You may start seeing the following words on your beloved iPhones: “Designed by Apple in California. Assembled in India."

If you haven’t heard, Apple has started making the new iPhone 14s in India much earlier than anticipated.

But this transition isn’t necessarily new. 

Apple has been transitioning its smartphone manufacturing base out of China since 2017. There are several reasons, but the two main ones are: 1) to reduce reliance on China and 2) to reduce labor costs.

The move has been widely reported as a positive one, which signifies a key milestone for India’s decisive move to becoming the world’s factory, despite the global recession. 

And rightfully so. 

Apple’s move is formidable from a geopolitical and economic standpoint. 

Geopolitically, China has been a headache to most manufacturers due to authoritative zero-covid policies, rising labor wages, and unstable relationships with the U.S. 

Economically, Apple is the most valuable company in the world, and the iPhone, its most valuable product, accounts for 50% of revenues. In absolute numbers, about $190~$200billion. 

Considering that India only started to manufacture smartphones in 2014 (less than ten years ago), it is remarkable that they were able to woo the global smartphone titans. And the second and third economic effects of Apple’s decision are enormous. 

“It’s a thoughtful move by the government aimed at wooing Apple to bring significant iPhone manufacturing to India, when the iPhone maker shifts, an entire economic ecosystem follows. The next five years will be dramatic, and India could become the new China in phone manufacturing.” — Hari Om Rai, Lava Founder

However, there is a caveat to the explosive growth that doesn’t get much spotlight in the news: human rights issues in new factories. 

As India tries to hit aggressive growth targets, there have been multiple protests in iPhone factories with horrible working conditions.

If you own an iPhone or want to buy one, you may want to understand what is happening in Apple’s transition to India.

In this article, I will go over India’s aggressive goals, Apple’s ecosystem, and where the growth pains are showing.

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India’s Transition to the World’s Manufacturing Hub

India’s economic growth is nothing short of impressive. 

Aside from 2020 (COVID), it has enjoyed 5%+ GDP growth during the 2010s and is forecasted to grow at 6.5% for 2022–2023.

India is Asia’s third-largest economy and has overtaken the United Kingdom to become the 5th largest. Can you believe it? 

From being part of the Commonwealth just 70 years ago, it is stunning to see India overtake the United Kingdom.

Despite such impressive economic growth, India has one massive problem: the unemployment rate. And it has been particularly affected by the pandemic. 

Although measuring unemployment in a country like India is tricky, it runs to about ~6.5%. In comparison, China is about 4%.

Around 40% of the workers are still engaged in agriculture. 

To create massive employment, Modi started the “Make in India” campaign in 2014. Furthermore, India began the Production Linked Incentive (PLI) scheme to accelerate growth, which provides incentives for key manufacturing sectors.

Mobile manufacturing was selected as one of the critical sectors for growth. And the incentives announced have been a massive boon for the growth spurt. One is an incentive of 4% to 6% on incremental sales of goods manufactured in India.

The results of the scheme have been a success so far.

India didn’t have a single mobile manufacturing factory in 2014. Now, India is the second largest mobile manufacturing factory in the world, just after China. India had been a large importer of mobiles from China, but now they are largely self-sufficient.

There have been 30 global and local players accepted to the production-linked scheme (Nokia, Rising Star, etc.)

Of these, three names stick out in particular: Foxconn, Pegatron, and Wistron, all of which are Apple’s main manufacturers from Taiwan.

Apple’s Transition to India

Apple started working with China in 2001 with the iPod. So Apple and China have been linked for close to two decades. 

Over the two decades, China has built an ecosystem to handle the sourcing, handling, and assembling of complex parts for the iPhone. Apple purchases components from suppliers in 43 countries, sends them to China and assembles them.

By 2010, approximately 90% of Apple’s products are made in China.

Fun fact, you can go to your iPhone to see where it has been manufactured. Go to Settings > General > About>, and you can find the “Model Number.” The letters before the slash (1 or 2) are where your iPhone has been manufactured. “CH” is China, “J” is Japan, “TH” is Thailand, “VC” is Canada, etc.

As China took a formidable position as the “world’s factory floor,” its GDP per capita skyrocketed during the last two decades.

While China and Apple have had a mutually beneficial relationship for nearly two decades, Apple has tried reducing its dependence. And although it may seem like the move has been triggered by China’s zero-covid policy and recent geopolitical tensions between US and China, the transition to India started in 2017.

At first, the main reason for the transition was the incentives from the Indian government to boost manufacturing. 

The beginning was Wistron, one of Apple’s leading suppliers, setting up a subsidiary in 2017. They have built the iPhone SE (2017) and iPhone 6s (2018). After Wistron came Pegatron and Foxconn (the two other gains in Apple’s ecosystem) investing in India.

Then the pandemic and further geopolitical tensions accelerated Apple’s transition to India. Last year it was estimated that India produced 3.1% of the manufacturing supply of iPhones. 

Morgan Stanley estimates the number to be 6~7% in 2022. And the trajectory seems to be strong.

The obvious advantages for Apple are the production-linked incentives from the Indian government and the cheap labor wages. It is estimated that India’s labor wages are 1/3 that of China's.

With an explosive trajectory, India is estimated to manufacture 25% of Apple’s iPhones by 2025.

But it is not all positive news.

There are growing pains when going through rapid expansion, with a major one being: the exploitation of workers.

In many factories, employees work long hours for little pay and are often denied fundamental rights such as freedom of association and collective bargaining. 

This can result in extreme conditions, such as exposure to hazardous materials or dangerous equipment. 

And Apple’s factories have not been an exception. Numerous incidents have happened but get less spotlight.

Unintended Consequences

On December 2020, Forbes wrote: Report: iPhone Factory In India Committed Multiple Labor Violations, Underpaid Wages.

Due to wage underpayment, irregular working hours, and poor working conditions, there was an outbreak of violent protests at a Wistron factory in India.

You can see a video capturing the incident here. 

159 people were arrested as they broke down glasses and lights in the factory.

It has led to $7.7M in damages to the factory, which is substantial.

What was the reaction?

Local politicians and authorities were more concerned about the negative repercussions of the violent incident to possible foreign investments. State Minister Jagadish Shettar commented he will be putting “stringent measures to prevent such unpleasant events from recurring.”

Unfortunately, this wasn’t the only human rights incident.

Pegatron’s factory was also on probation one month before this incident due to students working night shifts and overtime.

Furthermore, in December, Foxconn’s factory was scrutinized last year as protests erupted after over 150 women were hospitalized from food poisoning.

Let’s paint a picture.

• Barely 150 square feet of room.

• Seven female workers crammed.

• No bed, no mattresses.

• Just one fan and one light.

• No attached washroom or bathroom.

• One window.

• Wage is $120 (10,000 rupees)/month.

• Unhygienic food that led to the hospitalization of nearly 150 people.

These are the conditions in the Foxconn factory that resulted in violent protests.

As the manufacturing capabilities in India are set to accelerate exponentially, we can expect similar incidents to happen.

Human rights incidents occurred in all three of Apple’s main suppliers in one year.

But who is to blame? Apple, with its aggressive growth targets and strategic move toward India? The Indian government prioritizing foreign investments with cheap labor costs?

There is one stark difference between China's and India’s governments. China has been a closed country for many years, with its government keeping a tight grip on information and limiting contact with the outside world.

On the other hand, all of the incidents in India are widely reported for the entire world to see. So will we see improvements? At what rate?

Until we know the answer to that question, we should ask, why are iPhone prices increasing?

Alternatively, you can get a Medium subscription for $5/month. If you use this link, it will support me.

Further Reading

• India is Planning to Dominate Smartphone Manufacturing

• Apple Makes iPhone 14 in India Amid China Woes

• India’s Top Conglomerate in Talks to Join Club of iPhone Makers

• Tech Companies Slowly Shift Production Away From China

• At 75, India seeks way forward in big but job-scarce economy

• India second-largest phone manufacturer globally, shows govt …

• Apple’s New iPhone 14 to Show India Closing Tech Gap With China

• Apple iPhone Exports From India Doubling in Boon to Modi’s Plan

• Modi’s Make in India revolution is coming at the cost of Indian factory workers

• Protests at Indian iPhone plant offer a lesson for investors

• Apple puts supplier Foxconn’s India plant on notice after protests

• Interview: Arvind Subramanian, former Chief Economic Advisor to the Government of India

• Apple Looks to Boost Production Outside China

• Report: iPhone Factory In India Committed Multiple Labor Violations, Underpaid Wages.

• Apple Factory Violence | “PM Very Worried”: BS Yediyurappa On Violence At iPhone Factory

• Follow relevant topics and analyses on Medium@birdsongwakeup

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While the image above was taken in a Greek bakery, not a German one, please note the affordable prices. Low prices for fresh bread, if not a just a tad higher, have been common all around Europe for as long as I, or anyone in my family, can remember.

In the US, the equivalent of €1–€2 can’t even buy you a crappy industrial made loaf that is pre-sliced and loaded with additives. (Not sure one could even call it bread.) Artisan loaves, as shown above, can easily cost $8–12 stateside. ($1=€1 as of this writing.)

Unlike the US, Europe has always treated artisan bread as an essential. A human right, if you will.

This is no longer the case.

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Germany

Eckehard Vatter, of the Vatter Bakery chain founded in 1955, said that his business of 35 bakeries had a fixed-price contract for gas through 31 December 2023 for €5,856/month, but it was cancelled without notice. The gas supplier now demands €75,000/month, leaving Vatter with mortgage-sized gas bill of €330,000 for 4.5 months. A bill they demand payment for before the end of this month. (Source)

Without gas, Vatter can’t run the ovens or heat his bakeries.

On 8 September, more than 800 bakeries across Germany turned off their lights and sold bread in the dark to call attention the energy crisis. Patrons who chose to eat their pastries and sandwiches in the bakery sat in the dark.

In the true ass-backwards nature politics and policy, bakeries are not eligible for energy subsidies from the EnergieKostenDämpfungsProgramm (EKDP), but companies producing trivial things such as wallpaper and vermouth qualify. (Source)

Ireland

Geraldine Dolan, the proprietor of The Poppy Fields Café, a small coffeeshop in Athlone, received a bi-monthly electric bill for €9,836.92, including €812.22 VAT (value-added tax).

Energy costs are skyrocketing, but her patrons’ salaries are not. Therefore, Ms. Dolan can only pass on a small portion of her increased operating costs to her customers. Ultimately, closing the doors of the business she started 16 years ago, may soon be her only option. (Source)

Britain

Earlier this month in the UK, popular television show This Morning added “Energy Bills” to their Spin-to-Win game. The wheel being dotted with options to win either £1,000 or have your energy bills paid by ITV, the channel whose show it is, for 4 months!

Energy bills are so high in Britain that callers were hoping to land on the “Energy Bills” tabs instead of the cash prizes because it would save them so much more money. Then, This Morning went on to change it to “All Household Bills” the next day.

However, the privileged “blue checkmarks,” who probably aren’t yet feeling the pressure of the exorbitant energy costs started bashing ITV and whinging about how dystopian This Morning had become, so “Energy Bills” and “All Household Bills” were removed from the wheel. (Source)

So, now everyday, hardworking people who are struggling to get by miss out on this opportunity to snag a bit of reprieve because some privileged shitheads couldn’t keep their virtual traps shut.

What these “blue checkmarks” fail to grasp is that the show itself is not dystopian. What’s dystopian is that energy bills are now consuming 50% or more people’s monthly take-home pay. That people are being forced to choose between heat and food, and it’s only getting worse.

It’s Time to Fire the Politicians

What’s amusing is how often I hear EU and British politicians blame Russia for the energy crisis, and then listen to their “subjects” —yes, we allow them to treat us as such —mindlessly parrot the same BS, like programmed robots.

Sure, Russia cut off/reduced gas supply to the EU as a response to the sanctions imposed on them by the EU, US, and UK and for SWIFT all but booting Russia out of the international banking system except for “essential” trade.

Unfortunately for all of us obedient in the West, sanctions did diddly-squat to the Kremlin and have been hurting us ever since.

The ruble tanked for all of 2 weeks, and then soared to rates higher than before the sanctions (click on Graph and then 1 Year), becoming the best-performing currency in the world in 2022.

We can thank your politicians for that. Sanctions backfired, and now we’re suffering. (Source)

But our stubborn politicians either don’t want to admit they were wrong or are, for some psychopathic reason, dead-set on reducing the West to third or fourth world status.

