5 things you need to know before the markets open in Australia and around the world.

1. What you need to know about the US China trade war

The Oxford dictionary defines a trade war as “a situation in which countries try to damage each other’s trade, typically by the imposition of tariffs or quota restrictions”[1]. The escalating situation between China and the United States that has been transpiring goes far beyond the simple imposition of tariffs and quotas.

The US has imposed three rounds of tariffs, totalling $250bn with additional tariffs proposed/threatened should they be unable to come to an agreement of at least $267bn totalling over $500bn in tariffs. This is likely to have an adverse effect on the economy with tariffs affecting the importing and exporting of goods ranging from railway equipment, washing machines and even steel with duties on consumer and industrial goods ranging from 10% to 25%. The Americans and Chinese are engaged in talks now however should they be unable to come to an agreement around early March further trade restrictions could follow[2].

As stated earlier there are other previously unforeseen consequences of this Sino-American trade war specifically the potential extradition of Huawei executive Meng Wanzhou daughter of Huawei’s founder and CEO. In addition to the diplomatic ramifications Ms Wanzhou has filed a civil claim suing the Canadian government in the British Columbia Supreme Court[3]. If this wasn’t already a big enough story these events have coincided with the disappearance and arrest of two Canadians Mr Kovrig and Mr Spavor under accusations of stealing state secrets[4].

With all these events transpiring its easy to note that things may be headed to a full-blown trade war however, it is also important to note that it is in the best interests of both parties to cooperate. It is highly unlikely that someone attempting to sabotage the talks but rather two proud lions trying to scare the other into backing down first. Unfortunately, the lions are only a metaphor rather the world’s two biggest superpowers.

 

2. A comparison of the world’s youngest ‘self-made’ billionaires

What do companies like Facebook, Snapchat, Stripe and Airbnb have in common? The answer is that all companies have founders who are the youngest self-made billionaires in the world from $1 to $45 billion. Who is their newest and youngest member according to Forbes? Why Kylie Jenner of course.

Forbes recently named Kylie Jenner as the youngest ‘self-made’ billionaire at the tender age of 21. She overtook Mark Zuckerberg who was aged 23 when he made his first billion at 23. Why would Forbes define Kylie Jenner as ‘self-made’ in the same light as Mark Zuckerberg who taught himself how to speak French, Hebrew and Latin before university then launched Facebook in his Harvard dormitory[5]. Compare her with other people on the list like Snap-Chat co-founder Bobby Murphy at $1.8 billion who had to give up half his pay-check working as a software engineer at Revel Systems for a year until they could secure funding with venture capitalists[6] or Do Won Chang at $6.1 Billion founder of Forever 21 who started his business while working as a janitor, gas station attendant and barista at the same time[7]. When we compare these self-made giants with someone like Kylie Jenner, we start to see something problematic with Forbes’ definition listed below as someone who:

“built a company or established a fortune on her own, rather than inheriting some or all of it”[8]

Much of her wealth can be attributed to Kylie Cosmetics, launched in 2015 which famously used her as a brand to sell $54.5 million worth in products within a time period of six weeks[9]. Personally, basing your argument that someone is self-made primarily because they did not inherit anything through a will/estate is misleading in that it implies that she didn’t benefit from already being in one of the world’s most famous families. Let’s give credit where credit is due whilst also staying aware that this Forbes story has been retweeted millions of times most likely due to the questionable nature of how ‘self-made’ Kylie really is benefitting both Kylie and Forbes in ways which cannot be easily quantified.

 

3. Germans to make further investment in electric cars.

Massive investment is expected soon over the next three years in electric cars and automated driving. The German Car Industry Association president Bernhard Mattes stated on 2 March 2019:

“We will invest over 40 billion euros in electric mobility during the next three years, and another 18 billion euros will be invested in digitization and connected and automated driving.”[10]

This marks a significant change of pace for the planets gradual and inevitable shift towards green energy in Germany. This of course includes all the benefits environmentally conscious nation with reduced emissions, improved air quality and more affordable fuel alternatives.

Germany intends to be a leader within this market and is set to have a much higher share of electric vehicles among its new registrations than the average rate across the EU[11]. Goals for reduction in emissions at its current rate cannot be achieved by the 2030 deadline at the current rate, therefore the German government is attempting to offset this with further subsidies, a massive expansion in electric vehicle charging infrastructure and more offerings for e-vehicle buyers[12].

