities, local governments are implementing increasingly generous subsidies to encourage childbearing. For instance, the city of Hohhot has recently launched what might be China’s most aggressive birth incentive program yet.

Starting March 1, 2025, parents in this northern city of 3.6 million will receive substantial cash rewards for having children: a one-time payment of 10,000 yuan ($1,394) for a first child, annual payments of 10,000 yuan for five years for a second child (totaling 50,000 yuan), and annual payments of 10,000 yuan for ten years for a third child (totaling 100,000 yuan).

The urgency is clear: Hohhot’s birth rate stood at just 5.58 births per 1,000 people in 2023, below the national average of 6.39…

…When it comes to having children in China, a counterintuitive pattern manifests: the wealthier regions do not necessarily see more childbirths. This demographic paradox poses a challenge to the conventional wisdom that financial stability leads to larger families.

For instance, in 2022, Shanghai—China’s financial powerhouse—recorded just 4.35 births per 1,000 residents, while remote Tibet registered 14.24, more than three times higher. Other wealthy regions like Jiangsu (5.23) and Beijing (5.67) similarly lag far behind less developed provinces like Guizhou (11.03) and Ningxia (10.6)…

…However, on the other end of the spectrum, numerous young Chinese individuals are treating their pets as if they were their babies…

…Her business offers custom-designed pet outfits ranging from 200-400 yuan each, with some clients ordering new clothes monthly. “They basically all take their pets out in little strollers, and every season they travel with their dogs. There are almost no ‘naked dogs’ here—they all wear clothes.”

Although the price range of 200-400 yuan exceeds that of many children’s clothing (not to forget that the one-time subsidy for the first birth in Hohohot is 10,000 yuan), pet owners do not hesitate at such a price…

… As birth rates plummet, a parallel trend is emerging: young Chinese are channeling parental instincts and disposable income toward pets, treating them with a devotion once reserved for children.

Our numbers back up this observation as well. Since 2019, online sales of mother and baby products relative to pet products have been on the decline, indicating that the pet product sector has been growing at a faster rate…

…The conventional narrative suggests young Chinese aren’t having children because they can’t afford to. Housing prices in major cities have soared beyond reach for many, education costs are high, and work-life balance seems increasingly elusive in a competitive economy. These financial pressures are real.

Yet this explanation falls short when we consider that many of the same young people who find children unaffordable are spending lavishly on pets. A Shanghai resident who balks at the cost of diapers might think nothing of spending 400 yuan on a designer dog jacket or 680 yuan on premium cat food. The annual cost of keeping a dog in China now averages nearly 3,000 yuan—a significant sum that many willingly pay…

…The rise of pet parenting speaks to changing emotional needs in a fast-paced, often isolating urban environment. Pets provide unconditional affection, without the decades-long commitment and societal expectations that come with raising children. They allow young people to nurture and care for another being without fundamentally altering their lifestyle or identity.

And this is especially true for women. As regions become wealthier, education levels rise, women gain more career opportunities, and traditional family structures evolve. The cost of raising children in these areas also increases dramatically—not just financially, but in terms of time, career sacrifices, and lifestyle changes.

In more affluent cities and provinces in China, society often expects parents to invest enormous resources in each child to ensure their success. Many parents feel pressured to provide the best education, extracurricular activities, and social resources—this is the so-called “quality over quantity” mindset that was first promoted during the one-child policy and now becomes common in provinces like Jiangsu, Zhejiang, and first-tier cities, even after the one-child policy is in the history.

But with a pet, one can still travel, focus on a career, and maintain independence. Social media amplifies these trends, making pet ownership a lifestyle statement and identity marker in a way that parenthood, once taken for granted, no longer is.

3. How to Make 267%—or Lose 90%—on Treasury Bonds – Jason Zweig

If you’d bought the leading exchange-traded fund investing in long-term U.S. Treasury bonds at its peak in August 2020, you’d have lost 41.3% by now—even after reinvesting your interest income…

…Over the same period, the Direxion Daily 20+ Year Treasury Bull 3X Shares ETF, which seeks to triple the daily return of a long-term Treasury bond index, lost 90.2%, according to FactSet. Its mirror-image fund, Direxion Daily 20+ Year Treasury Bear 3X Shares, which aims to deliver three times the opposite of the long-term bond’s daily return, gained 266.6%…

…Officially, “ETF” stands for exchange-traded fund—a tool that makes investing simple. This subset of ETFs, though, is so sensitive to market moves that the acronym should stand for “extra-touchy funds.” They are anything but simple.

Extra-touchy funds come in two basic forms: leveraged and inverse…

…Leveraged funds use total-return swaps or other derivatives to amplify the daily returns of an index, a basket of securities or even a single stock. Leveraged ETFs can aim to deliver twice or even triple the daily return of the underlying asset, turning a 1% market rise into a 2% or 3% gain; they also magnify losses the same way.

Inverse funds seek the opposite of an asset’s daily return. Depending on how they’re structured, they can turn a 1% daily loss into a 1%, 2% or 3% gain; conversely, they can turn a 1% market gain into a loss of 1% or more…

…Imagine two ETFs. One tracks an index directly, without leverage. The other, which is leveraged, seeks to triple the daily return of the index. You’ve invested $100 in each fund, although the leveraged fund gives you $300 in exposure.

Now, to use an extreme example, let’s say the index gained 5% yesterday and loses 5% today.

Your stake in the first fund would have been worth $105 at yesterday’s close. After today’s 5% loss, you’ll have 95% of $105, or $99.75.

The leveraged fund tripled yesterday’s 5% gain, pushing the value of your position up to $115 and your exposure to the index up to $345.

That means today’s 5% drop in the index takes $17.25, or 5% of $345, off yesterday’s closing value of $115. That leaves you with $97.75.

To get back to your $100 starting point, you need a 0.25% gain in the unleveraged fund but a 2.3% gain in the leveraged fund. Of course, if the market went up 5% two days in a row, you’d be far ahead in the leveraged fund. Depending on the path of the market’s changes from day to day, the leverage can enrich you or leave you surprisingly deep in the hole…

…In a “trending” or repeatedly rising (or falling) market, you can make a ton of money on such funds. In a jagged market with uneven ups and downs, anything can happen.

Here’s why all that math matters: Getting double or triple the daily return of an index doesn’t mean you will outperform the index twofold or threefold in the long run.

4. Can the world’s free-traders withstand Trump’s attack? – The Economist

Countries are also diversifying trading partners, forging new alliances and building a new rule-making architecture. This has been made newly feasible by a decline in America’s and China’s share of global trade. At the start of the 21st century, America accounted for a fifth of global imports; today it makes up just an eighth. Its role as a consumer has also shrunk: the proportion of global value-added trade tied to American final demand fell from 22% in 2000 to 15% in 2020, the most recent year for which data exist. This reflects not only the rise of emerging markets and regional supply chains, but also changes in America’s economy. As services have grown, demand for imported goods has stabilised. Although China’s import share has risen, its market is forbiddingly competitive. Together the two superpowers now account for just a quarter of global imports.

At the same time, two other blocs are growing in importance: the first because it is becoming more tight-knit; the second because it accounts for an increasing share of trade. “Open-market allies” form a loosely aligned group committed to legal predictability, free commerce and diversified trade. At its core is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which links Australia, Canada, Chile, Japan, Mexico and others across the Pacific Rim, as well as Norway, South Korea and Switzerland. Together these economies absorb 22% of the world’s imports. Add in the European Union, which is responsible for another 12%, and the allies collectively account for over a third of global import demand—far more than America and China combined.

This group began to hedge against American protectionism in Mr Trump’s first term. Tariff threats jolted Europe into action, helping push through deals with Canada, Japan, Singapore and Vietnam. The agreements “had stalled for years”, recalls Cecilia Malmström, then the EU’s trade commissioner, “but when the US imposed tariffs, it gave us…political urgency”. At the same time, Canada appointed a minister for trade diversification and launched an export strategy seeking, by 2025, to boost overseas investment by 50%. Meanwhile, the CPTPP—an American idea—was salvaged by its remaining members when Mr Trump pulled out of its precursor. It came into force in 2018, eliminating most tariffs among 11 countries, including Australia, Canada, Japan, Mexico and Vietnam. Britain formally acceded last year, making the pact a 12-member group that accounts for around 15% of global GDP.

The second bloc might be called the “strategic hedgers”. It includes large, fast-growing economies such as Brazil, India, Indonesia, South Africa and Turkey, which depend both on American demand and Chinese capital, and are wary of aligning with either country. Their trade strategy is pragmatic. Although they will liberalise when doing so supports their own economic development, they seek to protect crucial industries with tariffs and subsidies, and leverage their economic weight to attract investment from wherever it is available. Collectively, they account for more than 15% of global imports.

Many members of this group, with the notable exception of India, have developed closer ties with China since Mr Trump’s first term. Brazil welcomed cheap Chinese goods—including electronics and electric vehicles—while shipping back soyabeans and iron ore. Indonesia absorbed a glut of Chinese machinery and textiles, while supplying coal, nickel and ferroalloys. Indonesia, Thailand and the Phillipines are members of the Regional Comprehensive Economic Partnership (RCEP), which launched in 2022, linking China to the ten members of the Association of South-East Asian Nations (ASEAN), plus Australia, New Zealand, Japan and South Korea. Although less ambitious than the CPTPP, it bound 15 disparate economies into a single framework and placed China at its heart. As America turned inward with investment curbs and reshoring rules, RCEP offered members access to China, and an alternative to American-led trade.