Because at this rate, economic activity in Europe will go to zero this winter.

This is just based on the rising energy costs alone. It doesn’t even include the costs of labor and other essentials businesses require to operate. It also doesn’t factor in that most people won’t be able to afford much beyond food. Or that governments keep printing money, which has only ever exacerbated inflation, historically-speaking.

But even if the West lifted its sanctions on Russia now, who is to say Russia would start selling natural gas and oil to us again? After all, we are running a proxy war with them by arming and funding the Ukrainian government.

And if Europe goes down, so does the rest of the world. After all, the EU is the largest trading bloc in the world and the lead trading partner for 80 countries. (Source/Source 2)

In reality, our “leaders” keep making Russia the scapegoat for this manufactured crisis, so we don’t come after them instead.

It was their short-sightedness that got us into this position in the first place.

It’s time we all give our politicians a swift kick in the ass out the door before we are either frozen or starved out of existence — or at least into total submission so that we accept The Powers That Shouldn’t Be’s goal for total control via digital IDs, CBDCs, UBI, socialism, total censorship, and an even more heavily surveilled world (including snitching on one another — à la the GDR, aka East Germany before the Wall came down).

Dystopia is here, and George Orwell’s turning in his grave.

Wake up.

A Note on Socialism: Before you shout in favor of it, chances are you don’t really know what it is (especially if you’re from the US). France and the Nordic countries, for example, are capitalist/market-based countries with large social safety nets and benefits; they are not socialist. In her book The Nordic Theory of Everything, journalist Anu Partanen describes her home country Finland as a “capitalist’s dream.”

Socialism is not all rosy and cooperative as the TPTB in the West like to make it seem, and neither is communism.

Resources: I encourage you to read about life in the GDR before the Berlin Wall came down. Or learn about life in Cuba (a 23-min edifying video) or Venezuela, once the world’s 4th wealthiest country, and now one of the poorest (a fascinating 26-min video).

For those wanting insights from someone who as lived through economic collapse and hyperinflation, check out Arpad at Star Path Academy. He created a special series on Venezuela with the help of a Venezuelan woman, which you can see/listen to here.

If you found this article informative, check out these other pieces:

Are We Going to Talk About Lebanon?

The Government to Start Spying on Drivers (It just started in July 2022)

The US Will Lose Its World Reserve Currency Status

The US stock market has recently been one of the most popular investment options, with stellar returns outpacing almost any market.

This is clearly seen in the graph above. It shows a ratio of Emerging Markets divided by S&P500. In simple terms, if it is going up, Emerging Markets outperform US Markets and vice versa.

The yellow shaded area from 2001 to 2011 was when emerging markets outperformed the US market after the dot-com crash. Some of you may remember the BRICS movement.

The blue shaded area from 2011 to 2021 is where the US market outperformed emerging markets. This was primarily driven by the large tech stock boom on NASDAQ.

Looking at this graph, we can assume a certain number of things. First, the trend shift changes every ten years. And once the trend changes, it sustains for ten years.

Looking at the current graph, we might see that a 10-year trend is starting to change as the US stock market is crashing. And this may be a signal to investors for a buying opportunity in emerging markets.

Here’s why emerging markets are worth considering now.

Recommended Newsletter

By the way, if you want high-quality and easily digestible updates about new technologies like cryptocurrency and financial markets, I highly recommend “The Tech Oasis,” written by Ignacio de Gregorio. You can sign up for free here. It is a professional one-stop shop for Crypto, Tech, and financial markets.

Stagflation in US and EU

There is a high chance of sustained inflation in the US until the mid-long term. Ray Dalio has mentioned that inflation can continue well into 4~5% until next year.

Ray Dalio Believes Majority of Wall Street Estimates are Wrong

“I estimate that a rise in rates…will produce about a 20 percent negative impact on equity prices”.

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(I know that some people disagree with this. Fed and Wall Street think 2%, Elon Musk and Cathie Woods think deflation).

The issue is that we also have a high risk of recession or negative GDP growth. The combination of inflation and low growth may well drop developed nations (US and EU) into stagflation.

“Stagflation will force investors to look for pockets of growth in the world, and emerging markets will be the first in line, especially those more immune from weakening global demand” — Trinh Nguyen, a senior economist at Natixis SA

The low projected returns have led many investors to explore emerging markets with higher growth and possibly returns.

What are Emerging Markets?

The term “emerging markets” was coined by Antoine van Agtmael in 1981. At the time, he worked for the International Finance Corporation (IFC), a division of the World Bank.

The IFC had collected data on ten markets and found that foreign investors might be interested in investing in these places but would be put off by the risk of investing in a single location.

The answer was to provide them with a one-stop, broadly representative “Third-World Equity Fund.”

When Mr. Agtmael pitched the idea to a group of fund managers at an event hosted by the Salomon Brothers, some were intrigued but hated the name. So he created the term “emerging markets,” which evoke “progress, uplift, and dynamism.”

And what exactly are they?

Emerging markets are defined as countries that are in the process of experiencing rapid economic growth and development.

Some examples of emerging markets include Brazil, China, India, and Mexico. These countries have all seen significant economic growth in recent years, and they are expected to continue to grow at a rapid pace in the future.

As a result, they offer a lot of potential for businesses and investors. However, with that said, there are also risks associated with emerging markets. For example, political instability or economic downturns could cause problems for businesses operating in these countries.

But overall, emerging markets offer much potential for growth and development.

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The Case for Emerging Markets

Emerging markets could be a good hedge against stagflation due to the higher growth and inflation-adjusted returns.

Institutional and legendary investors recognize this and have been buying into emerging markets.

The above diagram shows Vanguard’s asset-class outlook for the next ten years by equity type. You can see that they believe global equities (below three) will have higher return projections. Please do note that the volatility or risk is higher for emerging markets unhedged equities.

Ray Dalio’s Big Position

If you look at Ray Dalio’s hedge fund’s top 10 holdings, emerging markets actually represent the third biggest position, just below P&G and JNJ.

Ray Dalio's Fund (World's Largest) Bought Huge Positions in 10 Stocks & Dumped Alibaba

Is the “China Bull” shifting away from China?

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Although he has offloaded some of his stake in emerging markets, I believe he is still bullish in the long term. He has recently opened an office in Singapore to strengthen his footprint in Asia.

Despite the current headwinds, such as strong inflation and weakness in US and EU that could decrease exports, developing countries with robust local demand may experience higher growth rates.

For instance, India is projected to have stronger economic growth than other major economies in 2023 as exports only account for 12% of their GDP. Even its stock market has managed to post some gains this year.

Also, some countries have hiked aggressively and already have lower inflation than interest rates. Therefore, you actually get a positive real yield, unlike in the US.

Beware of the Risks

However, we have to be extremely cautious. The Vanguard perspectives chart above shows that the median volatility or risk is extremely high for emerging markets.

And more importantly, we still don't know if now is the right time. The dollar is still rallying against other currencies, and inflation is still rising. Some developing countries are at risk of default.

Inflation Domino: These 6 Countries Could be the Next Sri Lanka

I don’t think there is any harm in waiting until the dust settles.

For example, Ray Dalio liquidated some of his emerging market positions last quarter.

How can you invest in them?

When it comes to investing in emerging markets, there are a few different options available to investors.

One option is to invest in ETFs, which are exchange-traded funds that track a specific index or sector. ETFs are a type of security that tracks an index, a basket of assets, or a commodity. There are many different types of emerging market ETFs available, so it is essential to do your research before investing.

Some ETFs track the MSCI Emerging Markets Index, meaning you will purchase in a basket of countries.

Some ticker symbols include the below (Ray Dalio owns both):

• Vanguard MSCI Emerging Markets ETF (VWO)

• iShares MSCI Emerging Markets Index ETF (EEM)

Another option is to select one country and buy an ETF following that specific country. For instance, if you want to invest in India, you could buy the below.

• iShares MSCI India UCITS ETF USD (ACC)

You may ask, how can you pick one emerging country? But it all depends on your research and conviction.

When researching which countries are attractive, you can look at GDP growth, unemployment rate, inflation, foreign reserves, current account, currency depreciation against dollars, etc.

Another option is to invest in stocks from emerging markets or ADRs, which are American depositary receipts representing foreign companies' shares. Some examples are TSM (Taiwan Semiconductor Manufacturing Company), BABA (Alibaba), and JD (JD.com).

But remember, ADRs are extremely risky because local regulations can change the investment landscape quickly.

Finally, some investors make direct investments in assets such as properties in that particular country.

Each option has its risks and rewards, so it’s important to do your research before deciding which one is right for you. But the risk increases as you move down the list.

I prefer to buy a large basket of countries such as VWO or EEM.

Ultimately, your best option will depend on your individual goals and risk tolerance.

Conclusion

So, what’s the verdict? Should you invest in an Emerging market ETF now?

I think it looks attractive, but there are some risks to be wary of.

First, it is difficult to say if the timing is right now. Although Ray Dalio is bullish in the long term, he just offloaded some shares in the last quarter.

Second, how much should you allocate to emerging markets? Again, I believe you should consider it a hedge to your overall portfolio rather than going all-in.

“A proper global stagflation shock is unlikely to spare emerging markets, but insofar as stagflation-type risks are a spectrum, emerging-market opportunities can help hedge developed-market risks,” — Vishnu Varathan, the head of economics and strategy at Mizuho Bank.

This is not financial advice. I am not a financial advisor, and you should do your own research and not just listen to anyone on the internet. Nothing contained in this publication should be construed as investment advice.

If you want to read more about what other legendary investors, such as Warren Buffett and Ray Dalio, have been doing in the current downturn, click here.

If you like Medium, please consider getting a Medium subscription for $5/month. If you use this link, it will support me.

Further Reading/Research

• Vanguard Perspective: Market perspectives September 2022

• Secret to Enduring Stagflation Sends Traders to Emerging Markets

• Diamonds In The Rough: 3 Top Emerging Market Stocks

• Goldman’s Maasry on Emerging Markets Outlook

• Follow relevant topics and analyses on Medium@charles_30927 and www.charlesamemiya.com

• If you don’t have a Medium membership, consider getting one, its only $5/mo

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Imagine trying to withdraw money from your bank and then finding out the bank won’t give it to you. Unfortunately, that’s what happened to many people in Lebanon.

The Lebanese government put very strict limits on the withdrawal of foreign money since the beginning of their economic crisis in 2019. This has essentially frozen many bank accounts and caused many problems for people who need their money for necessities.

And it’s caused quite a few people to do some desperate things.

This week, an armed woman and several of her associates took a group of people hostage at a BLOM bank in Beirut, Lebanon’s capital city. The woman, identified as Sali Hafiz, left with $13,000 of her own money. She told a news channel that the gun she used was just a toy and needed the money to pay for her sister’s cancer treatment.

She said, “I got to a point where I was going to sell my kidney so that my sister could receive treatment.”

The brave woman and her accomplices fled the bank before the police arrived.

The same day, a man went into a Bankmed bank in Lebanon and used a gun to forcibly take some of his money. He later turned himself in to the police.

In August of 2022, Bassam al-Sheikh Hussein held up a BLOM bank with a gun and also took hostages because the bank didn’t let him withdraw his money. Bassam needed $10,000 of his own money to pay for an operation for his dad.

As Bassam’s saga unfolded in the bank, a large crowd gathered outside the bank and supported him. News of his plight spread on social media, becoming a national hero. Hours after the bank siege, he surrendered to police after the bank agreed to release $30,000 of his funds. He was detained by police but later released.

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Economic Collapse

Lebanon’s currency lost over 90% of its October 2019 value. There are food, fuel, and water shortages. The country has been plagued by electricity cuts that have lasted over 20 hours.

More than 80% of Lebanon’s people live under the poverty line. Its healthcare system is under a lot of strain. The inflation rate will average about 178% in 2022. Now that everyone’s purchasing power has been decimated, its citizens have been forced to make hard choices.

Many have prioritized water and electricity over the food they normally eat. As a result, 90% of Lebanese families eat less expensive food, cut back on meals, and reduce portion sizes.

The banking crisis is making their problems much worse.

Financial Mismanagement & Corruption

These acts of violent civil disobedience have occurred because of extreme financial mismanagement and corruption. After a 15-year civil war, Lebanon’s economy rose quickly. It made money from tourism, foreign aid, support from rich Muslim countries, and the income from millions of its citizens who worked abroad.