These measures will not doubt push up demand for lithium-based products and will hopefully lead to more nations taking responsibility for the adverse impacts they may be making on the environment on the planet.

 

Please note:

40 billion Euros is equal to around $64,348,000,000 AUD

18 billion Euros is equal to around $28,953,000,000 AUD

 

4. Bezos, Bloomberg and Gates to create a “google earth for cobalt exploration”

A new start-up named KoBold Metals is using big data analytics to find new deposits of Cobalt in more ethical and politically stable jurisdictions in the world. This new start-up has the financial backing of business heavyweights Bill Gates, Ray Dalio, Jeff Bezos and Michael Bloomberg who see a problem with locating Cobalt in alternative locations across the world[13].

The world’s biggest producer the Democratic Republic of Congo (“the DRC”) holds at least 60 per cent of the world’s reserves. This would normally be a good thing for the country and economy however there have been recent allegations by the Daily Mail of over 40,000 child workers in DRC[14]. The cobalt is mined by unregulated labour and transferred to Asia, primarily China. The human cost of clean energy vehicles which use about 15Kg of Cobalt per motor can be greatly reduced if cobalt can be found in countries that actively participate and/or have the ability to enforce the International Programme on the Elimination of Child Labour[15].

The is a lot of research going into new types of batteries that use lithium ion, the dominant technology at this time which works best with cobalt[16]. What Kobold Metals has identified is that there is a demand for the metal remaining strong in the coming years. 

 

5. The origins of gold may lie in the shinning stars above

In August 2017, an explosion was spotted by astronomers in a previously obscure galaxy called NGC 4993, the results of this explosion? A universe shaking explosion causing a burst of gravitational waves was an ultra-powerful collision between two neutron stars which may give answers to how gold and other previous metals are made before being flung out into the universe[17].

NASA scientists has led them to believe “planetary collisions are at the core of our solar system’s formation”[18]. Scientists have long believed that after the moon’s formation, the earth was barraged with moon-sized planetary bodies 3.8 billion years ago. These collisions penetrated the earth all the way down to its core resulting in extensive amounts of previous metals and rock-forming minerals into the earth’s crust and mantle.

These scientists discovered that the debris from cataclysmic collision of neutron stars propelled glowing debris into all directions of space at 300 million kph – around one-third of the speed of light. This means that an earth made of gold which is about six billion tons could have been fashioned from debris of that one collision[19].

This has positive ramifications with regards to our understanding of where minerals we value come from and even greater contributions towards the body of knowledge that is our understanding of the universe.

 

[1] https://en.oxforddictionaries.com/definition/trade_war
[2] https://www.bbc.com/news/business-45899310
[3] https://www.abc.net.au/news/2019-03-04/huawei-executive-suing-canadian-government-over-arrest/10866780
[4] https://www.bbc.com/news/world-us-canada-46552644
[5] https://www.businessinsider.com.au/how-facebook-was-founded-2010-3?r=US&IR=T#we-can-talk-about-that-after-i-get-all-the-basic-functionality-up-tomorrow-night-1
[6] https://www.latimes.com/business/technology/la-fi-tn-snapchat-bobby-murphy-20170227-story.html
[7] https://www.deepadvantage.com/blog/billionaires-started-in-poverty/
[8] Forbes
[9] https://abc7chicago.com/finance/forbes-kylie-jenner-is-youngest-self-made-billionaire/5169324/
[10] https://www.reuters.com/article/us-autoshow-geneva-germany-vda/german-carmakers-to-invest-60-billion-euros-in-electric-cars-and-automation-vda-idUSKCN1QJ0AU
[11] https://www.rt.com/business/452904-germany-investment-electric-cars/
[12] ibid
[13] https://www.rt.com/business/453142-bezos-bloomberg-gates-earth/
[14] https://www.dailymail.co.uk/news/article-4764208/amp/Child-miners-aged-four-living-hell-Earth.html?__twitter_impression=true&fbclid=IwAR1AZh_kxUuhI5QBI72LdxHI7pNbgCMVWHK9qHZSx18dGxew2hVDdajzj54
[15] International Labour Organisation, International Programme on the Elimination of Child Labour (Effective 1992)
[16] https://oilprice.com/Energy/Energy-General/Bezos-Bloomberg-And-Gates-Back-Revolutionary-Exploration-Tech.html
[17] https://www.rt.com/business/422022-gold-origins-discovered-space/
[18] https://www.rt.com/news/412128-nasa-collisions-earth-formation/
[19] Ibid
Andrew Mortimer
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