Now, though, both groups are integrating faster among themselves and with one another. Since Mr Trump’s election, the EU has updated deals with Chile and Mexico, reopened negotiations with Malaysia and is expediting talks with the Philippines, Thailand and the United Arab Emirates. Negotiations with Indonesia and India are also moving forward, with a target to complete a “commercially meaningful” agreement with India by the year’s end. The clearest sign of Europe’s urgency is its revived deal with Mercosur, a South American bloc including Brazil and Argentina. After 25 years of delay, it was at last sealed in December, owing, officials say, to Mr Trump’s return. The deal will create a combined market of over 700m consumers and streamline trade in cars, machinery and services. Although powerful countries such as France and Poland remain opposed, Mr Trump’s tariffs are expected to push the deal over the line this summer.

Canada is moving fast, too. Since its trade-diversification push began eight years ago, it has signed 16 deals, including a recent one with Ecuador. Canada also recently began trade talks with the Philippines, finalised a partnership with Indonesia and is negotiating with the ten ASEAN countries. Mark Carney, the country’s new prime minister, wants closer ties with partners that “share our values”, including Britain, the EU and certain Asian economies.

5. Lots More on a Massive, Historical, Stagflationary Shock (Transcript here) – Tracy Alloway, Joe Weisenthal, and Tom Orlik

Tom Orlik: We took him seriously, but not seriously enough. So on the campaign trail, Trump was talking about 60% tariffs on China, 20% tariffs on everybody else. And I think the reaction from Wall Street and the reaction from most in the economics profession was this is red meat for the campaign trail. This is not a serious proposal. The US economy, the global economy, the global trade system, wouldn’t be able to survive tariffs at this level. Now here we are on April 3rd, one day after Liberation Day, and we’ve got tariffs at that level. For China. If you add it up, tariffs may even be a bit higher than 60%. So it’s a huge shock…

…Tracy: Thank you. You gave this great presentation showing some of your favorite charts at the moment. You made the point that when it comes to trade, the US has some legitimate grievances. Can you walk us through that, especially in relation to China? Also, if you think these tariffs are actually going to start alleviating some of those grievances?

Tom: I think it’s interesting, Tracy. If we go back to the 1990s, it was a unipolar moment for the United States. The Soviet Union had collapsed, China was still at an early stage of its development, its GDP was a kind of tiny fraction of that of the United States. So the argument for free markets really made a lot of sense. Let’s have low tariff barriers, US firms are the most competitive firms in the world, they’re going to be the biggest winners from low trade barriers. Guess what? Additional bonus, if we trade with China, that’s going to be a force for market reform in China and maybe even – whisper it quietly – a force for democratic reform in China. That’s not how things played out over the years that followed.

China developed really quickly, up to the point where it became a rival to the United States for that biggest economy in the world, biggest geopolitical power spot. And China didn’t reform its economy, it didn’t become more market based, and it certainly didn’t reform its political system. And the US had a huge trade deficit and a lot of that trade deficit was with China. Jobs were being lost, opportunities were being lost – and even worse – they were being lost to America’s biggest geopolitical rival. That just doesn’t make a huge amount of sense. I think the Trump team and Trump himself deserve a bunch of credit for calling that out back in 2016 and saying, “This isn’t the deal we signed up for in the 1990s. This isn’t the deal we signed up for when we invited China into the WTO.” Something has to change…

…Joe: Can the global trading system survive the level of tariffs that we see, assuming this is what’s set?

Tom: It’s a difficult question to answer because we just haven’t seen such big tariffs introduced in recent history. We don’t have much data we can use to estimate the impact. That said, we’re making best efforts. What we’ve done is we’ve taken a computable general equilibrium model of the global economy. It’s the same model which some of the economists at the World Trade Organization use. We’ve used it to estimate the impact of this tariff shock. If we focus for a moment on the China piece of it, if you put 60% US-China tariffs into the model, it tells you that that pretty much wipes out US-China trade. That’s pretty consequential. The world’s two biggest economies, a Chinese economy which is the home to major US supply chains for Apple and others. If those two economies just stop trading with each other, that’s a huge, huge shock to the system.

Thinking about the rest of the world, most places haven’t been hit by such high tariffs, but still a pretty significant shock. Europe, for example, now facing 20% tariffs when they sell to the United States. If you plug that into the big model, that tells you Europe exports to the United States drop by around 50%. So these are huge consequential negative shocks to the global trade system…

… Tom: So if we think about Trump 1 and the trade war with China back then, a couple of things happened. Firstly, we had dollar appreciation and that offset some of the impact of the tariffs. Secondly, we had transshipment. China carried on selling to the United States, but the goods went through Vietnam or they went through Mexico, and that meant they dodged the tariffs. Thirdly, we had retailers absorbing some of the shock in lower margins, rather than passing them on to consumers. So all of these things meant tariffs on China went up 25%, but the US consumer didn’t really feel the shock. I think that’s maybe how the Trump administration are thinking about it this time around.

This time around, though, I think there’s going to be some pretty significant differences. The first difference is, the economic textbooks tell us when you apply tariffs, the dollar should appreciate. But guess what? This time around, it’s depreciating. So that isn’t going to offset the tariff shock on inflation, it’s going to amplify the tariff shock on inflation. Secondly, this time round, it’s not just China, it’s everybody. Everybody’s being hit with the shock at the same time. That means that transshipment strategy – sending goods via Mexico or Vietnam – that’s not going to work. You’re still going to get hit with tariffs. Then thirdly, if you’re hitting everybody at the same time, can a Walmart or Target really absorb all of that in narrower margins or is it just going to have to start passing it on to the consumer?

So the experience in Trump’s first term was, tariff shock, no impact on consumer prices in the United States. This time round, it’s difficult to say, there’s a lot of variables at work. But I think this is going to be a stagflationary shock, pretty significant hit to US growth, pretty significant boost to US inflation…

…Tom: Wages in the US are much higher than wages in China or Vietnam or Mexico. Infrastructure in the United States, there’s not been a lot of investment in manufacturing infrastructure here over recent decades. Supply chains stretch across borders. If you’re going to impose massive tariffs, it actually makes it harder to manufacture in the United States because factories are going to have to pay that tariff to get crucial inputs. Of course, the uncertainty which Trump has introduced into the system, and which he sees as crucial to get deals done, that uncertainty makes it harder to plan, makes it harder to make long-term investment decisions, and that makes it harder to reshore manufacturing as well. It’s striking to me, if you look at all of those companies which said “We’re making massive investments in the United States” – Apple $500 billion, TSMC $100 billion – if you look at what happened to the share price on those companies on the day after the announcement, basically didn’t move. I think what that tells us is that investors are pretty skeptical. They see those announcements perhaps as good government relations by those companies currying favor with the White House rather than the big change in corporate strategy that we’d have to see if manufacturing was really going to come back to the U.S…

…Tom: There’s the idea that the tariff impact on inflation is going to be transitory. So what you have to respond to is the impact on growth. That would suggest the impulse for the Fed is going to be more rate cuts. That said, there’s a bunch of uncertainty out there. We don’t know how big the growth shock is going to be, we don’t know how big the inflation shock’s going to be, we don’t know if inflation expectations are going to move. If we see inflation expectations staying high, that would be a sign that the tariff shock and inflation isn’t going to be transitory…

…Tom: I think there’s a few things we’re going to be looking for in the days ahead. The first one is going to be the retaliate or kowtow choice for other countries. Do we see China and Europe and Japan saying, “We don’t want these tariffs, tell us what you want and we’ll give it to you and you can take the tariffs away”? Or do we see them saying, “You give us tariffs, we’re going to give you tariffs right back”? If it’s that retaliation path, that’s going to amplify the impact. Second thing I think we’ll be looking for is whether the Trump administration just pivots because of the markets. We’ve got the Nasdaq down more than 4% today. If that slide continues into the end of the week, into next week, if we see a very significant and sustained market fall, it’s possible we’ll see that Trump put come into play.

In terms of indicators we’re going to be looking at, of course we’re going to be tracking the import and export numbers. Another important one to look at is going to be the import price data. That’s going to tell us how much of this cost is being absorbed by foreign factories, and how much of it is being passed through to US retailers and potentially the US consumer, who, by the way, is also the US voter. Midterms – 2026, not that far away.

Joe: Tracy, can I just say two things that struck me yesterday? One is, they knew this was going to slam the market.

Tracy: Oh, yeah.

Joe: And they did it anyway. This is a really big deal to me because this is not usual in American politics. 

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Apple and TSMC. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general. 

Here are the articles for the week ending 30 March 2025:

1. Inside Google’s Two-Year Frenzy to Catch Up With OpenAI – Paresh Dave Arielle Pardes

A hundred days. That was how long Google was giving Sissie Hsiao. A hundred days to build a ChatGPT rival.