Then it began losing financial support from affluent Muslim states because of political and social division. As a result, it sunk deeper in debt as people wasted money on luxury items and banks paid excessive interest rates. Instead of lowering spending, Lebanon’s government increased public sector pay and didn’t do any financial reform, which stopped foreign donors from giving more money.

Only the rich benefited from this financial stupidity.

Mass protests took place, foreign exchange funds collapsed, and people started pulling their money out of Lebanon. Banks were unable to give many of their customers their own money. Long lines of angry customers formed outside local banks. The government defaulted on its debt, and the currency collapsed.

As is often the case, the rich got richer, and the poor got poorer.

This is a cautionary tale for any developing country.

The only way out of this financial shit storm is to get rid of the government corruption and stop the financial mismanagement, two things that are far easier said than done.

Like other countries struggling with corrupt leaders, political instability, and severe economic decline, Lebanon needs strong, ethical leaders who will focus on reform, common sense economic policies, and moderate spending.

Most of all, it needs leaders who care deeply about the well-being of the people and will never put greed above humanity.

People in this world should never have to rob a bank to get their own money.

Btw, Lebanon is a beautiful country…sample itinerary from AI

Lebanon is a beautiful country with a rich history and culture. Situated on the Mediterranean Sea, Lebanon has a coastline of over 170 miles. The country is also home to several mountain ranges, including the Lebanon Mountains, which reach an elevation of over 10,000 feet. Visitors to Lebanon can enjoy a variety of activities, from exploring ancient ruins to soaking up the sun on one of the country's many beaches. Here is a sample travel itinerary for Lebanon:

Day 1: Arrive in Beirut and check into your hotel. Spend the day exploring the city. Visit renowned landmarks such as the Beirut Souks and Martyr's Square. In the evening, enjoy a delicious Lebanese meal at one of the city's many restaurants.

Day 2: Drive north to The Cedars, a UNESCO World Heritage Site. Once covered in forests of cedar trees (from which the name is derived), today The Cedars is home to a ski resort and several hiking trails. Enjoy lunch at a local restaurant before returning to Beirut in the afternoon.

Day 3: Travel south to Tyre, one of the oldest continuously inhabited cities in the world. Explore the city's Roman ruins before heading to one of Tyre's beaches for a swim or some relaxing time in the sun. In the evening, enjoy dinner at a seafood restaurant overlooking the Mediterranean Sea.

Day 4: Drive east to Baalbek, home to some of the best-preserved Roman ruins in Lebanon. Spend the day exploring Baalbek's temples and colonnades before returning to Beirut in the late afternoon.

Day 5: Depart Lebanon after breakfast and begin your journey home.

You have already heard, but recent inflation numbers were pretty bad.

The Consumer Price Index report released Tuesday showed that prices increased by 8.3 percent from a year earlier. This is compared to the 8.5 percent increase in July.

Even though gas prices have decreased, other expenses, like rent, healthcare, and restaurant meals, have increased more quickly. For example, check out the graph below, where inflation rapidly increases, excluding food and energy.

If this trend continues, it could severely affect the economy and American households. Already, rising prices are putting a strain on budgets and forcing people to cut back on spending. However, if inflation continues to increase at this rate, it could lead to widespread economic hardship.

So the key questions are, 1) what can we expect? and 2) when would it happen?

Ray Dalio explains in his new article the mechanism of how inflation, interest rates, markets, and the economy are linked. Then, he also shares his opinion on what will happen in the future.

It is specifically interesting because his long-term views are pretty different from Wall Street’s perspective.

And this matters for us, retail investors, because where there is dislocation with the market’s perspective, there is opportunity.

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The Mechanism: How Inflation Affects the Economy

Ray Dalio mentions in his article that “the process starts with inflation.”

Inflation is when the prices of things go up. This happens when more money and credit are spent on things (demand). Also, if there are supply disruptions, the number of products and services goes lower, shooting prices higher.

Next, central banks decide how much money and credit should be available by transacting debt assets. Currently, the central bank is raising interest rates to fade the amount of money and credit available.

Then, prices go down in equities, investing assets, and properties. When interest rates rise faster than inflation, it makes it harder for people to afford things. Since investors know all this will slow down economic growth, they expect earnings growth to be lower, too — which is reflected in the prices of investment assets.

Finally, the economy is affected. When the interest rates are high and there is not much credit available, people spend less, and there is a crash in equities.

Differences in Ray Dalio’s and Wall Street’s View

Inflation

The first dislocation between Ray Dalio's and Wall Street’s views is the long-term inflation outlook.

• Wall Street: Inflation is really high, but markets estimate it will come down to 2.0% in the long term.

Many believe that the markets will come down to pre-pandemic levels, but Ray Dalio strongly views the opposite.

• Ray Dalio: Ray Dalio suggests it will be about 4–5% long-term.

In the near term, I expect inflation will fall slightly as past shocks resolve for some items (e.g., energy) and then will trend back up towards 4.5 percent to 5 percent over the medium term. — Ray Dalio

Interest Rates View

• Wall Street: Markets estimate interest rates to go down to 1.0% in the next ten years.

• Ray Dalio: He estimates real interest rates of 4.5–6% short-term and long-term. That is a pretty big gap.

I think it looks like interest rates will have to rise a lot (toward the higher end of the 4.5 to 6 percent range) and a significant fall in private credit that will curtail spending. — Ray Dalio

Ray Dalio’s Predictions on What Will Happen

As Ray Dalio believes that interest rates will rise, he estimates there will be a 20% negative impact on equities.

I estimate that a rise in rates from where they are to about 4.5 percent will produce about a 20 percent negative impact on equity prices-Ray Dalio

Another 20% market decline will be devastating as the S&P500 has already declined 19% this year.

How long will it take?

He believes the decline will take some time, as cash/wealth levels are relatively high now. Also, there is low unemployment, which will support the flushing out of the equity markets.

In conclusion, Ray Dalio’s view can be described as a pretty bearish outlook.

• The inflation rate will stay above what people expect

• Hence, interest rates will rise

• Thus, markets will go down

• And the economy will be weak.

• Combined with external and internal conflicts, we should be extra cautious.

So what does all this mean for investors?

It means that markets are currently underestimating the amount of inflation we will see in the future. This could lead to major market corrections as reality catches up with expectations in the coming years.

So what can we do to protect ourselves?

We must diversify our income sources, save money, and invest in assets that will hold their value. Read below to see what Warren Buffet has been purchasing.

Warren Buffet Accumulated Massive Positions in these 5 Stocks During the Downturn

Of course, no one can surely say how things will play out.

Great thinkers such as Elon Musk also believe rate hikes can actually lead to deflation.

What do you think? Will inflation ease up?

This is not financial advice. I am not a financial advisor, and you should do your own research and not just listen to anyone on the internet. Nothing contained in this publication should be construed as investment advice.

If you want to read more about what other legendary investors, such as Chamath, have been doing in the current downturn, read here.

If you like Medium, please consider getting a Medium subscription for $5/month. If you use this link, it will support me.

Suggestions for Furthur Reading/Research

• Ray Dalio: It Starts With Inflation

• BCG Report: The CEO’s Dilemma, Building Resilience in a Time of Uncertainty

• Inflation Report was a Disaster — Federal Reserve Strategy Ineffective

Today’s post is a collaboration with a dear colleague and beautiful soul, Joshua Mayfield, who is a Legal Analyst covering issues related to industrial policies and geopolitical trends and also has a background in consulting and research on International Affairs and Foreign Languages.

• Follow relevant topics and analyses on Medium@44jmonroe91 and Twitter @Jmonroe_4PEACE

• His publication, “Areas and Producers,” explores a Paradigm Shift by analyzing business news, legal cases, and international affairs related to industrial policies and geopolitical trends.

• In addition, Joshua Mayfield leads and organizes a local sustainability initiative in the United States. Find out more about the sustainability project goals on Instagram @jm4peace

If you would also like to write for “Inflated World,” reply to this email!

I’m citing a provocative analysis from the Institute for the Study of Diplomacy at Georgetown University as the reason for my writing about Brazil’s Fertilizer Diplomacy.

Although I don’t entirely agree with the overall concept of this article’s portrayal of China’s ethnic issues in the context of Middle East geopolitics, I do think it is an effective analysis of using Defensive Realism as a case study of Middle Eastern diplomacy.

Read it here:
Analysis: Why Muslim countries in the Middle East support Chinese atrocities in Xinjiang

On May 3, 2022, Brazil announced that the government was taking a trip to North Africa to engage Jordan, Egypt and Morocco for “Fertilizer Diplomacy.”

This diplomatic engagement underscores Brazil's issues securing fertilizer imports during the conflict with Russia and Ukraine.

Moreover, because Russia is one of the world’s largest fertilizer exporters, Brazil has doubled its efforts to implement a new fertilizer strategy unveiled by President Bolsarno earlier this year.

Brazil’s National Fertilizer Plan even proposes to mine potash from underground reserves in the Amazon Rainforest, which has caused an uproar from the indigenous communities there.

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What is Fertilizer Diplomacy?

This concept has reshaped the whole narrative of the global fertilizer industry. It implies that the fertilizer markets have become susceptible to geopolitical forces. Perhaps because the world is facing an unprecedented food crisis, but mainly because of renewed conflict over geopolitics and military strategy, as evidenced by Russia and Belarus — Belarus is one of the world’s largest potash producers — and how the countries have used their influence over fertilizer supply to increase political leverage.

Read more about the importance of potash and the current global fertilizer industry dynamics with this story about Canada’s Nutrien Ltd.’s CEO transition: https://medium.com/@44jmonroe91/what-went-down-at-the-worlds-largest-potash-producer-nutrien-ltd-c174d19e403d

In fact, the concept of “Fertilizer Diplomacy” originated when Russia began initiating countermeasures against Europe for the Nord Stream 2 pipeline. This occurred because of extremely high natural gas prices due to the Covid-19 pandemic, hitting the European Union (EU) market extremely hard.

But in 2020, analysts claim that Russia’s fertilizer production of mineral fertilizers grew at a rate of 5% hitting approximately 54.8 million tons. By comparison, the world average grew at around 2% in 2020.

The truth is that this fertilizer diplomacy seems to be unraveling during the worst times of this century — global pandemic, food crisis, inflation — while Russia’s invasion of Ukraine has also caused severe changes to commodities and other aspects of the global economy.

No wonder the governments of the world are already conceptualizing critical global commodities as a way to engage in diplomacy. This adds a geopolitical factor to any country’s supply and production targets. As the dimensions of political leverage grow in their favor, they would continue to use fertilizer as a way to influence important political decisions.

On the other hand, when fertilizer prices subside, fertilizer diplomacy could contribute to the health of global economic recovery and help alleviate the global food crisis. Africa is a case in point, as Morocco seeks to lead the way as Africa’s main supplier to increase agricultural productivity and modernity. This would be a major boon to Africa’s growth and development.

What is Defensive Realism?

Defensive Realism is a theory of International Relations (IR) that belongs to the school of Neorealism, or Structural Realism, which says that the structural principles of the international system consist of an international order of anarchy, and thereby countries must seek to maintain their overall security while expanding on the distribution of capabilities vis-a-vis other countries in the international system. (See link in a paragraph).

According to this theory, Steven E. Lobell explains that countries in the international system must seek to attain security by using moderate and reserved policies to avoid resorting to means of domination and hegemony to attain security.

Factors such as geography and rivalries (sometimes historical ones) tend to play a bigger role in this school of thought.

That’s why I believe it is the perfect way to understand Brazil’s fertilizer diplomacy. The act of touring through the Middle East and North Africa (MENA) is based around the whole geographical region; on the other hand, by ensuring fertilizer supply from many countries in MENA, ensures Brazil that it will be dealing with similar cultures and geographical constraints when working with producers and suppliers.

These will be critical elements for judging the effectiveness of this fertilizer strategy. Therefore, using Defensive Realism here allows for a broader way of looking at the strategy of any given country: in this case, Brazil and the country’s fertilizer strategy.

In the publication Fertilizer View by FShow, the organization looks at Brazil’s record-breaking planting season from 2021–22, whereby projections have estimated that Brazil’s production of soybeans, corn, cotton, rice, and beans — amounting to approximately 289.6 million tons — would account for 95% of its overall grain production from 2021–22.

