🔔 Munger's Bad Alibaba Bet

This is the story of the past few weeks in a meme 👇

Let's take a look at the Hang Seng Index...

Disgusting.

Find me a chart that looks worse than this. A complete capitulation from 25k to 19.5k. No respite at the Covid lows, this dip just kept on dipping.

The Hang Seng is now quietly down 22% in five weeks... 

The Hang Seng tech index fell by 11% today alone.

We talked about the Hang Seng (and relying too heavily on technical analysis) in today's vid. 👇

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Back to China. The rumour mills are ramping up. Various media reports all quote multiple sources... There's more layoffs to come at tech giants Alibaba & Tencent.

Yilanshangye learned from several sources that Alibaba‘s MMC business unit is planning to sever ties with many employees, while the proportion of layoffs in this round will stand at roughly 20%.

At present, several business lines within the company have finalized their initial layoff list.

Everyone gets it wrong sometimes

Even Charlie Munger. Buffett's partner in crime is also chairman of the Daily Journal Corporation. Back in April 2021 filings revealed that DJC had bought shares in Alibaba. At the time, it was the third largest position in their portfolio behind Bank of America & Wells Fargo.

Daily Journal initiated holding in Alibaba Group Holding Ltd. The purchase prices were between $222.72 and $270.83, with an estimated average price of $245.98. 165,320 shares, 19.02% of the total portfolio.

As the share price dipped, they kept on buying...

By the end of Q4 2021, they'd scooped up just over 602,000 shares

Daily Journal added to a holding in Alibaba Group Holding Ltd. The purchase prices were between $111.96 and $177.7, with an estimated average price of $145.1. 602,060 shares, 27.65% of the total portfolio.

This is how it was reported at the time...

And this is how it's gone since the peak in November 2020 👇

The horizontal lines are the average purchase prices. Who taught who a lesson here?

It's really not looking pretty.

And regulators haven't finished with big tech firms yet... 👇

While everyone's declaring that China's about to take over the world because the US and Europe actually grew a pair and stood up to Russia...

We wrote about this for Macrodesiac Premium subscribers back in march 2021, long before the collapse happened.

Check out what we said about Evergrande then 👇

China's economy hasn't recovered from this. It's still playing out.  

Here's David's tweet from August last year...

Country Garden (white) vs Evergrande. CG is China's 2nd largest developer. If Evergrande had issues, then so will CG.

Onto the chart. Where one leads...

August 23rd 2021

The other (eventually) follows...

March 14th 2022

China's house price data on Wednesday should give more details...

China's economy was already vulnerable. It's now facing multiple headwinds: Commodity price increases, Covid shutdowns, limited fiscal support, job cuts, and the full impact of the property slowdown yet to pass through.

Here's a good read on the possible outcomes for China from the Ukranian war.

China Facing A Strategic Choice...

From a Chinese perspective, this is the worst case scenario. 👇

Once Putin falls, the U.S. will no longer face two strategic competitors but only have to lock China in strategic containment.

Europe will further cut itself off from China; Japan will become the anti-China vanguard; South Korea will further fall to the U.S.; Taiwan will join the anti-China chorus, and the rest of the world will have to choose sides under herd mentality.

China will not only be militarily encircled by the U.S., NATO, the QUAD, and AUKUS, but also be challenged by Western values and systems.

The author has a suggestion to avoid this:

China should avoid playing both sides in the same boat, give up being neutral, and choose the mainstream position in the world.

However, this position does not meet Russia’s needs, and it has infuriated Ukraine and its supporters as well as sympathizers, putting China on the wrong side of much of the world.

In some cases, apparent neutrality is a sensible choice, but it does not apply to this war, where China has nothing to gain.

This is mainly written from a perspective of how to best meet China's own interests.

Wednesday's meeting between Sullivan & Yang Jiechi will be one to watch on this score.

This week that's been billed as "all about central banks" could end up being "all about China".

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