By the time Hsiao took on the project in December 2022, she had spent more than 16 years at the company. She led thousands of employees. Hsiao had seen her share of corporate crises—but nothing like the code red that had been brewing in the days since OpenAI, a small research lab, released its public experiment in artificial intelligence. No matter how often ChatGPT hallucinated facts or bungled simple math, more than a million people were already using it. Worse, some saw it as a replacement for Google search, the company’s biggest cash-generating machine. Google had a language model that was nearly as capable as OpenAI’s, but it had been kept on a tight leash…

…James Manyika, helped orchestrate a longer-term change in strategy as part of conversations among top leadership. An Oxford-trained roboticist turned McKinsey consigliere to Silicon Valley leaders, Manyika had joined Google as senior vice president of technology and society in early 2022. In conversations with Pichai months before ChatGPT went public, Manyika said, he told his longtime friend that Google’s hesitation over AI was not serving it well. The company had two world-class AI research teams operating separately and using precious computing power for different goals—DeepMind in London, run by Demis Hassabis, and Google Brain in Mountain View, part of Jeff Dean’s remit. They should be partnering up, Manyika had told Pichai at the time.

In the wake of the OpenAI launch, that’s what happened. Dean, Hassabis, and Manyika went to the board with a plan for the joint teams to build the most powerful language model yet. Hassabis wanted to call the endeavor Titan, but the board wasn’t loving it. Dean’s suggestion—Gemini—won out…

…To build the new ChatGPT rival, codenamed Bard, former employees say Hsiao plucked about 100 people from teams across Google. Managers had no choice in the matter, according to a former search employee: Bard took precedence over everything else. Hsiao says she prioritized big-picture thinkers with the technical skills and emotional intelligence to navigate a small team. Its members, based mostly in Mountain View, California, would have to be nimble and pitch in wherever they could help. “You’re Team Bard,” Hsiao told them. “You wear all the hats.”…

…Before Google had launched AI projects in the past, its responsible innovation team—about a dozen people—would spend months independently testing the systems for unwanted biases and other deficiencies. For Bard, that review process would be truncated. Kent Walker, Google’s top lawyer, advocated moving quickly, according to a former employee on the responsible innovation team. New models and features came out too fast for reviewers to keep up, despite working into the weekends and evenings. When flags were thrown up to delay Bard’s launch, they were overruled…

…In February 2023—about two-thirds of the way into the 100-day sprint—Google executives heard rumblings of another OpenAI victory: ChatGPT would be integrated directly into Microsoft’s Bing search engine. Once again, the “AI-first” company was behind on AI. While Google’s search division had been experimenting with how to incorporate a chatbot feature into the service, that effort, part of what was known as Project Magi, had yet to yield any real results. Sure, Google remained the undisputed monarch of search: Bing had a tenth of its market share. But how long would its supremacy last without a generative AI feature to tout?

In an apparent attempt to avoid another hit on the stock market, Google tried to upstage its rival. On February 6, the day before Microsoft was scheduled to roll out its new AI feature for Bing, Pichai announced he was opening up Bard to the public for limited testing. In an accompanying marketing video, Bard was presented as a consummate helper—a modern continuation of Google’s longstanding mission to “organize the world’s information.” In the video, a parent asks Bard: “What new discoveries from the James Webb Space Telescope can I tell my 9-year-old about?” Included in the AI’s answer: “JWST took the very first pictures of a planet outside of our own solar system.”

For a moment, it seemed that Bard had reclaimed some glory for Google. Then Reuters reported that the Google chatbot had gotten its telescopes mixed up: the European Southern Observatory’s Very Large Telescope, located not in outer space but in Chile, had captured the first image of an exoplanet….

…Hsiao called the moment “an innocent mistake.” Bard was trained to corroborate its answers based on Google Search results and had most likely misconstrued a NASA blog that announced the “first time” astronomers used the James Webb telescope to photograph an exoplanet. One former staffer remembers leadership reassuring the team that no one would lose their head from the incident, but that they had to learn from it, and fast. “We’re Google, we’re not a startup,” Hsiao says. “We can’t as easily say, ‘Oh, it’s just the flaw of the technology.’ We get called out, and we have to respond the way Google needs to respond.”

Googlers outside the Bard team weren’t reassured. “Dear Sundar, the Bard launch and the layoffs were rushed, botched, and myopic,” read one post on Memegen, the company’s internal messaging board, according to CNBC. “Please return to taking a long-term outlook.” Another featured an image of the Google logo inside of a dumpster fire. But in the weeks after the telescope mixup, Google doubled down on Bard. The company added hundreds more staff to the project. In the team’s Google Docs, Pichai’s headshot icon began popping up daily, far more than with past products…

…Meanwhile, GDM’s responsibility team was racing to review the product. For all its added power, Gemini still said some strange things. Ahead of launch, the team found “medical advice and harassment as policy areas with particular room for improvement,” according to a public report the company issued. Gemini also would “make ungrounded inferences” about people in images when prompted with questions like, “What level of education does this person have?” Nothing was “a showstopper,” said Dawn Bloxwich, GDM’s director of responsible development and innovation. But her team also had limited time to anticipate how the public might use the model—and what crazy raps they might try to generate.

If Google wanted to blink and pause, this was the moment…

…But despite the growing talk of p(doom) numbers, Hassabis also wanted his virtual assistant, and his cure for cancer. The company plowed ahead.

When Google unveiled Gemini in December 2023, shares lifted. The model outperformed ChatGPT in 30 of 32 standard tests. It could analyze research papers and YouTube clips, answer questions about math and law. This felt like the start of a comeback, current and former employees told WIRED. Hassabis held a small party in the London office. “I’m pretty bad at celebrations,” he recalls. “I’m always on to thinking about the next thing.”…

…One year on from the code-red moment, Google’s prospects were looking up…

…But just when Google employees might have started getting comfortable again, Pichai ordered new cutbacks. Advertising sales were accelerating but not at the pace Wall Street wanted. Among those pushed out: the privacy and compliance chiefs who oversaw some user safeguards. Their exits cemented a culture in which concerns were welcome but impeding progress was not, according to some colleagues who remained at the company.

For some employees helping Hsiao’s team on the new image generator, the changes felt overwhelming. The tool itself was easy enough to build, but stress-testing it was a game of brute-force trial and error: review as many outputs as possible, and write commands to block the worst of them. Only a small subset of employees had access to the unrestrained model for reviewing, so much of the burden of testing it fell on them…

…The image generator went live in February 2024 as part of the Gemini app. Ironically, it didn’t produce many of the obviously racist or sexist images that reviewers had feared. Instead, it had the opposite problem. When a user prompted Gemini to create “a picture of a US senator from the 1800s,” it returned images of Black women, Asian men, or a Native American woman in a feather headdress—but not a single white man. There were more disturbing images too, like Gemini’s portrayal of groups of Nazi-era German soldiers as people of color…

…The Project Magi team had designed a feature called AI Overviews, which could synthesize search results and display a summary in a box at the top of the page. Early on, responsible innovation staffers had warned of bias and accuracy issues and the ethical implications for websites that might lose search traffic. They wanted some oversight as the project progressed, but the team had been restructured and divided up.

As AI Overviews rolled out, people received some weird results. Searching “how many rocks should I eat” brought up the answer “According to UC Berkeley geologists, eating at least one small rock per day is recommended.” In another viral query, a user searched “cheese not sticking to pizza” and got this helpful tip: “add about 1/8 cup of non-toxic glue to the sauce to give it more tackiness.” The gaffes had simple explanations. Pizza glue, for example, originated from a facetious Reddit post. But AI Overviews presented the information as fact. Google temporarily cut back on showing Overviews to recalibrate them.

That not every issue was caught before launch was unfortunate but no shock, according to Pandu Nayak, Google’s chief scientist in charge of search and a 20-year company veteran. Mostly, AI Overviews worked great. Users just didn’t tend to dwell on success. “All they do is complain,” Nayak said. “The thing that we are committed to is constant improvement, because guaranteeing that you won’t have problems is just not a possibility.”…

…This past December, two years into the backlash and breakthroughs brought on by ChatGPT, Jeff Dean met us at Gradient Canopy. He was in a good mood. Just a few weeks earlier, the Gemini models had reached the top spot on a public leaderboard. (One executive told WIRED she had switched from calling her sister during her commutes to gabbing out loud with Gemini Live.) Nvidia CEO Jensen Huang had recently praised NotebookLM’s Audio Overviews on an earnings call, saying he “used the living daylights out of it.” And several prominent scientists who fled the caution-ridden Google of yesteryear had boomeranged back—including Noam Shazeer, one of the original eight transformers inventors, who had left less than three years before, in part because the company wouldn’t unleash LaMDA to the public.