This means that despite the global fertilizer supply shock due to higher commodity prices and fertilizer shortages, Brazil will continue to rely on fertilizer imports from sources worldwide. It is a classic example of defensive realism and why Brazil must maintain friendly relations (i.e., moderate and reserved policies) with Russia, even as the United States and European Union, including others, intend to ostracize Vladimir Putin’s regime for the war in Ukraine.

What’s Likely To Happen Next?

In July 2022, Russian Foreign Minister Sergei Lavrov began the African Tour. This tour coincided with visits from French President Emmanuel Macron and U.S. Special Envoy for the Horn of Africa Mike Hammer to the Middle East and North Africa (MENA) region.

This event is relevant to this analysis of Brazil’s fertilizer diplomacy in MENA, as many analysts claim that the primary purpose of Lavrov’s tour this year revolves around Russia’s security guarantees of food and fertilizer supplies to MENA. But it was also a way for Russia to raise support from those countries in light of increased sanctions from the United States and the European Union due to the war in Ukraine. For instance, Lavrov ended the tour in Ethiopia, where he defended the country’s handling of the Tigray conflict since November 2020.

Moreover, Lavrov stated the current situation in world affairs where he insulted the United States and European Union’s efforts in MENA:

“I am sure the overwhelming majority of world countries do not want to live as if the colonial times [have] come back”

The votes in the United Nations General Assembly (UNDA) resolution on the war in Ukraine reflected this sentiment, as half of all abstentions on the resolution came from African countries. However, BBC points out that while the United States and France have each offered their aid packages to combat food security in Africa, Russia has offered nothing to those countries in support of alleviating food insecurity issues in the region.

In conclusion, it is clear from these most recent events that the MENA region is becoming a diplomatic showdown area between the United States and European Union, and Russia. However, defensive realism would point out that the 17 absentee votes on the UNGA resolution from African countries signal an opportunity for them to ensure secure supplies from Russian commodities while also benefiting from the aid packages offered by the United States and France.

These are the moderate and reserved policies these countries must maintain to attain security and facilitate economic trade to their benefit. They also cannot ignore the reality that Russia’s invasion of Ukraine is a way for Russia to seek hegemony and domination, which they must avoid to attain their security. What happens next will be determined by the needs of MENA countries balanced with the entire region’s security framework. Those countries will seek favorable relations with the United States and Russia in the future. Commodities and conflict will indeed exacerbate the situation.

The following article has been written in collaboration with a 23-year-old living in Kenya to share his experiences and how he tries to navigate living in an inflated and unstable government.

Recently Congo opened licensing rights for 30 oil and gas blocks, which could release large amounts of carbon into our air. The priority was economic growth over the climate.

“The launch of the tendering process… speaks to our desire to put our resource potential at the service of our country” — Tshisekedi, President DRC

It was a headline grabber, as the decision went totally against the ideal tides of our days. On the opposite spectrum, Sri Lanka has one of the highest ESG scores but is bankrupt. Citizens are fighting through high food, energy, and living costs.

So this led me to the question: Do we have to compromise economic growth when striving for sustainability?

From the All-In Podcast, David Sachs (former COO of PayPal) summarizes it in a dark picture.

I do think that we can’t save the planet by destroying the economy. It seems to me that too many of these save the planet people want to take reckless, extreme actions that would wreck our economy.

Which decision is correct?

Kenya is in a questionable state. 80% of its electricity comes from renewable sources (geothermal). And they have more capacity.

Yet, the energy situation in Kenya is not good. The country has a vast potential for clean energy sources, but the cost of electricity is very high compared to neighboring countries. In addition, the power supply is unreliable and intermittent. 

This article will look at what Kenya is trying to do regarding the energy paradox and what is being done to move towards solar energy to ensure that clean energy sources constitute a majority of its national grid by 2030.

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Kenya’s Excellent Carbon Valley.

Kenya has some of the world’s most significant potential for clean energy production. The nation is home to two of the most potent geothermal plants in Africa, which produce up to 80% of Kenya’s electricity and are helping to drive down its carbon emissions.

But despite this great start, Kenya still faces challenges regarding addressing climate change and meeting its global climate commitments.

The issue is that while there are many benefits associated with renewable energies like solar and wind power, they’re often expensive because they require more advanced technology with higher maintenance costs than petroleum derivatives (coal/natural gas).

Because each kilowatt hour from a traditional fossil fuel source costs just over $0.10 worldwide but around $0.30 in Kenya, many people struggle financially trying to keep their lights on every day after paying their utility bills.

The Energy Crisis

Throughout recent years, the government has significantly improved the electricity supply in the country. However, a quarter of Kenya’s population is still not connected to the electrical grid.

Though connectivity has improved, the government has failed to address the problems of unreliable power supply, high electricity prices, and the general vandalization of major electric supply equipment like transformers.

Unreliable and Intermittent Power Supply.

Power outages are common and tend to last a few minutes up to several hours in Kenya. They can be caused by lack of rain or technical faults but are also often the result of theft or sabotage.

Recently in January of 2022, there was a nationwide blackout for a whole day in the country.

The problem was that the main electricity supply line had been damaged, and since Kenya has a monopolistic supply chain for electricity, Kenya Power and Lighting Company (KPLC).

Kenyans could only rely on them to repair the damages and restore power. Unfortunately, this took several hours, meaning billions of losses in the economy for that day.

Cost of Electricity in Kenya

The cost of electricity in Kenya is higher than in most neighboring countries. 

For example, the price of electricity in Kenya is roughly double that of Uganda, Tanzania, and Rwanda.

The high costs make it difficult for Kenyans to afford necessities like food and shelter; the average household spends more than 10% on energy costs. It also creates an environment where companies are reluctant to invest in new technologies to make their products more affordable.

So what’s causing this disparity? 

Only one company countrywide supplies electricity to the whole country: Kenya Power and Lighting Company (KPLC). Being a monopoly in the energy sector means it provides electricity on its basis and rates. This reduces price competitiveness and motivation to innovate.

Clean Energy Sources in Kenya

Kenya could increase its electricity production if it utilized its solar, wind, geothermal and hydroelectric resources to their fullest extent. Kenya is one of the sunniest countries, and over 80% of its land is arid or semi-arid. 

In addition, a ton of wind blows across these lands. So it is no surprise that wind power also plays a vital role in Kenya’s long-term strategy for clean energy growth.

Wind turbines can be placed anywhere, even near cities, if needed, and supply clean power 24/7 without having any fuel costs associated with them (like coal or natural gas).

Wind farms generally only need maintenance once every five years or so. After that point, they can keep producing electricity indefinitely without needing anything else besides regular cleaning done regularly by technicians.

“We have installed the biggest wind power plant in sub-Sahara Africa — the Lake Turkana Wind Power Project, and are steadily exploiting and deploying available geothermal potential, currently estimated to be 10,000 Megawatts,” — President Kenyatta

The Move Towards Solar Energy

Aside from wind power, solar power is the most abundant energy source, and it’s also the cleanest form of energy and relatively cost-effective compared to other alternative points.

Kenya’s government has made severe strides in ensuring that clean energy sources are part of its national grid, but plenty of work still needs to be done. President of Kenya, H.E Uhuru Muigai Kenyatta, is spearheading the initiative.

The country has made significant solar energy investments to reduce its reliance on fossil fuels and increase its access to electricity. 

Ample foreign investments are coming to the country too. For example, the Emerging Africa Infrastructure Fund (EAIF), financed by the governments of the U.K., the Netherlands, Switzerland, and Sweden, provided a loan to build a 40MW solar project in Kenya (costing $87 million).

Initiatives in Pushing for Clean Energy.

James Irungu Mwangi, a Kenyan social entrepreneur, is a significant advocate not only in Kenya but in the whole of Africa for a move into the utilization of clean energy sources like solar, wind, and geothermal energy.

He was recently on TED talk and aired out his ideals on how Africa, in general, is blessed with natural resources, some of which can be utilized to produce energy for generations to come at available rates.

Road Not Taken

Ideally, the energy situation in Kenya is wanting, and there’s still substantial work to be finished before it can solve its power crisis. 

With the government making serious strides in ensuring that clean energy sources are part of its national grid and the rise of social entrepreneurs, Kenya may be able to show a path where sustainability and economic development coexist.

We are on course to achieve our target of 100% use of clean energy by 2030 — President Kenyatta

A Quick Tour of Kenyan Cuisine (Courtesy of AI)

Kenyan cuisine is as varied as the people who live in the East African nation. The country's culinary tradition has been shaped by a long history of migration and trade, and as a result, dishes from across the globe can be found in Kenyan kitchens. While some dishes are specific to certain ethnic groups, others have become popular nationwide.

One of the most iconic Kenyan dishes is ugali, a thick maize porridge that is commonly served with greens or stew. Ugali is a staple food for many Kenyans and is often eaten for breakfast, lunch, and dinner. Other popular dishes include pilau, a rice dish flavored with spices, and chapati, a flatbread typically served with curry. Regardless of where you are in Kenya, you will surely find a dish that satisfies your appetite.

We have already seen multiple days of red in the market after Fed Chairman Jerome Powell’s speech at Jackson Hole.

Despite having a summer rally from June to August (S&P surged 17%), the Jackson Hole Speech seemed to have ended the positivity. Powell reiterated his commitment to fighting inflation, even if it meant tanking the markets.

The S&P500 and Nasdaq are down over 5% from Thursday, and we have officially entered the worst month in the stock market.

September’s Curse

If you go back to World War II, September has averaged a loss of -0.56%, which is far worse than any other month.

The exact reason for this trend is unknown, but one reason is that investors and portfolio managers start reassessing their portfolios after the summer vacation. Mutual funds also sell positions at a loss to reduce the size of their capital gains income.

It is also a sign of a substantial trend change.

September marked the beginning of a lot of the crashes in the past: 1929, 1987, and 2008.

This chart shows the stock price decreasing from the beginning of September 1929 to 1932. You can see that the trend began in September and crashed significantly during October.

Similarly, the above graph shows the Dow Jones during the 2008 crash, but you can see a massive crash from the beginning of September. What followed was a long, painful decline for a multi-year down market.

And now, we seem to be in a similar position.

There are many factors to be concerned about:

• A hawkish fed, where the interest rates keep rising not only in the US but all around the world

• An energy crisis, along with a prolonged war in Ukraine and Russia

• A global food crisis, in which we may see impacts later in the year to next year 

• Midterm elections, where we see a wide variety of policy changes that could distort market conditions even more (inflation reduction, student debt forgiveness, etc.)

We still cling to the robust unemployment rate, but that could change when a new job market report indicates otherwise.

“It’s all about the employment data. We have to get into a position where bad news will become bad news. That’s where the market becomes more attractive to us because that generates a real Fed pivot.” 

— Tony Dwyer, chief market strategist at Canaccord Genuity.

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Buying Opportunity Arising?

But if you have a lot of cash on the sidelines, this may be one of the best buying opportunities in the coming years.

But, what will you buy?

Luckily, legendary investors' recent stock filings reveal what they purchased during the downturn.

I tried to analyze them to give you some information if you are considering what to purchase. However, please note the figures are rough estimates, as the exact stock price when they were purchased is unknown.

For the Growth Stock Lovers

If you are a firm believer in growth or tech stocks in the future, the Saudi Wealth Fund and Tiger Global have been purchasing significant positions during the downturn.

A) Saudi Wealth Fund: PIF

Saudi’s largest sovereign wealth fund is Public Investment Fund (PIF). They are the world’s 6th largest sovereign wealth fund with an AUM of $620bn.

They are notably interested in new technology (AI, IoT, Electric Vehicles, Autonomous, Robotics, etc.) and have invested significant amounts of capital in companies like Lucid, Softbank Vision Fund, etc.

Therefore, it is not surprising to see that they have purchased several growth stocks during the recent downturn.

Below are the top purchases during the second quarter of 2022.

You can see familiar growth stock names such as Paypal, Datadog, Zoom Video, Nextera Energy, and blue-chip IT stocks such as Amazon, Meta, Alphabet, Microsoft, Adobe, and Salesforce.

The Saudi kingdom believes the recent sell-off was a great buying opportunity and doubled down on the major technology stocks.

B) Tiger Global

Tiger Global had tremendous gains during the early 2021 pandemic-led bubble, but they have recently cut significant portions on their growth stocks. Namely, they have trimmed their exposure in Door Dash, Snowflake, Shopify, and Carvana.