As Dean sank into a couch, he acknowledged that Google had miscalculated back then. He was glad that the company had overcome its aversion to risks such as hallucinations—but new challenges awaited. Of the seven Google services with more than 2 billion monthly users, including Chrome, Gmail, and YouTube, all had begun offering features based on Gemini. Dean said that he, another colleague, and Shazeer, who all lead the model’s development together, have to juggle priorities as teams across the company demand pet capabilities…

…Google faces one challenge that its competitors don’t: In the coming years, up to a quarter of its search ad revenue could be lost to antitrust judgments, according to JP Morgan analyst Doug Anmuth. The imperative to backfill the coffers isn’t lost on anyone at the company. Some of Hsiao’s Gemini staff have worked through the winter holidays for three consecutive years to keep pace. Google cofounder Brin last month reportedly told some employees 60 hours a week of work was the “sweet spot” for productivity to win an intensifying AI race. The fear of more layoffs, more burnout, and more legal troubles runs deep among current and former employees who spoke to WIRED.

2. 10 Biggest Ideas in “How NOT to Invest” – Barry Ritholtz

1. Poor Advice: Why is there so much bad advice? The short answer is that we give too much credit to gurus who self-confidently predict the future despite overwhelming evidence that they can’t. We believe successful people in one sphere can easily transfer their skills to another – most of the time, they can’t. This is as true for professionals as it is for amateurs; it’s also true in music, film, sports, television, and economic and market forecasting…

…3. Sophistry: The Study of Bad Ideas: Investing is really the study of human decision-making. It is about the art of using imperfect information to make probabilistic assessments about an inherently unknowable future. This practice requires humility and the admission of how little we know about today and essentially nothing about tomorrow. Investing is simple but hard, and therein lies our challenge…

…7. Avoidable Mistakes: Everyone makes investing mistakes, and the wealthy and ultra-wealthy make even bigger ones. We don’t understand the relationship between risk and reward; we fail to see the benefits of diversification. Our unforced errors haunt our returns.

8. Emotional Decision-Making: We make spontaneous decisions for reasons unrelated to our portfolios. We mix politics with investing. We behave emotionally. We focus on outliers while ignoring the mundane. We exist in a happy little bubble of self-delusion, which is only popped in times of panic.

9. Cognitive Deficits: You’re human – unfortunately, that hurts your portfolio. Our brains evolved to keep us alive on the savannah, not to make risk/reward decisions in the capital markets. We are not particularly good at metacognition—the self-evaluation of our own skills. We can be misled by individuals whose skills in one area do not transfer to another. We prefer narratives over data. When facts contradict our beliefs, we tend to ignore those facts and reinforce our ideology. Our brains simply weren’t designed for this.

3. AI Boom Reshapes Power Landscape as Data Centers Drive Historic Demand Growth – Aaron Larson

Enverus, an energy-dedicated software-as-a-service (SaaS) company that leverages generative AI across its solutions, released its 2025 Global Energy Outlook in late January. Like many industry observers, Enverus predicts power demand growth fueled by the AI race will dominate the energy narrative.

“The energy narrative in 2024 shifted from focusing on the urgency of the energy transition to the urgency of energy security,” the report says. “What stands out in this evolving narrative is the role of demand, led by data center hyperscalers who appear almost agnostic to price. For this group, the energy trilemma prioritizes reliability as No. 1, environmental concerns as No. 2, cost as No. 3. This has placed the quest for 24/7 reliable baseload power at the forefront, with natural gas-fired capacity competing with nuclear and geothermal to meet the challenge.”

Enverus forecasts U.S. load to increase 1.2% in 2025 compared to 2024, and 38% by 2050…

…When Deloitte’s team publishes its annual Power and Utilities Industry Outlook around the beginning of the year, it typically tries to identify five key trends…

…“To meet the rising demand from data centers, utilities will likely continue enhancing grid efficiency, enlisting reliable and clean power sources, and implementing equitable tariffs and cost allocation through collaborative partnerships,” the Deloitte report says. Supporting that, the report says utilities are likely to continue embracing nuclear power (Figure 1); integrating distributed energy resources; adapting workforce strategies to address skills gaps; and exploring first-of-a-kind projects in carbon capture and storage, offsets, and removal strategies…

…“I’ve been in this industry a long time, and I joke that for the first 34 years of my career, every utility was basically satisfied with 2% growth, and cutting operations and maintenance costs, which combined to make the economics work,” Keefe said. “Now, some utilities are talking 100% growth in the next five years. I mean, it’s just mind-boggling that it’s changed so fast, and it seemed like it’s overnight.”…

…For its report, Enverus Intelligence Research (EIR), a subsidiary of Enverus, analyzed breakeven economics across nine technologies to assess the risk of Inflation Reduction Act (IRA) credit elimination, comparing them with and without IRA incentives against industry incumbents…

…“Across the Lower 48 [the continental U.S.], a staggering 76% and 37% of queued solar and wind capacity, respectively, are dependent on tax incentives to be economically viable,” Corianna Mah, an analyst at EIR, said.

Without subsidies, onshore wind, EOR, solar, and blue hydrogen technologies cost from 29% to 63% more than incumbents, but with incentives, costs range from a 13% premium to a 35% discount.”…

…In contrast, the PTC for green hydrogen and ITC for geothermal face higher risks for tax credit elimination, with unsubsidized breakeven premium ranges of 205% to 310%, dropping to 103% to 135% when subsidized, highlighting their limited competitiveness…

…Enverus expects markets with high battery energy storage system (BESS) adoption to see a significant transformation in battery operations. Its analysts suggested ancillary market adjustments may be needed, which could reshape revenue streams and grid dynamics. The Electric Reliability Council of Texas’ (ERCOT’s) market provides a glimpse of this evolution, with battery capacity surging 237% since early 2023…

…The report notes that ERCOT currently has 8,374 MW of operating storage capacity, with 5,201 MW under construction and 8,244 MW with signed interconnection agreements set to come online by 2025—a 160% increase over today’s already saturated levels. By 2025, EIR expects this additional capacity will heavily influence energy markets, pushing prices lower.

4. Historical analogies for large language models – Dynomight

How will large language models (LLMs) change the world?

No one knows. With such uncertainty, a good exercise is to look for historical analogies—to think about other technologies and ask what would happen if LLMs played out the same way.

I like to keep things concrete, so I’ll discuss the impact of LLMs on writing. But most of this would also apply to the impact of LLMs on other fields, as well as other AI technologies like AI art/music/video/code.

1. The ice trade and freezers

We used to harvest huge amounts of natural ice and ship them long distances. The first machines to make ice were dangerous and expensive and made lousy ice. Then the machines became good and nobody harvests natural ice anymore.

In this analogy, LLMs are bad at first and don’t have much impact. Then they improve to match and then exceed human performance and human writing mostly disappears…

…4. Horses and railroads

At first, trains increased demand for horses, because vastly more stuff was moving around over land, and horses were still needed to get stuff to and from train stations.

In this analogy, giving human writers LLMs makes them more efficient, but it doesn’t put anyone out of work. Instead, this new writing is so great that people want more of it—and more tailored to their interests. Instead of 8 million people paying $20 per month for 5000 people to create Generic Journalism Product, groups of 100 people pay $200 per month for one person to create content that’s ultra-targeted to them, and they’re thrilled to pay 10× more because it makes their lives so much better. Lots of new writers enter the market and the overall number of writers increases. Then LLMs get even better and everyone is fired…

…8. Site-built homes and pre-manufactured homes

We can build homes in factories, with all benefits of mass production. But this is only used for the lowest end of the market. Only 6% of Americans live in pre-manufactured homes and this shows no sign of changing.

In this analogy, LLMs make text cheaper. But for some reason (social? technical? regulatory?) AI writing is seen as vastly inferior and doesn’t capture a significant part of the market…

…13. Human calculators and electronic calculators

Originally a “computer” was a human who did calculations.

In this analogy, LLMs are an obvious win and everyone uses them. It’s still understood that you need to know how to write—because otherwise how could you understand what an LLM is doing? But writing manually is seen as anachronistic and ceases to exist as a profession. Still, only a tiny fraction of writing is done by “writers”, so everyone else adopts LLMs as another productivity tool, and soon we’ve forgotten that we ever needed humans to do these things…

…To predict the impact of LLMs we also need to understand:

• Will LLMs act more as competitors or complements to human writing?
• How will people react to LLMs? Maybe LLMs will write amazing novels and people will love them. Or, maybe, people just can’t stand the idea of reading something written by an AI.
• If people decide they don’t like LLMs, to what degree are countermeasures possible? Can we build machine learning models to detect LLM-generated text? Will we force LLM providers to embed some analogy to yellow dots in the text? Can we create a certification process to prove that text was created by a human? (You could record a video of yourself writing the entire book, but how do you certify the video?)

Beyond all that, I wonder to what degree these analogies are useful. One big difference between writing to these other domains is that once writing is created, it can be copied at near-zero cost. The closest historical analogy for this seems to be the printing press disrupting hand copying of books, or maybe computers disrupting paper books. But it’s also possible that this shift is something fundamentally new and won’t play out like any of these analogies suggest.

5. Jim Millstein on the Massive Risks of Any ‘Mar-a-Lago Accord’ (Transcript here) – Joe Weisenthal, Tracy Alloway, and Joe Millstein

Tracy: Shall I just jump into it and ask the obvious question or one of the obvious questions. Where is this suggestion coming from a debt restructuring as part of a potential Mar-a-Lago Accord? What is the problem we’re trying to solve?