However, this hasn’t stopped them from purchasing blue-chip IT stocks that they believe are worth investing in for the long term.

The names are Google, Meta, cybersecurity firm SentinelOne, and Kanzhun (a Chinese real estate platform). Kanzhun seems like a surprising move considering the recent real estate crash in China.

But similar to the Saudis, Google and Meta seem to be popular choices for growth stock purchasers.

For the Value Stock Lovers

If you are tired of the volatility of growth stocks, maybe you should consider value stocks: retail, healthcare, banking, energy, etc.

During the downturn, value stocks are less volatile and may generate higher returns due to their high profitability.

This year, energy is a clear winner, with a YTD performance of 43.95%.

And there has been one legendary investor loading up on the energy sector all year: the “Oracle of Omaha.”

C) Berkshire Hathaway

Berkshire Hathaway, led by Warren Buffett, has a ton of cash on its balance sheet.

At the beginning of 2022, they had roughly $140bn in cash, which has shrunk to $70bn, as he has been purchasing stocks at a discount.

During Q2 2022, Berkshire Hathaway made considerable purchases in a few companies.

As you can see, Warren Buffett has purchased huge positions in Occidental Petroleum and Chevron. He has loaded up on both of these companies, and now, Chevron is the 4th biggest position while Occidental is the 7th biggest of his entire portfolio.

There are rumors that Berkshire Hathaway may acquire Occidental, as he recently got regulatory approval to purchase up to 50% of the company.

Other than the energy companies, Berkshire Hathaway has been purchasing Ally Financial, the former banking division of General Motors. He has increased his stake by 234% this quarter and seems confident in its value. Despite the downturn, the company has been growing at 8% and has solid financials.

Regarding tech stocks, Buffett decided to double down on his favorite, Apple, and purchased more of Activision, reiterating his stance to take advantage of the merger acquisition arbitrage that could close with Microsoft.

Finally, Paramount is another billion-dollar bet that Buffett has been taking since 2022, when he invested $2.6 billion in May. Moreover, he has increased his stake during the most recent quarter. 

Paramount seems like a good company within the content space as it has exposure in all mediums: streaming, legacy tv & broadcast, and films. Additionally, with the phenomenal success of Top Gun: Maverick and Paramount+, the company has been reporting good financial earnings.

The stock is still considerably battered (down 28% this year). 

D) Bridgewater Associates

Lastly, Ray Dalio has also been making significant changes to his portfolio.

With an inflationary environment, Ray Dalio has shifted some of his position towards companies that offer low-discount prices.

These companies are CVS ($179M), Walmart ($93M), and Target ($45M).

This position has already paid off well, as Walmart reported good earnings in mid-August, and the stock surged to the highest amount since 2020.

In addition, surprisingly, Dalio has also dipped his toes in undervalued tech stocks such as Google and Paypal.

However, the most surprising move was that the “China Bull” sold out of his Alibaba and JD.Com positions and divested a few of his Chinese shares.

It may be a sign that Ray Dalio is cautious of the short-term outlook of the Chinese economy with the property market crash, regulatory changes, and risk of delisting.

In summary, these legendary investors have different profiles and strategies so you can pick them based on your preference. I don’t suggest buying simply because these investors have decided to do so, but it is worth giving further research into the names they have purchased.

Now for some recap.

For the growth lovers…

• Saudi Wealth Fund and Tiger Global are the funds to benchmark. They have purchased Paypal, Datadog, Zoom Video, Nextera Energy, cybersecurity firm SentinelOne, and Kanzhun (a Chinese real estate platform)

• Ray Dalio also has bought into Paypal and Zoom.

For the less risky blue-chip IT stocks (the usual suspects)…

• Google (Saudi Wealth Fund, Tiger Global, Ray Dalio)

• Meta (Saudi Wealth Fund, Tiger Global)

• Microsoft (Saudi Wealth Fund)

• Apple (Warren Buffett)

For the value investors…

• Finance: Ally Financial (Warren Buffett)

• Retail: CVS, Walmart, Target (Ray Dalio)

• Energy: Occidental, Chevron

• Content: Paramount

Again, we don’t know if there will be a buying opportunity in September. We might even see a short-term rally.

But one good gauge to see if it is a good buy timing is the VIX. Chamath says it is an excellent strategy to purchase when the VIX is above 30, so it is worth looking at it.

I hope this article helps during a volatile period and good luck with your trading!

This is not financial advice. I am not a financial advisor, and you should do your research and not just listen to anyone on the internet. Nothing contained in this publication should be construed as investment advice.

By the way, if you are looking for a good way to end the week, I have a good substack for you. Daily life has constant moments of learning that we can share to grow. Every Sunday, The Weekly Wrap shares things that make us say, “Ooo! That’s interesting!” Check it out here!

Let’s say you work a 9–5 job and get paid $3,000 at the end of the month. This $3,000 allowed you to purchase the daily necessities for yourself and your family. However, the next month you realize that the prices of your nearby groceries had increased 50%.

You can only purchase half the amount of food with the same amount of money. You are infuriated but can’t do anything about it. You can’t blame the grocery owner. You can’t blame your employer for not paying you enough. The system is not working. Before you know it, your savings are up in smoke. What a nightmare.

The picture painted above depicts the situation in Venezuela. Prices of goods and services doubled every 26 days during 2018. The same cup of coffee that cost 450 Bolivars in 2016 cost a whopping 2.5 million Bolivars in 2018.

I want to show you how cryptocurrency has become a savior for Venezuelans during this imminent crisis.

By the end of this article, I hope you will understand that cryptocurrency is more than a fad, meme, or get-rich-quick scheme. Instead, it is a technology that solves social issues, and we are still very early in the adoption cycle of this nascent technology.

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History of Hyperinflation

Venezuela has one of the most abundant oil reserves in the world. In 1960, Venezuela was one of the wealthiest countries, providing 10% of the crude oil demands on the whole planet. However, the country has been in chaos through a vicious cycle since the Maduro administration took power in 2013.

Very briefly, Venezuela reached a hyperinflationary economy through three steps: 1) High spending on social programs leading to government deficit, 2) Overexposure to oil revenue (90~95% of Venezuela’s export revenue is oil), 3) Excessive printing of money to compensate for the government deficit.

When oil prices plummeted in 2014 from $100 to $70, things started turning sour for the newly appointed Maduro administration. The situation worsened when the oil price plummeted to $30 in 2016. Also, the US sanctioned Venezuela from international markets for additional capital. In desperation, Venezuela had no choice but to turn their hopes for a solution from within by printing more Bolivars.

The Venezuelan Bolivars quickly became worthless. Inflation reached an annual rate of 65,000% in 2018. The Maduro administration eliminated five zeros to prevent citizens from carrying bags of paper cash, but it didn’t solve anything fundamentally. While the Venezuelan Bolivar was losing credibility, the Maduro administration decided to develop and deploy its cryptocurrency called the Petro.

The Petro was heavily marketed in Venezuela and caught international media attention. But the cryptocurrency was not built with the decentralized ideals of the crypto-economy but instead reflected the authoritarian nature of the Maduro administration. The government still controlled the cryptocurrency supply, and Venezuela's natural oil reserves backed the value.

There is speculation that Maduro developed the cryptocurrency to circumvent US sanctions to convert Petros and raise US dollars and Euros. Needless to say, The Petro isn’t widely adopted in Venezuela due to its instability and lack of usability. Currently, it is only used to pay taxes (Petro is the only option for Venezuelans to get their taxes done).

As a result, both the Petro and Bolivars have not served as credible currencies in Venezuela. The US Dollar has become an informal currency in the country, and as of now, 1 dollar is about 782,862 Venezuelan Bolivar. The hyperinflation crisis has led the economy to grave poverty, inaccessibility to food and medicine, and a high crime rate.

“Prices are stable in dollars. But the price rise in terms of the Bolivars. The salaries here are in Bolvars. And people are getting increasingly upset. — Rafael Garcia, Charcao Residents Group

Cryptocurrency to the Rescue

Cryptocurrency has been gaining popularity amidst hyperinflation as a choice for a store of value. Bitcoin, Dash, Eos, Ether, and Reserve are the cryptocurrencies getting traction in Venezuela.

Bitcoin volume has surged in Venezuela over the last couple of months. As a result, a lot of merchants have been accepting cryptocurrencies as a form of payment. A famous example is Pizza Hut, announcing that it would start accepting payments in Bitcoin and Dash on November 30, 2020.

“Whether it’s furniture, clothing or groceries — virtually everything can be purchased with cryptocurrencies” — Jose Maldonado (Journalist for Cointelegraph)

In addition, Reserve has been an upcoming choice for Venezuelans as an alternative to more volatile cryptocurrencies. It has a stablecoin pegged to the US dollar and allows Venezuelans to preserve their wealth in US Dollars. Bolivars can be easily converted to RSV (the stablecoin of Reserve) via a mobile app called Reserve. You can check the details of their project here. Sam Altman (President of YCombinator), Coinbase Ventures, and Peter Thiel are investors.

In the last week of March 2020, Reserve was the #1 most downloaded finance app in Venezuela, and surpassed 100,000 total downloads. — Reserve Team

The popularity of cryptocurrency among Venezuelans is due to the utility they provide:

・Store of Value: If Venezuelan keeps their salary in Bolivars, hyperinflation will quickly eradicate the value of savings. $1,000 in 2013 would be virtually $0 in 2018. Cryptocurrency allows for the preservation of wealth.

・Ease of Conversion: Venezuelans can easily convert Bolivars to cryptocurrency through mobile phones. Before cryptocurrencies, Venezuela's conversion rate was vastly manipulated, and there were different rates in different markets. However, cryptocurrency trading platforms such as Binance and Reserve have given a haven for transparent and liquid conversion of Bolivars to other currencies.

・Security: Cryptocurrency can be stored on your mobile phone. You do not need to physically keep it somewhere or in the bank account. It mitigates the risk of physical looting and any encounters with the government. According to Carlos Henandez, a Venezuelan economist, Venezuelan military personnel at the borders have a reputation for seizing the money of people who want to leave.

“I think mining is a tool against the government. Because it helps everyone who is mining here to resist” — Anonymous Miner in Venezuela, Quartz Documentary (Why cryptocurrency is loved by oppressive rulers)

Although the adoption cycle of cryptocurrency has been accelerating in Venezuela, there are still issues, such as the lack of mobile and internet access for some families living in poverty and the limits of transactions.

However, using cryptocurrencies in real-world situations has allowed emerging companies to develop a feedback loop with all stakeholders: customers, merchants, government entities, etc. The feedback loop is crucial for products with emerging technologies to go live and hopefully reach wide-scale adoption in Venezuela. As showcased in Venezuela, cryptocurrency has shown a viable solution to a country with an imminent crisis. It will be a benchmark for other developing countries in dire need to follow suit.

The adoption of cryptocurrencies will soon lead the price indicators and make the mass realization that the insane prices of cryptocurrencies are merely just noise.

What are some delicious Venezuelan cuisines? (Courtesy of AI)

Venezuelans love their food and always look for new and interesting ways to prepare it. One of the country's most popular dishes is arepas, a cornmeal pancake filled with anything from cheese to chicken. Arepas are usually served for breakfast but can also be enjoyed as a snack or light meal. Another Venezuelan favorite is pabellon criollo, a dish made with rice, black beans, and shredded beef. Pabellon criollo is often served with arepas, and it is a popular choice for lunch or dinner. Whether you're looking for something to eat on the go or a hearty meal to sit down to, Venezuelan cuisine has something to offer.

The Ukraine and Russia war began on February 24.

Almost 6 months have passed, with no end in sight. The war has ballooned into a global crisis, leading to volatile energy and food prices.

While not directly intervening militarily, the West has supported Ukraine financially and militarily and imposed economic sanctions on Russia.

The initial line of thought was to cripple Russia’s war chest until it could not continue its war efforts in Ukraine. However, the war has become a quagmire, and some are doubtful about the effectiveness of the sanctions.

Ironically, the Russian current account surplus hit a new all-time high of $166 billion in the first seven months of this year — triple its level in the same period a year earlier, which was already a record high.

Sanctions designed to cut Russia’s energy export income haven’t worked, and the Kremlin is now earning more money than ever since energy prices skyrocketed. Additionally, the highly successful bans on equipment and technology imports to Russia have dramatically lowered Russian imports, significantly boosting the current account surplus.