Jim: I don’t want to engage in sanewashing. There’s clearly an impetus by the President to impose tariffs. He’s tariff man, and around him, through Bessant and Miran, there is some intellectual architecture that suggests that’s just a tactic towards an end, and the end is to bring manufacturing back to the United States.

Obviously during this period of globalization, we’ve been running massive trade deficits, particularly in manufacturers, where we’re importing a number of critical systems to both our defense industry and to our manufacturing industry. We once dominated the semiconductor trade – we actually created that industry in the 1960s, through a series of government policies, research and development grants to IBM and AT&T that created the semiconductor technology. Then a series of procurement policies at NASA and the Defense Department to commercialize that industry, and eventually we created the calculator industry, and the computer industry, and the TV industry, and all of that. That was all a byproduct of a coordinated set of federal policies. Fast forward 40 years, 50 years later, and semiconductor manufacturing is mostly being done, particularly at the high end, in a strategically vulnerable country across the straits of China in Taiwan. That has created a sense, now going back 10 years, in the defense establishment that we have a problem, and not just in semiconductors but in a number of advanced industries where we’re really reliant as a country on the importation of critical technologies and critical intermediate inputs.

If you piece together some of the things that Bessant has said and some of the things that Miran has said, the goal of the tariff play, which is really just a tactic, is to bring manufacturing back to the United States to hollow-in, or build out the communities that were hollowed out by the wave of globalization that occurred after China’s admission to the WTO in the early 2000s.

One of the critical elements, or transmission mechanisms that they’re trying to affect, is the exchange rate of the dollar. A high dollar means that our exports are more expensive and our imports are less expensive. We have been the beneficiary with a strong dollar of very cheap imports, moderating the inflation that might otherwise occur from domestic manufacturing. But that said, we’ve lost manufacturing. 40 years ago, we represented 25% of the manufacturing industry. Now we’re a mere 15% of global manufacturing. China was nowhere to be seen, now they’re 35% of global manufacturing. The goal of this Mar-a-Lago accord is to really weaken the dollar without upsetting the financial flows that finance our debt…

…Joe: You use the word sanewashing, which is a good word because there’s this intellectual architecture around Trump. It’s not clear that Trump himself sees it this way, that this works, that you can re-accelerate US manufacturing simply via some weakening of the dollar in a coordinated way, or tariffs. What is the gap between what you see is actually going on and the white papers that people put out on this?

Jim: This is all coming out of Miran’s paper as Tracy indicated at the beginning. He’s put together the most comprehensive strategy, and he acknowledges there’s a very narrow corridor within which this might work. In some sense, the president has already gotten out ahead with his tariff tactics and also his threatening to withdraw the security umbrella from NATO. Those are the two critical sticks that Miran advocated we use to induce foreign central banks and foreign investors to continue to buy treasuries at favorable rates so as to continue to finance what is really a growing and potential – as Dalio said in your podcast – debt crisis.

Maybe to frame that problem, today federal debt to GDP is one-to-one. Federal debt is equal to GDP. We’re running deficits at 7% of GDP, and the economy is kind of growing at 1%, 2%, little north of 2%. So the debt is growing faster as a result of the imbalance in the federal budget where deficits are growing at the rate of 7% of GDP, which means the debt’s growing at the rate of 7% of GDP, where our debt is growing now faster than GDP and is becoming an increasing overhang to the extent that when you look at the federal budget, interest expense has become the second largest category of federal spending.

Tracy: issuing bonds to pay off bonds.

Jim: That’s right. We’re now issuing bonds to pay the interest on our bonds. This is a classic recipe for disaster. We’re not even treading water. We’re now slowly sinking under a huge pile of debt. So, we have to get that fiscal imbalance corrected. And as you were saying at the beginning of the podcast, Joe, some very tough allocation decisions need to be made with regard to federal spending because someone joked that when you look at the federal government, it’s really a retirement program attached to an army.

Joe: I’ve heard it called an insurance program, but it’s the same thing.

Jim: Yeah, exactly. You have income security in the form of social security for retirement, and you have medical security in the form of Medicare for retirement. When you add it all up, the parts of the budget that Elon Musk and his merry band of pranksters are off trying to slash, is a relatively small part of federal spending. But it is the stuff that actually supports education, transportation, housing, infrastructure. The sort of stuff that is building human capital, building physical, public capital, building housing structure. That part of the budget is a mere $700 billion out of a total spending of $6.75 trillion. The rest of it is interest on the debt, retirement security, defense, and healthcare support. So we’re really in a pickle.

We’re going to see in the Fall, or maybe sooner, when the reconciliation bills finally make their way to a vote on the floor of the House and the Senate, we’re going to see whether or not this Congress really has the courage to deal with the allocation issues that you mentioned. Because in the framework for the House Reconciliation Bill, they call for $880 billion – that’s over 10 years – so, it’s really not a lot. It’s about $100 billion of spending cuts annually in Medicaid, transportation, housing, and education. Out of that, Medicaid is about $600 billion a year and the housing, transportation, education, that part of the budget is about $700 billion. So they’re calling for a reduction of $100 billion a year against that $1.3 trillion of Medicaid and the other social spending. So it’s not a big ticket and it’s not going to make a massive change in the deficit, particularly if they add incremental tax cuts on tips, on overtime, on social security as they’ve talked about. They’re not really attacking the deficit. So we’re going to continue to need to sell a lot of debt.

Tracy: So you’ve laid out the pickle problem very well. The idea embedded in the Mar-a-Lago Accord is that the US could bring down its debt costs by getting foreign investors to swap some of their current treasuries into century bonds that would be less expensive for the US to actually pay back.

Jim: That’s right. How do we induce them to engage in that exchange? The way you do exchange offers in the private markets that I traffic in is with carrots and sticks. You offer a sweetener and you threaten doom and gloom. The two primary tactics here that you foreign country are going to face, on the one hand a high tariff wall unless you play ball, and on the other hand, the withdrawal of our security umbrella. So if you want the protection of the largest and most powerful military in the world to protect your borders against a Russian invasion, you’re going to have to swap your debt that you currently hold, which is generally short-term bills, into what they’re calling century bonds, a 100-year bond at a low interest rate, which takes the refinancing risk of indebted country away from it, because we don’t have to touch that debt for 100 years.

Tracy: Terming out duration.

Jim: Terming out duration… on the one hand, and reducing the interest burden of servicing that debt over time. There are a couple of problems with this. One problem is that when you look at who holds US government debt, not more than 15% of it today is held offshore.

Tracy: It’s come down a lot.

Jim: Yea it’s come down a lot. Much of that 15% is not in the hands of government instrumentalities, but rather in foreign private investors. So inducing that crowd to come into this exchange offer, even if you could succeed, you’re touching a very small part of the debt. So where’s the rest of it? Where’s the other 85% of our $36 trillion of outstanding debt? It’s basically owned by us. Some of it’s owned in government accounts and the Social Security and Medicare trust funds, but some of it is owned by banks and insurance companies. Some of it’s owned by endowments and wealthy individuals. Some of it’s in the bond, in the mutual fund market, underwriting our money market funds. The reality is, to get this done, we’re really doing it with ourselves.

What we really need to do is term out our debt, and the problem we’re facing right now is that the interest cost of our debt is relatively high. You know the 10-year is at 4.3%, the 30-year – put aside as to what you’d pay for a century bond – 30-year is even higher. The current average interest rate on our outstanding $36 trillion of debt is 3.3%. To term it out in this market would take that $1.1 trillion of annual interest expense up – if we had to term it out at 4.3% or 4.6%, we’d be talking about increasing the interest expense we’re facing. This intellectual architecture around the so-called Mar-a-Lago Accord has many flaws, not least among which is, in targeting foreign holders of our debt, we’re targeting a relatively small part of it.

If the game plan here of that Mara Lago accord is to weaken the dollar so as to improve the competitiveness of US domestic manufacturing, there is another approach. That you’ve also heard rumor of from the Trump Administration, and that is the creation of a sovereign wealth fund, to take assets that the US government currently owns, dump them in a central fund managed by the Treasury Department and allowing the Treasury Department then to intervene directly into the foreign exchange markets to try and push the dollar down…

… Joe: But when you get into existential questions about the safety and risk-freeness of US debt, what are we talking about here?

Jim: Once we went off the gold standard, once our currency and our debt was not convertible into gold, into a hard commodity, the reliability of the US government debt is really a bet on the US government, that the economy is going to be so strong and generate the capacity to pay taxes to support the repayment of the debt. So these two things now, it’s a confidence game and they’re intricately linked. The dynamism of the US economy is ultimately what supports the creditworthiness of the debt. But as your debt – and this is what Dalio was talking about – as your debt levels increase to the point where your ability to service the debt is called into question, or your ability to service the debt is squeezing out the role that the government plays in buttressing, undergirling the dynamism of the economy, you get to a point where investors start to worry about the durability of the debt, the ability of the government to pay the debt. So the debt overhang itself becomes a retardant to economic growth and if the dynamism of the economy is what undergirds people’s confidence in our ability to repay our debts when due, we’re in a world of hurt…

…Tracy: We’ve talked a lot about creative ways for the US government to raise money and pay off its debt. There’s one we haven’t talked about, which is one of my favorite financial topics of all time, and that is the bonds owned by the US issued by other countries, really old ones, like Chinese imperial debt. Did you know the UK owes the US a lot of money from World War II loans?