This leads to the question: will the sanctions ever be effective enough to stop Putin?

Or does Putin have all the cards on the table?

Major publications seem to be confused as well.

On the one side, you see publications like Bloomberg, Economist, etc., reporting that the sanctions are not as effective.

• Are sanctions on Russia working? (Economist)

• Russian Corporate Profits Jump 25% as Sanctions Hit Muted (Bloomberg)

On the other hand, research papers and financial Youtubers specify the contrary.

• Business Retreats and Sanctions Are Crippling the Russian Economy (Yale University)

• LEAKED: Russia’s ENTIRE Economy Is About To IMPLODE (Casgains Academy)

In this article, we will first provide an overview of the economic sanctions and then delve into the effects and the timing of when they might take effect.

An Overview of the Sanctions

A slue of financial and economic sanctions have been executed from the West and ally nations. Therefore, I think it is essential to revisit the sanctions.

1.1 Freezing Foreign Currency Reserves (Financial)

• Summary: The sanctions prohibit the Russian Central Bank from moving foreign currency reserves abroad, making it difficult for the government to intervene in the foreign exchange market or redeem government bonds denominated in foreign currencies.

• Agreed Parties: U.S, E.U, and Japan

• Impact: Around 60% of Russia’s $604 billion in foreign currency reserves are unavailable.

1.2 Banning Transactions with Russian Banks (Financial)

• Summary: The U.S. Treasury Department designates major Russian banks subject to comprehensive transaction restrictions. Corporations and individuals doing business with the designated banks will be punished for violating the sanctions.

• Agreed Parties: US

• Impact: Restrictions on the remittance of foreign currency to Russia will cause exports to stagnate, making it difficult to obtain foreign currency.

1.3 Exclusion from SWIFT (Financial)

• Summary: Eleven major Russian banks are excluded from SWIFT. The convenience of transactions to Russian banks will be significantly reduced.

• Agreed Parties: SWIFT (International system)

• Impact: Restrictions on the transactions with Russian banks will cause exports to stagnate, making it difficult to obtain foreign currency.

2.1. Ban on the export of high-tech products (commercial)

• Summary: Exports of semiconductors and AI-related products are banned. These products fall under the “dual-use products” category that can be converted into weapons.

• Agreed Parties: U.S., Japan, Taiwan

2.2. Import restrictions and bans on energy resources (commercial)

• Summary: Countries are trying to ban imports of oil, coal, and natural gas, but sanctions have not yet taken effect regarding significant portions of natural gas, including in Europe.

• Agreed Countries: 

• U.S.: Import bans on oil, coal, and gas. 

• EU: Import ban on coal and oil (in principle). Natural gas imports are to be reduced by one-third by the end of the year.

• G7: Gradually reduce energy dependence on Russia, including phasing out coal imports.

2.3. Ban on airspace (commercial)

• Summary: All Russian aircraft are banned from flying in Russian airspace.

• Agreed countries: U.S.A., Canada, U.K.

2.4. Major companies withdraw resources (commercial)

• Summary: Western-affiliated companies, from infrastructure to consumer goods, are scaling back or shutting down their Russian operations across the board.

• Examples: McDonald’s, Shell, IKEA, H&M, UNIQLO, Starbucks

Most of them seem devastating, but at first glance, the high energy prices seem to help Russia’s case.

Despite the Sanctions, Russia seems to be thriving.

In June, Russia’s ruble hit its strongest level in 7 years.

But what exactly is going on?

Due to the surge in energy prices, Russian oil is still 60% above typical export pricing last year, even though it is still significantly discounted from international rates.

As noted above, many Russian financial institutions are subject to sanctions, but the energy sector is not subject to sanctions across the board.

This is simply because Western countries cannot rapidly reduce their energy procurement from Russia to zero. The EU depends on Russia for 40% of its natural gas, 25% of its oil, and 45% of its coal.

More than 100 days after the invasion began, many European countries, such as Germany, Italy, the Netherlands, and Japan, still paid Russia for fossil fuels.

Meanwhile, China has become the largest buyer of Russian oil, surpassing Germany. They have bought $12.6 billion worth of oil since the war began. It has also been reported that Beijing opened discussions with Moscow to purchase additional oil supplies, which signifies that China was strengthening its energy ties with Russia as the country struggled to offload its oil amid the sanctions.

India has also increased their spending by negotiating lower prices, as low as $70 a barrel.

The Russian military is estimated to be spending anywhere from $100 million to several hundred million daily for the war against Ukraine. At a minimum, the war costs $3 billion a month, or about $10 billion in three months.

On the other hand, Russia is said to have earned about $13 billion from energy exports alone in the first 100 days of the war, which translates to about $12 billion per day, more than the cost of the war. (According to CREA, a Finnish think tank.)

Despite the decline in total exports, the unprecedented rise in international market prices is a tailwind.

According to Bloomberg, Russian corporate profits have surged 25%.

The countries’ GDP results were out in early August, and the economy shrank 4 percent from April through June YoY. 

So the economy seems to be contracting, but it is not as drastic as people initially believed.

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Or is the Russian government cherry-picking data?

Is the situation a lot worse than people think? Yale professor Jeffrey Sonnenfeld specifies that the mainstream media miss key points. 

Key Point 1: Russian imports have collapsed by over 50 percent. 

It is assumed that Russia imports products from Asia, replacing their lost products from Western countries. However, according to the Chinese General Administration of Customs, Chinese exports to Russia collapsed by more than 50%.

Key Point 2: Russian domestic consumption is declining.

The Russian government reports a plateau in inflation as of late.

However, multiple data points imply that domestic consumption is decreasing.

• Foreign car sales in Russia fell by an average of 95% across significant car companies.

• Consumer spending and retail sales data dropped 20% YoY

• E-Commerce sales within Yandex have dropped.

Youtuber “Inside Russia” gives you an unfiltered look at the empty stores in Russia after the sanctions.

Key Point 3: There is high unemployment

Over 1,000 companies retreated from Russia and are estimated to have reduced 5 million jobs from the Russian workforce.

This plight equates to three decades’ worth of foreign investment disappearing. So how can the Russian economy be thriving?

Key Point 4: Russia is running on a budget deficit and needs to use its rainy day funds.

Russia is currently running a 2% budget deficit this year. The main reason is the increased military spending, and he has to access his rainy day funds. This is where the sanctions prove effective, as Putin cannot access $300 billion of foreign exchange reserves.

Nevertheless, the situation is opaque, and it is challenging to grasp the reality of the Russian economy.

However, regardless of the situation, the key differentiator is whether or not Europe can reduce its dependence on Russia. If Europe is not a buyer, China and India probably cannot cover the unsold supply, leading to a severe collapse in Russia.

So the question remains, can the EU stop importing natural gas from Russia?

It is difficult to generalize about the EU, as the dependence on Russian gas varies heavily by country.

For instance, Eastern and Central European nations are significantly more dependent than Western countries. However, the whole union needs a collective effort if the aim is to ban imports of Russian oil and gas.

There have been some developments, but it is questionable whether they will be effective.

Countries like Germany have looked at alternative energy resources to decrease their dependency on Russia. They have restored 16 of its coal power plants, calling it a “necessary but painful move” to curb gas flows from Russia.

Furthermore, German chancellor Scholz made a U-Turn on the politically charged nuclear energy source, extending the lifetime of the 3 remaining nuclear power plants. As a result, German sentiment toward nuclear has drastically changed.

In July 2022, Algeria struck a multi-party deal with TotalEnergies (France), Eni SpA (Italy), and Occidental Petroleum (US) to develop the Berkine basin to raise the natural gas supply.

But infrastructure plans require time, and the short-term situation is deeply unsettling.

What to look forward to towards the end of the year.

In the coming weeks, EU gas demand will spike due to the cold winter, when heating usage increases.

In other words, winter is the time for the EU to become most dependent on Russia.

Russia can use the EU’s vulnerability to this is the time when Russia can confront the EU and other Western countries by flirting with a potential “gas supply cutoff,” which could cripple the EU.

If Russia has the war chest to continue the war for several months, even if revenues from gas are halted, we may see some hard negations.

However, if Russia’s finances are slim to none in the winter, Russia will probably try to squeeze every dollar from the EU. At this point, we may be able to see who has the upper hand. We will see how effective the sanctions are when we see how Russia moves in the winter.

If the EU can figure its supply out and help with the energy crisis, it might be the crucial step we need for a ceasefire.

Furthermore, with the EU solving its energy dependence, the energy crisis will cool off, and we may get low energy prices. Hence, we may see signs of disinflation next year. Just imagine what that CPI print will do to the market!

Fun Fact about Russia (Courtesy of AI)

Despite its size, Russia only has 11 time zones. When it was first established in 1918, the country had 23 time zones, but this was reduced to 11 in 2010. This might not seem like much of a fun fact, but it’s quite interesting when you consider the history behind it. The 23 time zones were originally created to help improve railway schedules, but they quickly became a source of confusion and chaos. In one famous incident, a train carrying Vladimir Lenin arrived at its destination an entire day late because the engineer had misunderstood the time zone changes. As a result, the decision was made to reduce the number of time zones, making it easier for people to keep track of time across the vast country.

Is it true? I don’t know, but it certainly is interesting. Try giving AI your prompt for free here!

The following article has been written in collaboration with a colleague living in Algeria to share her experiences and how she tries to navigate living in an inflated and unstable government.

Algeria in the Headlines

Today’s post will shine the spotlight on Algeria.

I think you have seen Algeria more in the headlines compared to previous years.

The reason is simple: Algeria, being in the footsteps of Europe, could play a pivotal role in the European energy crisis triggered by Russia’s invasion. 

Algeria has one of the largest natural gas reserves (11th) and is a major global supplier.

Hence, many European leaders are trying to mend ties with the once isolated country.

This year alone, the below leaders have visited Algeria:

• Italian Prime Minister Mario Draghi

• Venezuelan President Nicolas Maduro

• Saudi Crown Prince Mohammed bin Salman

• Foreign Minister of Portugal, Russia, and USA (first visit by a US secretary of state since 2014)

And finally, the Prime Minister of France Macron has decided to visit Algeria after 5 years. Actually, Algeria and France have a very complicated past. Some French people still see Algeria as a part of France (they call it “la France d’outre-mer”), and Macron himself has made very controversial statements. For example, he allegedly questioned whether Algeria existed as a country before the French invasion and accused them of strengthening "hatred towards France."

It is ironic because iconic French football superstars like Zidane and Benzema have Muslim Algerian backgrounds.

But dire situations call for immediate actions, and they don't have the luxury of fighting over pride. So in July 2022, Algeria struck a multi-party deal with TotalEnergies (France), Eni SpA (Italy), and Occidental Petroleum (US) to develop the Berkine basin to raise the natural gas supply.

While it is an important step to decrease dependence on Russian gas, the timeframe for the delivery is yet to be clarified.

But that is about the extent of the worldwide coverage of Algeria. No major publications report the domestic situation, so with the help of a female colleague living in Algeria, we can get a glimpse of daily life.

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Inflation in Algeria: A real threat

In the case of Algeria, inflation has been increasing in the last few years. Since the health and oil shocks of 2020, the attention of households, companies, and other institutions have been drawn to inflation and the instrument used to measure it (the Consumer Price Index - CPI -) because of the price movements of significant goods and services which are eroding their purchasing power day after day and depriving investors of any economic viability.

Indeed, purchasing power in Algeria has recently dropped after the inflation rate reached 11.7% in June 2022. Experts believe this increase is due to the devaluation of the Algerian dinar, economic stagnation due to the Corona pandemic, and high unemployment rates.

This year, the government started handing out stimulus checks to Algeria's unemployed youth from 19~40. If you are eligible, the government will give you 2/3 the minimum wage or about $100/month to help weather the economic crisis.

How inflation affected our daily life

Each family has different consumption habits: some own a car and eat meat, others only use public transport or are vegetarians. Yet, inflation in the country has influenced almost every aspect of daily life. This has resulted in a major shock to commodity markets, disrupting global trade, production, and consumption patterns that will likely keep prices high for years to come. Keep in mind that if prices rise faster than wages, the amount of goods and services a household can buy decreases.

Most impacted aspect

Consumers are experiencing higher prices on food, gasoline, rent, and many other everyday goods and services. I think the most affected aspect is definitely food! As an illustration, in Algeria, a cup of coffee that used to cost $2 now costs $4. Food costs have doubled, and we now have to reduce the quantity of all our meals due to the country's high prices and food shortage, especially milk and flour. 