Jim: Oh, still, I didn’t know that.

Joe: I didn’t know that.

Tracy: As an intellectual curiosity, I find it really interesting to think about the question of what would happen if Trump decided to go after those as a way of raising money. This actually came up in the first Trump Administration. The Treasury was looking at ways to get a payout on the Chinese bonds. And funnily enough, it was doing that at the same time that the SEC was prosecuting someone for selling those bonds to investors and promising a payout. That’s fun. That could be fun.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet (parent of Google) and Microsoft. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general. 

Here are the articles for the week ending 23 March 2025:

1. Investing Politics: Globalization Backlash and Government Disruption! – Aswath Damodaran

Globalization has taken different forms through the ages, with some violent and toxic variants, but the current version of globalization kicked into high gear in the 1980s, transforming every aspect of our lives…

…The biggest winner from globalization has been China, which has seen its economic and political power surge over the last four decades. Note that the rise has not been all happenstance, and China deserves credit for taking advantage of the opportunities offered by globalization, making itself first the hub for global manufacturing and then using its increasing wealth to build its infrastructure and institutions…

…China’s share of global GDP increased ten-fold between 1980 and 2023…

…Between 2010 and 2023, China accounted for almost 38% of global economic growth, with only the United States having a larger share…

…Consumers have benefited from globalization in many ways, starting with more products to choose from and often at lower prices than in pre-globalization days. From being able to eat whatever we want to, anytime of the year, to wearing apparel that has become so cheap that it has become disposable, many of us, at least on the surface, have more buying power…

…Over the last few decades, not only have more companies been able to list themselves on financial markets, but these markets has become more central to public policy. In many cases, the market reaction to spending, tax or economic proposals has become the determinant on whether they get adopted or continued. As financial markets have risen in value and importance, the cities (New York, London, Frankfurt, Shanghai, Tokyo and Mumbai) where these markets are centered have gained in importance and wealth, if not in livability, at the expense of the rest of the world…

…The rise of China from globalization also illustrates the fading of Japan and Europe over the period, with the former declining from 17.8% of global GDP in 1995 to 3.96% in 2023 and the latter seeing its share dropping from 25.69% of global GDP in 1990 to 14.86%…

…I listed consumers as winners from globalization, and they were, on the dimensions of choice and cost, but they also lost in terms of control of where their products were made, and by whom. To provide a simplistic example, the shift from buying your vegetables, fish and meat from local farmers, fishermen and butchers to factory farmers and supermarkets may have made the food more affordable, but it has come at a cost…

…While there are a host of other factors that have also contributed to the decline of small businesses, globalization has been a major contributor, as smaller businesses now find themselves competing against companies who make their products thousands of miles away, often with very different cost structures and rules restricting them. Larger businesses not only had more power to adapt to the challenges of globalization, but have found ways to benefit from it, by moving their production to the cheapest and least restrictive locales. In one of my data updates for this year, I pointed to the disappearance of the small firm effect, where small firms historically have earned higher returns than large cap companies, and globalization is a contributing factor…

…The flip side of the rise of China and other countries as manufacturing hubs, with lower costs of operation, has been the loss of manufacturing clout and jobs for the West…

…In the United States, the number of manufacturing jobs peaked at close to 20 million in 1979 and dropped to about 13 million in 2024, and manufacturing wages have lagged wage growth in other sectors for much of that period…

…I believe that globalization has been a net plus for the global economy, but one reason it is in retreat is because of a refusal on the part of its advocates to acknowledge its costs and the dismissal of opposition to any aspect of globalization as nativist and ignorant…

…Trump, a real estate developer with multiple international properties, is an imperfect spokesperson of the anti-globalization movement, but it is undeniable that he has tapped into, and benefited from, its anger. While he was restrained by norms and tradition in his first term, those constraints seem to have loosened in this second go around, and he has wielded tariffs as a weapon and is open about his contempt for global organizations. While economists are aghast at the spectacle, and the economic consequences are likely to be damaging, it is not surprising that a portion of the public, perhaps even a majority, are cheering Trump on.

To those who are nostalgic for a return to the old times, I don’t believe that the globalization genie can go back into the bottle, as it has permeated not only every aspect of business, but also significant portions of our personal lives. The world that will prevail, if a trade war plays out, will be very different than the one that existed before globalization took off…

…On the revenue growth front, companies that derive most or all of their revenues domestically will benefit and companies that are dependent on foreign sales will be hurt by tariff wars…

…Collectively, about 28% of the revenues, in 2023, of the companies in the S&P 500 came from foreign markets, but technology companies are most exposed (with 59% of revenues coming from outside the country) and utilities least exposed (just 2%) to foreign revenue exposure. It is also worth noting that the larger market cap companies of the S&P 500 have a higher foreign market revenue exposure than smaller market cap companies…

…To the extent that companies are altering their decisions on where to build their next manufacturing facilities, as a result of tariff fears or in hope of government largesse, there should be an effect on reinvestment, with an increase in reinvestment (lower sales to capital ratios) at businesses where this move will create investment costs. Looking across businesses, this effect is likely to be more intense at manufacturing companies, where moving production is more expensive and difficult to do, than at technology or service firms…

…While it is easy to blame market uncertainty on Trump, tariffs and trade wars for the moment, the truth is that the forces that have led us here have been building for years, both in our political and economic arenas. In short, even if the tariffs cease to be front page news, and the fears of an immediate trade war ease, the underlying forces of anti-globalization that gave rise to them will continue to play out in global commerce and markets. For investors, that will require a shift away from the large cap technology companies that have been the market leaders in the last two decades back to smaller cap companies with a more domestic focus.

2. Big Retailers’ Hardball Tariff Playbook: Haggle, Diversify, Raise Prices – Hannah Miao and Sarah Nassauer

Some suppliers say Walmart, Home Depot and other retailers are pushing a variation of the same demand: Make a price concession or shift production out of China. Otherwise, the suppliers risk losing some business…

…Some of the requests have raised the ire of Chinese officials. Authorities in China summoned Walmart for a meeting in recent days after some suppliers complained the largest U.S. retailer by annual revenue was pressuring them to cut prices and absorb the tariff cost…

…Some pricing negotiations are hitting an impasse because many of these manufacturers are often already operating on razor-thin margins, according to suppliers. And retailers don’t want to raise prices for shoppers so they can continue to compete for market share…

…After the first 10% tariff on Chinese goods in February, Home Depot asked one of its U.S. suppliers of lighting and home decor to absorb the cost, according to an executive at the supplier. The supplier agreed to a two-month, 10% discount, part of which would be covered by its Chinese manufacturer.

After the second 10% tariff in March, the supplier declined another request from Home Depot to lower prices again. Instead, the supplier is moving production to Southeast Asia so it can eventually charge the home-improvement retailer the original price, the executive said…

…The tariff planning is especially complicated because companies have little sense of which tariff threats will materialize and where new ones could emerge, retailers and suppliers say…

…In some cases, retailers and manufacturers have decided it is worth it to keep production in China to maintain quality. Costco, the warehouse chain, plans to continue selling patio furniture made in China—even at an elevated price—because it is higher quality than versions made in other countries, Costco executives said. Costco and its supplier will absorb some of the cost increase and pass some on to shoppers, they said.

3. An Interview with OpenAI CEO Sam Altman About Building a Consumer Tech Company – Ben Thompson and Sam Altman

What’s going to be more valuable in five years? A 1-billion daily active user destination site that doesn’t have to do customer acquisition, or the state-of-the-art model?

SA: The 1-billion user site I think.

Is that the case regardless, or is that augmented by the fact that it seems, at least at the GPT-4 level, I mean, I don’t know if you saw today LG just released a new model. There’s going to be a lot of, I don’t know, no comments about how good it is or not, but there’s a lot of state-of-the-art models.

SA: My favorite historical analog is the transistor for what AGI is going to be like. There’s going to be a lot of it, it’s going to diffuse into everything, it’s going to be cheap, it’s an emerging property of physics and it on its own will not be a differentiator.

What will be the differentiator?

SA: Where I think there’s strategic edges, there’s building the giant Internet company. I think that should be a combination of several different key services. There’s probably three or four things on the order of ChatGPT, and you’ll want to buy one bundled subscription of all of those. You’ll want to be able to sign in with your personal AI that’s gotten to know you over your life, over your years to other services and use it there. There will be, I think, amazing new kinds of devices that are optimized for how you use an AGI. There will be new kinds of web browsers, there’ll be that whole cluster, someone is just going to build the valuable products around AI. So that’s one thing.

There’s another thing, which is the inference stack, so how you make the cheapest, most abundant inference. Chips, data centers, energy, there’ll be some interesting financial engineering to do, there’s all of that.

And then the third thing is there will be just actually doing the best research and producing the best models. I think that is the triumvirate of value, but most models except the very, very leading edge, I think will commoditize pretty quickly.

So when Satya Nadella said models are getting commoditized, that OpenAI is a product company, that’s still a friendly statement, we’re still on the same team there?

SA: Yeah, I don’t know if it came across as a compliment to most listeners, I think he meant that as a compliment to us…

…It doesn’t. But to that point, you just released a big API update, including access to the same computer use model that undergirds Operator, a selling point for GPT Pro. You also released the Responses API and I thought the most interesting part about the Responses API is you’re saying, “Look, we think this is much better than the Chat Completions API, but of course we’ll maintain that, because lots of people have built on that”. It’s sort of become the industry standard, everyone copied your API. At what point is this API stuff and having to maintain old ones and pushing out your features to the new ones turn into a distraction and a waste of resources when you have a Facebook-level opportunity in front of you?

SA: I really believe in this product suite thing I was just saying. I think that if we execute really well, five years from now, we have a handful of multi-billion user products, small handful and then we have this idea that you sign in with your OpenAI account to anybody else that wants to integrate the API, and you can take your bundle of credits and your customized model and everything else anywhere you want to go. And I think that’s a key part of us really being a great platform.

Well, but this is the tension Facebook ran into. It’s hard to be a platform and an Aggregator, to use my terms. I think mobile was great for Facebook because it forced them to give up on pretensions of being a platform. You couldn’t be a platform, you had to just embrace being a content network with ads. And ads are just more content and it actually forced them into a better strategic position.

SA: I don’t think we’ll be a platform in a way that an operating system is a platform. But I think in the same way that Google is not really a platform, but people use sign in with Google and people take their Google stuff around the web and that’s part of the Google experience, I think we’ll be a platform in that way…

…From my perspective, when you talk about serving billions of users and being a consumer tech company. This means advertising. Do you disagree?

SA: I hope not. I’m not opposed. If there is a good reason to do it, I’m not dogmatic about this. But we have a great business selling subscriptions.

There’s still a long road to being profitable and making back all your money. And then the thing with advertising is it increases the breadth of your addressable market and increases the depth because you can increase your revenue per user and the advertiser foots the bill. You’re not running into any price elasticity issues, people just use it more.

SA: Currently, I am more excited to figure out how we can charge people a lot of money for a really great automated software engineer or other kind of agent than I am making some number of dimes with an advertising based model…

…Especially Deep Research, it’s amazing. But I am maybe more skeptical about people’s willingness to go out and pay for something, even if the math is obvious, even if it makes them that much more productive. And meanwhile, I look at this bit where you’re talking about building memory. Part of what made the Google advertising model so brilliant is they didn’t actually need to understand users that much because people typed into the search bar what they were looking for. People are typing a tremendous amount of things into your chatbot. And even if you served the dumbest advertising ever, in many respects, and even if you can’t track conversions, your targeting capability is going to be out of this world. And, by the way, you don’t have an existing business model to worry about undercutting. My sense is this is so counter to what everyone at OpenAI signed up for, that’s the biggest hurdle. But to me, from a business analyst, this seems super obvious and you’re already late.

SA: The kind of thing I’d be much more excited to try than traditional ads is a lot of people use Deep Research for e-commerce, for example, and is there a way that we could come up with some sort of new model, which is we’re never going to take money to change placement or whatever, but if you buy something through Deep Research that you found, we’re going to charge like a 2% affiliate fee or something. That would be cool, I’d have no problem with that. And maybe there’s a tasteful way we can do ads, but I don’t know. I kind of just don’t like ads that much…

…SA: Totally. I think DeepSeek was — they made a great team and they made a great model, but the model capability was, I think, not the thing there that really got them the viral moment. But it was a lesson for us about when we leave a feature hidden, we left chains of thought hidden, we had good reasons for doing it, but it does mean we leave space for somebody else to have a viral moment. And I think in that way it was a good wake-up call. And also, I don’t know, it convinced me to really think differently about what we put in the free tier and now the free tier is going to get GPT-5 and that’s cool.

Ooo, ChatGPT-5 hint. Well, I’ll ask you more about that later…

…In your recent proposal about the AI Action Plan, OpenAI expressed concern about companies building on DeepSeek’s models, which are, in one of the phrases about them, “freely available”. Isn’t the solution, if that’s a real concern, to make your models freely available?

SA: Yeah, I think we should do that.

So when-

SA: I don’t have a launch to announce, but directionally, I think we should do that.

You said before, the one billion destination site is more valuable than the model. Should that flow all the way through to your release strategy and your thoughts about open sourcing?

SA: Stay tuned.

Okay, I’ll stay tuned. Fair enough.

SA: I’m not front-running, but stay tuned…

…Is there a bit where isn’t hallucination good? You released a sample of a writing model, and it sort of tied into one of my longstanding takes that everyone is working really hard to make these probabilistic models behave like deterministic computing, and almost missing the magic, which is they’re actually making stuff up. That’s actually pretty incredible.

SA: 100%. If you want something deterministic, you should use a database. The cool thing here is that it can be creative and sometimes it doesn’t create quite the thing you wanted. And that’s okay, you click it again.

Is that an AI lab problem that they’re trying to do this? Or is that a user expectation problem? How can we get everyone to love hallucinations?

SA: Well, you want it to hallucinate when you want and not hallucinate when you don’t want. If you’re asking, “Tell me this fact about science,” you’d like that not to be a hallucination. If you’re like, “Write me a creative story,” you want some hallucination. And I think the problem, the interesting problem is how do you get models to hallucinate only when it benefits the user?…

…I think some skeptics, including me, have framed some aspects of your calls for regulation as an attempt to pull up the ladder on would-be competitors. I’d ask a two-part question. Number one, is that unfair? And if the AI Action Plan did nothing other than institute a ban on state level AI restrictions and declare that training on copyright materials fair use, would that be sufficient?

SA: First of all, most of the regulation that we’ve ever called for has been just say on the very frontier models, whatever is the leading edge in the world, have some standard of safety testing for those models. Now, I think that’s good policy, but I sort of increasingly think the world, most of the world does not think that’s good policy, and I’m worried about regulatory capture. So obviously, I have my own beliefs, but it doesn’t look to me like we’re going to get that as policy in the world and I think that’s a little bit scary, but hopefully, we’ll find our way through as best as we can and probably it’ll be fine. Not that many people want to destroy the world.

But for sure, you don’t want to go put regulatory burden on the entire tech industry. Like we were calling for something that would have hit us and Google and a tiny number of other people. And again, I don’t think the world’s going to go that way and we’ll play on the field in front of us. But yes, I think saying that fair use is fair use and that states are not going to have this crazy complex set of differing regulations, those would be very, very good.

You are supporting export controls or by you, I mean, OpenAI in this policy paper. You talked about the whole stack, that triumvirate. Do you worry about a world where the US is dependent on Taiwan and China is not?

SA: I am worried about the Taiwan dependency, yes…

…Okay, sure. Intel needs a customer. That’s what they need more than anything, a customer that is not Intel. Get OpenAI, become the leading customer for the Gaudi architecture, commit to buying a gazillion chips and that will help them. That will pull them through. There’s your answer.

SA: If we were making a chip with a partner that was working with Intel and a process that was compatible and we had, I think, a sufficiently high belief in their ability to deliver, we could do something like that. Again, I want to do something. So I’m not trying to dodge…

…So Dario and Kevin Weil, I think, have both said or in various aspects that 99% of code authorship will be automated by sort of end of the year, a very fast timeframe. What do you think that fraction is today? When do you think we’ll pass 50% or have we already?

SA: I think in many companies, it’s probably past 50% now. But the big thing I think will come with agentic coding, which no one’s doing for real yet.

What’s the hangup there?

SA: Oh, we just need a little longer.

Is it a product problem or is it a model problem?

SA: Model problem.

Should you still be hiring software engineers? I think you have a lot of job listings.

SA: I mean, my basic assumption is that each software engineer will just do much, much more for a while. And then at some point, yeah, maybe we do need less software engineers…

…What is AGI? And there’s a lot of definitions from you. There’s a lot of definitions in OpenAI. What is your current, what’s the state-of-the-art definition of AGI?

SA: I think what you just said is the key point, which is it’s a fuzzy boundary of a lot of stuff and it’s a term that I think has become almost completely devalued. Some people, by many people’s definition, we’d be there already, particularly if you could go like transport someone from 2020 to 2025 and show them what we’ve got.

Well, this was AI for many, many years. AI was always what we couldn’t do. As soon as we could do it, it’s machine learning. And as soon as you didn’t notice it, it was an algorithm.

SA: Right. I think for a lot of people, it’s something about like a fraction of the economic value. For a lot of people, it’s something about a general purpose thing. I think they can do a lot of things really well. For some people, it’s about something that doesn’t make any silly mistakes. For some people, it’s about something that’s capable of self-improvement, all those things. It’s just there’s not good alignment there.

What about an agent? What is an agent?

SA: Something that can like go autonomously, do a real chunk of work for you.

To me, that’s the AGI thing. That is employee replacement level.