Situation of family and friends

People whose wages and income cannot keep pace with inflation and those who are retired and living on a fixed income are penalized because the value of their savings and income falls rapidly in times of high inflation. So I can actually say that everyone is angry here. As a result, my family and friends are modifying their investment strategy by allocating capital to tangible assets like apartment buildings or hard currencies like gold.

Combatting inflation

Although inflation is a silent budget killer, we must not let it distract us. On the contrary, I think people need to dust themselves off and invest for the long term, as the situation could worsen in the next years! Personally, I started working online on different platforms to earn extra money. Cutting my expenses was also a big help!

Perspectives on future situations

Inflation rates may not matter much daily, but the long-term effects can be significant. I firmly believe people need to rethink their savings and spending choices. I am not very optimistic about the future, and I think people should prepare themselves for the worst!

Wait! Before you go, some fun facts about Algeria.

Before signing off, at least learn some facts about Algeria that you can use as an icebreaker at your next party.

Did you know...

1. Algeria is the largest country in Africa and the Mediterranean.

2. The capital of Algeria is Algiers, located on the Mediterranean coast.

3. Algeria is home to some of the oldest and biggest mosques in the world, including the Grande Moschea d'Algeria, which was built in 703 AD.

4. Over 80% of Algeria is desert.

5. Algeria's official language is Arabic, but French is also widely spoken due to the country's colonial history.

6. Algeria is known for producing dates and olives and its vast natural gas and oil reserves.

7. The Algerian flag is green and white with a red crescent and star in the center.

8. Camel rides are a popular tourist activity in Algeria's deserts.

9. In 2010, Algerian writer Ahlam Mosteghanemi became the first Arab author to win France's prestigious Prix Goncourt award for her novel Memories of the Flying Fish Girl.

FYI, the above fun facts were written by AI. Honestly, language AI has been freakishly good these days (especially with the advent of GPT-3). You can try your own prompts for free with this software. Try playing around!

Further Reading:

• Unemployed youth in Algeria to receive monthly pay

• Natural Gas Reserves by Country

• Algeria has been isolated for years. Now it’s making a shaky return to the world stage.

• French President Macron heads to Algeria to relaunch ties

Hi there, this is our weekly digest edition (shared every Wednesday).
It shares news & charts to shine more light on the current state of inflation worldwide. And generally, things that I found interesting.

Bullet points:

• Energy Crisis

  1. Germany has decided to keep the last three nuclear power plants to weather the energy crisis during the winter.

  2. European natural gas prices surged after Russia’s state-owned energy giant Gazprom said it would shut down Nord Stream 1.

  3. Xi Jinping will meet Saudi MBS for his first diplomatic trip since the pandemic.

  4. China to send troops to Russia for joint week-long military drills

  5. Why the Russian economy keeps beating expectations, Rubles at all-time highs, and Russia with high current account balances? What is really happening to Russia?

• Food Crisis

  1. Food prices have come down for the first time in months; can we expect lower food prices to continue?

  2. India May Import Wheat in Blow to Modi Goal of Feeding World

• Other Current Affairs

  1. Pakistan Keeps Key Rate Steady Amid Easing Funding Crunch

  2. Leaders of the US, UK, France, and Germany discuss Iran nuclear deal (Al Jazeera)

  3. Shanghai to LA freight costs are declining (Furniture Today)

• Business

  1. Saudi Aramco’s net profits are larger than Meta, Apple, Microsoft, and Tesla combined.

  2. Founder of WeWork, Adam Neumann, has returned with a $1bn valuation for his new Venture: “Flow.” It is a residential concept of WeWork, and he has purchased 3,000 units. TBH, I quite like him as a founder

  3. Popular Manga App Seeks 2023 IPO in Tokyo at $6 Billion Value. Why Tokyo? And it is one of the largest IPOs in this downturn. So let’s see what happens.

  4. The Crypto Geniuses Who Vaporized a Trillion Dollars

• Some Fun

  1. Singapore will be the place with the most % of millionaires by 2030, surpassing the US.

  2. Japan’s Bid to Get Young to Drink More Meets Online Backlash

  3. Inflation Triggers Fried-Chicken Price War in South Korea. I hope this isn’t a worldwide phenomenon

  4. Usain Bolt Files for Trademarks to Protect His Victory Pose

➤If you don’t have a Medium account, sign up here. You can read articles for 17cents a day, and it will be great help for me.

Charts/Snapshots

(Original sources/authors are all in the graphs: Financial Times, Chartr, Bloomberg)

Inflation is highest in Latin America, Eastern Europe, and South Asia. However, China and Japan seem to be cooling off.

Stagflation much?

Energy Prices are leading CPI.

Largest profits, EVER for any company. It’s unfathomable.

WeCrashed is a great show if you haven’t watched it.

China’s housing market has declined for the first time since 2015.

And US Housing markets slowing down, too

European gas prices are back to all-time highs.

The IMF recently released a gloomy report on the projection of the global economy.

Their April edition was already grim, but with how the current affairs unfolded, IMF decreased its baseline projections.

You can read the full report here.

Although the IMF has made a couple of scenarios and predictions of what to expect next, the future remains highly unpredictable.

2 key questions arise when thinking about what to expect next:

1. How sticky is inflation, and how much would it cost (interest rate hikes) to reduce inflation

2. If the interest rates go up, how much would the economy contract?

Let’s look at what the IMF is projecting about the global economy and what we can expect in the future.

Primary Projections for the Global Economy.

The worldwide economy is anticipated to grow more slowly than previously predicted, with negative risks taking precedence. These include food costs, oil prices, and interest rates spiking in an atmosphere of financial market turmoil due to inflationary pressures.

• It was forecasted that growth would decelerate from 6.1 percent last year to 3.2 percent in 2022, but this was 0.4 percentage points lower than what was reported in the April edition of the World Economic Outlook.

• Global inflation is rising because of food and energy prices and continuing supply and demand problems. This year, it is expected to be 6.6% in developed countries and 9.5% in developing countries. These numbers are revised upwards from the previous estimates by 0.9 and 0.8 percentage points, respectively.

• Disinflationary monetary policy is expected to cause the global economy to grow by just 2.9% in 2023.

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Factors Contributing to the Gloomy Global Economic Situation

• Global Economic Slowdown: The global economy has slowed down, which has led to a decrease in business activity. This has been made worse by political instability and conflict.

• Global Trade: This is another reason the global economy is having problems. Trade volumes have continued to decline since 2022. This trend started because of the United States-China trade war that happened in 2019.

• Global Interest Rates: There is less money circulating within countries’ borders. As a result, there will be more demand for capital than the available supply. Hence, interest rates will go up. However, this might not be enough for some companies who need access to credit so they can continue operating without going bankrupt.

• Global Inflation: The rates have skyrocketed due to continued economic growth stagnation in both developed and developing countries. This can be mainly attributed because most central banks’ currencies weakening against foreign currencies such as the US dollar (USD) by using monetary policy tools, including increasing interest rates or devaluing their currencies.

• China’s Economic Slowdown: In addition, China’s economy has slowed down significantly since 2022 due to its continuous trade war with the United States and other problems such as COVID -19, declining productivity levels, increased debt levels, and a real estate market crash.

• Global Unemployment: The global unemployment rate has risen to its all-time high of 7.8% in 2022. This can be attributed primarily to job losses during the CoVID — 19 pandemic and an increase in labor force participation by younger people who were not previously looking for work. Although the US paints a different circumstance, global unemployment is hurting.

• The Russia — Ukraine War: The United States and European Union (EU) placed economic sanctions on Russia. These sanctions have dramatically slowed economic growth rates within both countries and put pressure on their currencies. The overall outcome has also affected the global market since Russia is a major exporter of petroleum products and Ukraine is a major wheat exporter.

• The Global Government Debt: The debt has risen to unprecedented levels in recent years. In 2022, the United States had a national debt of $20 trillion, or 104% of GDP. But developing countries are also rising to unprecedented levels. The Institute of International Finance reports that global debt reached a record high of $303 trillion in 2021. According to the IMF, this represents the biggest one-year debt surge since World War II.

The Countries Thriving and Declining from the Current Economic Situation.

Developing countries, especially in Africa, have been hit the hardest by the current economic situation. The cost of essential food commodities has risen, making inflation a considerable problem. Their governments are less resilient to the sudden spikes and volatility of the financial markets. Countries in Africa are called “hunger hotspots,” which you can read more in detail in our previous post.

The countries that are declining from the current economic situation include:

Russia and Ukraine. After the Russian military invaded Ukraine several months ago, Russia has been hit hard by sanctions imposed by Western powers such as Britain, France, and Germany.

On the other hand, some countries are thriving from the current economic situation: Iran, Iraq, UAE, and countries in the Middle East. The oil-rich countries of the Middle East see a massive surge in revenue. This is due to their low cost of production compared to other countries, and with increased global demand for oil, they are reaping some profound benefits.

Solutions Proposed by the IMF

The economy is cyclical; it will recover and stabilize itself, but only if we make the right decisions. There are several solutions to the economic crisis as per the IMF.

First, bring inflation under control by tightening monetary policy, and this means raising interest rates to reduce inflationary pressures and ensure currency strength, giving people confidence in their savings.

Second, protect the most vulnerable parts of society by protecting rising debt levels for low-income households through social welfare programs like unemployment insurance or food stamps.

This will help sustain spending during challenging times while preventing a “downturn” into full-blown depression or recession due to a lack of consumer purchasing power, which could significantly hurt businessesz bottom line.

Third, the government should focus on increasing productivity to improve the economy’s growth potential, which requires putting resources into infrastructure, education, and innovative work.

A strong economy can adapt to change quickly, innovate new technologies and services, generate jobs for its citizens, and provide them with opportunities to earn higher wages.

Finally, if the government wants to create jobs, it should focus on creating jobs for those most likely to suffer from unemployment. These include older workers, low-skilled workers, and those with disabilities.

The government can do this by increasing the minimum wage, ensuring that people who have been out of work for a long time get retrained, investing in infrastructure projects, and providing tax incentives to companies that hire older workers.

Honestly, no one knows what will happen shortly or whether the governments can implement the above measures.

But I believe it boils down to 2 key questions:

1. How sticky is inflation, and how much would it cost (interest rate hikes) to reduce inflation

2. How much would the economy contract with the interest rate hikes on the economy (new capital lending or existing debt levels)

1. How sticky is inflation?

The markets have been rallying as we saw a dip in the inflation rate or a negative MoM inflation rate. The consensus on Wall Street is that inflation will drop to 2 percent and stay there forever. The markets are pricing this scenario, and you see a consistent trend of predictions reaching this equilibrium.

However, what if we are in a different economy with a different nature? What if we keep printing 4~5% inflation for the next year? Then the FED has to increase rates even more, and there would be a considerable gap with the consensus estimates. Imagine how ugly the financial markets will be if this scenario persists.

2. The implications of the rate hikes

Rate hikes have a devastating impact on the current financial and debt market and also on the ability of new businesses and consumers to raise debt. Moreover, there have been concerning movements showing that rate hikes are already impacting markets.

2–1 The current consumer debt

According to the New York Fed, we are at unprecedented levels for consumer credit (mortgage, credit card loans, student debt loans, etc.) Some of these debts are lent at a variable rate, and when interest rates rise, the monthly payment increases. 

This could lead to a consumer credit crisis with foreclosures and delinquencies. Although we are still at low levels, you can see a tick-up in delinquencies and foreclosures. It is something to watch in the future.

2–2 New Capital Lending

The housing affordability index, or the measure of how easy it is for a family making the median income to afford a mortgage on a home, has been decreasing substantially.

As new housing is less affordable, the construction industry has been showing signs of decline. China’s real estate market just popped, and it has had a devastating impact on both the economy and on human lives.

So, although the markets have been booming recently, we are still not out of the woods yet.

The IMF warns that the global economy is in a tough time, and things are likely to worsen before they get better. Although the exact extent of the damage is unknown, it is clear that the world is still facing significant challenges.

Governments must take action to protect their economies from further harm, and citizens must be prepared for difficult times ahead. We can only hope that the measures taken by governments and central banks will be enough to prevent a full-blown global recession.

The following article has been written in collaboration with a foreigner living in El Salvador to share his experiences and how he tries to navigate living in an inflated and unstable government.