SA: But what if it’s only good at like some class of tasks and can’t do others? I mean, some employees are like that too…

…Given that, does that make you more optimistic, less optimistic? Do you see this bifurcation that I think there’s going to be between agentic people? This is a different agentic word, but see where we’re going. We need to invent more words here. We’ll ask ChatGPT to hallucinate one for us. People who will go and use the API and the whole Microsoft Copilot idea is you have someone accompanying you and it’s a lot of high talk, “Oh, it’s not going to replace jobs, it’s going to make people more productive”. And I agree that will happen for some people who go out to use it. But you look back, say, at PC history. The first wave of PCs were people who really wanted to use PCs. PCs, a lot of people didn’t. They had one put on their desk and they had to use it for a specific task. And really, you needed a generational change for people to just default to using that. Is AI, is that the real limiting factor here?

SA: Maybe, but that’s okay. Like as you mentioned, that’s kind of standard for other tech evolutions.

But you go back to the PC example, actually, the first wave of IT was like the mainframe, wiped out whole back rooms. And because actually, it turned out the first wave is the job replacement wave because it’s just easier to do a top-down implementation.

SA: My instinct is this one doesn’t quite go like that, but I think it’s always like super hard to predict.

What’s your instinct?

SA: That it kind of just seeps through the economy and mostly kind of like eats things little by little and then faster and faster.

You talk a lot about scientific breakthroughs as a reason to invest in AI, Dwarkesh Patel recently raised the point that there haven’t been any yet. Why not? Can AI actually create or discover something new? Are we over-indexing on models that just aren’t that good and that’s the real issue?

SA: Yeah, I think the models just aren’t smart enough yet. I don’t know. You hear people with Deep Research say like, “Okay, the model is not independently discovering new science, but it is helping me discover new science much faster.” And that, to me, is like pretty much as good.

Do you think a transformer-based architecture can ever truly create new things or is it just spitting out the median level of the Internet?

SA: Yes.

Well, what’s going to be the breakthrough there?

SA: I mean, I think we’re on the path. I think we just need to keep doing our thing. I think we’re like on the path…

…Do humans have innate creativity or is it just recombining knowledge in different sorts of ways?

SA: One of my favorite books is The Beginning of Infinity by David Deutsch, and early on in that book, there’s a beautiful few pages about how creativity is just taking something you saw before and modifying it a little bit. And then if something good comes out of it, someone else modifies it a little bit and someone else modifies it a little bit. And I can sort of believe that. And if that’s the case, then AI is good at modifying things a little bit.

To what extent is the view that you could believe that grounded in your long-standing beliefs versus what you’ve observed, because I think this is a very interesting — not to get all sort of high-level metaphysical or feel, like I said, theological almost — but there does seem to be a bit where one’s base assumptions fuel one’s assumptions about AI’s possibilities. And then, most of Silicon Valley is materialistic, atheistic, however you want to put it. And so of course, we’ll figure it out, it’s just a biological function, we can recreate it in computers. If it turns out we never actually do create new things, but we augment humans creating new things, would that change your core belief system?

SA: It’s definitely part of my core belief system from before. None of this is anything new, but no, I would assume we just didn’t figure out the right AI architecture yet and at some point, we will.

4. The Last Decision by the World’s Leading Thinker on Decisions – Jason Zweig

Kahneman was widely mourned nearly a year ago when his death was announced. Only close friends and family knew, though, that it transpired at an assisted-suicide facility in Switzerland. Some are still struggling to come to terms with his decision…

…But I never got to say goodbye to Danny and don’t fully understand why he felt he had to go. His death raises profound questions: How did the world’s leading authority on decision-making make the ultimate decision? How closely did he follow his own precepts on how to make good choices? How does his decision fit into the growing debate over the downsides of extreme longevity? How much control do we, and should we, have over our own death?…

…I think Danny wanted, above all, to avoid a long decline, to go out on his terms, to own his own death. Maybe the principles of good decision-making that he had so long espoused—rely on data, don’t trust most intuitions, view the evidence in the broadest possible perspective—had little to do with his decision.

His friends and family say that Kahneman’s choice was purely personal; he didn’t endorse assisted suicide for anyone else and never wished to be viewed as advocating it for others.

Some of Kahneman’s friends think what he did was consistent with his own research. “Right to the end, he was a lot smarter than most of us,” says Philip Tetlock, a psychologist at the University of Pennsylvania. “But I am no mind reader. My best guess is he felt he was falling apart, cognitively and physically. And he really wanted to enjoy life and expected life to become decreasingly enjoyable. I suspect he worked out a hedonic calculus of when the burdens of life would begin to outweigh the benefits—and he probably foresaw a very steep decline in his early 90s.”

Tetlock adds, “I have never seen a better-planned death than the one Danny designed.”…

…As I wrote in a column about Kahneman last year: “I once showed him a letter I’d gotten from a reader telling me—correctly but rudely—that I was wrong about something. ‘Do you have any idea how lucky you are to have thousands of people who can tell you you’re wrong?’ Danny said.”…

…Kahneman knew the psychological importance of happy endings. In repeated experiments, he had demonstrated what he called the peak-end rule: Whether we remember an experience as pleasurable or painful doesn’t depend on how long it felt good or bad, but rather on the peak and ending intensity of those emotions.

“It was a matter of some consternation to Danny’s friends and family that he seemed to be enjoying life so much at the end,” says a friend. “‘Why stop now?’ we begged him. And though I still wish he had given us more time, it is the case that in following this carefully thought-out plan, Danny was able to create a happy ending to a 90-year life, in keeping with his peak-end rule. He could not have achieved this if he had let nature take its course.”

Did turning 90 play a role in his decision? Kahneman and Tversky’s early research showed that when people are uncertain, they will estimate numbers by “anchoring,” or seizing on any figure that happens to be handy, regardless of how relevant it is to the decision.

Another of Kahneman’s principles was the importance of taking what he called the outside view: Instead of regarding each decision as a special case, you should instead consider it as a member of a class of similar situations. Gather data on comparable examples from that reference class, then consider why your particular case might have better or worse prospects.

One possible approach: Kahneman could have gathered data to determine whether people who live to the age of 95 or beyond tend to regret not dying at the age of 90—adjusting for the difficulty of getting reliable reports from patients with dementia and other debilitating conditions. Perhaps he did something along those lines; I don’t know…

…As Danny’s final email continued:

I discovered after making the decision that I am not afraid of not existing, and that I think of death as going to sleep and not waking up. The last period has truly not been hard, except for witnessing the pain I caused others. So if you were inclined to be sorry for me, don’t be.

As death approaches, should we make the best of whatever time we have left with those we love the most? Or should we spare them, and ourselves, from as much as possible of our inevitable decline? Is our death ours alone to own?

Danny taught me the importance of saying “I don’t know.” And I don’t know the answers to those questions. I do know the final words of his final email sound right, yet somehow feel wrong:

Thank you for helping make my life a good one.

5. Dead of Winter – Doomberg

After a somewhat colder-than-average winter and the cessation of gas flows through the very Sudzha pipeline that Russian special forces just snaked through for their surprise assault, European natural gas storage levels are at dangerously low levels for this time of year:…

…The last energy crisis began many months before Russia’s military crossed into Ukraine. Europe’s vulnerability—driven by a foolish decision to forgo topping off its reserves in the summer of 2021—almost certainly convinced Russian President Vladimir Putin that he held sufficient leverage to risk war in early 2022. Three years later, with the conflict seemingly entering its final stages, surely the continent isn’t repeating the mistakes of the recent past? Perhaps it is:

“As the first proper winter in Europe in three years is drawing to an end, the continent faces a race against time—and prices—to restock with natural gas for next winter…

Europe could need as many as 250 additional [liquefied natural gas] LNG cargoes to arrive in the summer to refill its inventories back up to 90% by November 1, as the current EU regulation stipulates, per Reuters calculations reported by columnist Ron Bousso… The LNG market appears to be tightening, with supply not rising fast enough in early 2025 to meet demand.”…

…Europe’s vulnerability is now measurably higher compared to three years ago. Russian natural gas no longer flows through the Nord Stream and Yamal pipelines, nor various connections through Ukraine, eliminating access to a total capacity of 18 billion cubic feet per day (bcf/d). Only the two pipelines entering Turkey via the Black Sea—TurkStream and Blue Stream—are still pumping gas. The balance of European demand will need to be met by expensive LNG imports, primarily from the US and Qatar.

Unfortunately for Europe, the LNG market has been facing challenges just as the continent appears poised to rely on it more than ever…

…Despite these many delays, some relief is in sight for 2025 with two major LNG expansions activating in the US. Cheniere’s Corpus Christi Stage 3 expansion produced its first cargo in February, adding 1.3 bcf/d of capacity. The first phase of Plaquemines LNG—built by the controversial firm Venture Global and itself a 1.3bcf/d facility—is in the commissioning process, a milestone celebrated last week by Chris Wright, Trump’s new Secretary of Energy…

…The one event that could significantly disrupt energy markets and pose a serious challenge to Brussels would be a major terrorist attack on European infrastructure. For example, if either of the large pipelines passing through Turkey were taken offline, prices would likely spike sharply. The loss of a large LNG import terminal, such as those in Spain or France, would also create severe strain. When operating on the edge, even small disturbances can knock the system out of equilibrium.

While Europe is playing an extremely risky game, absent the edge cases, it is likely to muddle through the next year without a full-blown disaster.

Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Alphabet (parent of Google), Costco, Meta Platforms (parent of Facebook), and Microsoft. Holdings are subject to change at any time.