I was born in 1987, and I am 35 years old. Most of my childhood was spent in the United States. For more than 10 years, I have lived in El Salvador with my family. I live with my wife and work for a company in the United States from my country.

What was the situation in El Salvador before cryptocurrencies?

Before cryptocurrencies, only the dollar was used as the official currency. In the years before 2019, two government parties were in the majority in the votes, but neither party improved the situation in El Salvador. Both political parties have been accused of dealing with the gangs.

On June 1, 2019, Nayib Bukele won the elections, representing his political party Nuevas Ideas (New Ideas). With this political change, a new era arises in the country, in which projects that previous governments had completely abandoned begin to continue. He also started new projects, one of which was making Bitcoin legal tender.

How was the transition to cryptocurrencies?

At first, many people started to strike against this new law that added Bitcoin as legal currency. Many news outlets interviewed regular people demonstrating.

One of the questions that were commonly asked was: “Why would you not like Bitcoin in El Salvador?” Many people on strike replied that they didn’t know what Bitcoin was.

Sometime later, investigations were carried out, and it was found that many people who made these demonstrations had received a payment to go and have Anti-Bitcoin posters in their hands.

When Bitcoin became legal tender, a special wallet called Chivo was created to keep Bitcoin in the economy. The government gave away $30 to everyone who registered with their ID. Many people criticized this, but currently, the application has about 3 million registered users, almost half of the population.

Want to hear personal accounts of people going through the inflation crisis? Please sign for our newsletter to support our writers from all over the world. It is free!

How are the people in El Salvador affected by the crash of Bitcoin?

One of the characteristics of the Chivo wallet is that Bitcoins and Dollars can be stored and used at the same time. The government added this flexibility so they don’t have to force everyone to invest in Bitcoin and thus lose their money.

In addition, the transactions can be made in Dollars or Bitcoins, and you can also configure which currency you want to receive transactions.

Many people had one of the main complaints that the president bought the “dip.” This term refers to buying a lot of cryptocurrencies when their value is very low in order to make more money when their value returns to a high point. In May 2022, Nayib Bukele bought 500 Bitcoins when the price was worth $30,744.

Then, by the end of June, the value of Bitcoin had dropped to $19,000 per coin. When Bitcoin had this value, Nayib Bukete made a Twit announcing that he had bought 80 more Bitcoins, at $19,000 each. Many people criticized this move yet again.

But at the beginning of August, Bitcoin rose to around $24,000. This somewhat calmed the lousy view of Nayib Bukele’s purchases of Bitcoins. But, the critics of the opposite political parties relentlessly complain.

But, it should be mentioned that these losses have not affected the El Salvadoran people. Nayib’s government continues to create projects such as hospitals despite these Bitcoin losses. The only people who have lost money are those who had their own money invested in Bitcoin.

Did you make money or lose money?

I haven’t lost any money as I don’t currently invest in Bitcoin. Many people think that creating a wallet that facilitates the investment in Bitcoin will make an entire country invest its money. But, I’m sure that most people in El Salvador don’t invest any of their money in Bitcoin.

Only 14% of El Salvador’s businesses have used bitcoin for transactions since it was launched in September, according to a March poll by the country’s Chamber of Commerce, and only 3% of those surveyed said they saw any potential commercial value.

First, many people in El Salvador don’t have enough resources to put money into Bitcoin and start investing. Another reason is that many people are not expert investors, and many decide not to risk their money.

Citizens took the $30 for the Chivo wallet but had not invested any more or less. That is why most citizens in El Salvador were not affected by the fall of Bitcoin.

The global food crisis is a critical issue that we cannot afford to ignore. 

The global supply of wheat, maize, and rice stocks is at historic lows as the supply chain has been disrupted. As a result, the oil and grain prices have become volatile and have skyrocketed over the past few months.

More and more people are going hungry daily, and many countries struggle to provide their citizens with enough food. 

The countries that are most impacted by hunger are those that are low-income and have the poorest people. The United Nations calls these places "hunger hotspots." It is not surprising that most wars lead to the poor taking the brunt of the damage.

They got money for wars but they can’t feed the poor — Tupac Shakur

Let’s examine why the food crisis worsened over 2022 and which countries are impacted most.

Why is the world hungry?

According to the UN, there are 4 factors that contribute to the world being hungry:

• Conflict: It is the biggest driver of hunger and economic catastrophe. 60% of the world’s people in famine live in areas afflicted by war and violence. Ukraine is one of the most significant conflicts in recent times that has exacerbated the situation.

• Climate shocks destroy lives, crops, and livelihoods. There have been droughts and weather shocks in recent years.

• COVID-19 Pandemic: People have lost jobs and incomes and are driving hunger to unprecedented levels.

• Costs: Rise in input costs, such as energy, lead to higher food costs, which in turn results in low-income regions being affected.

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Conflict: How did the Ukraine war make the food crisis worse?

You may have heard about the crisis in Ukraine, but you might not realize how severe it is. Russia and Ukraine are the world’s largest grain exporters, exporting almost all of the grain it produces. It accounts for about 27% of global wheat exports, according to the United Nations Food and Agriculture Organization (FAO).

Ukraine exports, on average, about 6 million tons of agri-commodities monthly to countries in the Middle East, Asia, and Africa.

Currently, only about 15 to 20 percent can be exported via rail, Danube river, and trucks (about 700,000 tons in April 2022 and nearly 1 million tons in May 2022).

Wheat prices have shot up because of the conflict, which is straining African countries like Egypt. At least 25 African countries import a third of their wheat from Russia and Ukraine. 15 of them import more than half from those two countries.

Can you believe this war's big impact on African nations?

In recent months there has been a concerted effort by world authorities at all levels (from federal ministry level down to local municipalities) working together with scientists, economists, and social workers focused on agriculture policy development aimed at increasing domestic crop yields through new methods to aid in the chain supply during this time.

Costs: Rising Energy and Input Costs

Some experts believe that the cost of agricultural inputs, such as fuel and fertilizer, has a more significant impact on food prices than the reduction in food exports from Russia and Ukraine.

This research paper estimates that the combination of agricultural input costs and food export restrictions could increase food costs by 60–100% in 2023 from 2021 levels. This could lead to the deaths of 400thousand–1 million people and the undernourishment of 60–110 million people.

Agricultural input costs have been increasing due to rising energy costs.

The electricity used for automated irrigation systems, the fuel used for farm equipment, and the various steps in food processing, packaging, transportation, and distribution all require energy.

Large amounts of indirect energy are consumed by using pesticides and mineral fertilizers. Fertilizer production relies heavily on natural gas as a feedstock.

“We are seeing record prices for every fertiliser type, which are all way above the previous highs in 2008. It’s very, very serious. People don’t realise that 50% of the world’s food relies on fertilisers.” — Julia Meehan, Head of Fertilizers, ICIS

Okay, but which countries are the most affected?

The Food and Agriculture Organization (FAO) of the United Nations and the World Food Program (WFP) caution that intense food insecurity is going to impact 20 nations; these countries are called “hunger hotspots.”

Ethiopia, Nigeria, South Sudan, and Yemen stay at the most elevated alert level from the past version of the FAO report. In their last accessible appraisals, these nations all had pieces of populaces projected to encounter starvation, malnutrition, and death.

Afghanistan, Haiti, Honduras, the Central African Republic, the Democratic Republic of the Congo, Sudan, the Syrian Arab Republic, Mali, Chad, and Mauritania remain nations of specific worry also as they have been affected by rising food prices, as mentioned in the past release of the FAO report.

Below is a graphical representation of the current situation for food insecurity trends in the hotspots of most significant concern.

Fortunately, Food Prices are Declining

In July, there was a significant drop in global food prices.

• Cereal prices decreased by 11.5% 

• Due in part to the response to the Russia-Ukraine grain deal and better harvests in the Northern Hemisphere, the price of wheat specifically dropped by 14.5%

• Vegetable oil prices decreased by 19.2 percent month over month, reaching a 10-month low, partly due to Indonesia’s large palm oil exports, falling crude oil prices, and a decline in sunflower oil demand.

• In light of declining demand, a weaker Brazilian real relative to the US dollar, and increased supply from Brazil and India, sugar prices fell by 3.8 percent to a five-month low.

• Prices for meat and dairy products fell by 0.5% and 2.5%, respectively.

Black Sea Export Ports

This can be attributed to the deal made by Russia and Ukraine to export grain from the black sea ports. The Russia-Ukraine value on grain exports is also because of seasonal availability from ongoing harvests in the northern hemisphere. They had delegates work out the deal to ease the two countries’ economic disarray.

Since the invasion, the first shipment of Ukrainian grain left the country’s southwestern port of Odesa in early August (26,000 tons of maize).

Sugar Price Index Fall

The Sugar Price Index fell by nearly four percent by July. The downward trend was influenced by indications of more significant exports and favorable production prospects in India, which has remedied the supply chain for the world.

But, We Can’t Be Optimistic

However, experts still worry that the Black Sea Export deals seem shaky. And many farmers in Ukraine and Russia can’t grow and sow seeds during a war.

Farmers and soldiers from Ukraine claim that the Russian military deliberately shoots ripe wheat and barley to start fires as a form of economic sabotage.

According to the USDA, Ukraine’s wheat exports is expected to fall by 50% in 2022–2023. Already, Ukraine had shipped nearly all of its exports for the marketing year as of May 2022. 

About 97 percent of Ukraine’s total wheat production is winter wheat, so Ukraine has to plant their wheat soon: between early September and mid-November. If the war is prolonged, the food crisis will continue for the world and especially, the “hunger hotspots.”

It is essential to be aware and wary that unstable regions will be most impacted. They have to invest in agriculture and building infrastructure that will allow them to produce their own food. But where will they get the capital at a time of macroeconomic financial distress?

An ideal world is where countries work together to ensure everyone can access food, regardless of location or economic status.

In reality, the rich countries have been able to protect themselves from the food crisis. For instance, according to the USDA, China acquired 50% of the world's wheat supply, 60% of rice, and 69% of corn in the first half of 2022. 

Proving once again that Tupac spits the truth:

They got money for wars, but they can’t feed the poor.

The following article has been written in collaboration with a foreigner living in Ecuador to share his experiences and how he tries to navigate living in an inflated and unstable government.

Rafael Correa, then-President of Ecuador, came on TV and said something I’ll never forget:

 “any foreigners caught in the protests will be promptly deported and barred entry into the country for life.” 

I was studying abroad in the capital, Quito, at the time. My house was about 15 minutes from the Presidential Palace he reported from.

He was trapped there by protesters–presumably not many foreigners.

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The Right to Protest is Granted ABSOLUTELY

You read about stuff like this in history books, and every once in a while, you see it on the news, but I never thought I’d come face to face with a despot or a tyrant–someone who would stifle another human being’s God-given right to protest or assemble.

It was surreal, watching this man on TV, knowing he was surrounded by a sea of people who wanted him gone, and he knew it. Yet, he looked straight at the camera unflinchingly and unapologetically.

The right to protest is enshrined in Ecuadorian law, but the government is not strangers to suppression of civil rights, and large swathes of the population support that suppression

Even my host dad, who’d be considered very affluent in the country, said, “if the protesters would just stop, Police wouldn’t have to resort to violence.” My face dropped. 

How could anything think that? These people are fighting for their very survival.

Class System

Ecuador has a class system that many Americans and other westerners wouldn’t understand. It’s not just a rich and poor dichotomy; it’s much more than that. 

There are the indigenous communities, who have been in Ecuador for centuries and live off the land, and there are middle-class families who own their homes and cars. 

They have enough money to take vacations and enjoy life without worrying about paying rent or bills. Then there are the upper-class families who are part of a very exclusive club.

There are many subclasses within those groups, but within the last one, there’s also the political elite. Most of them would be considered rich in any country, and many are educated at elite Universities abroad in Europe or the US.

Access to Information

The vast majority of people in the country are very poor, and the richest of the rich own everything. They own the property, they own the media, and they own import and export business. They make all the rules, and through the media, they dictate public opinion.

The elite’s hold on power seems to be very dependent on playing the classes off each other so that upper-middle-class men like my host dad feared the poor more than the rich. Maybe he thought he could be part of the elite one day, but I’ll never know what went through his head.

Either way, what Correa had was a monopoly on information, and what foreigners like me posed was a risk to that monopoly. He was afraid of foreign ideas leaking into public opinion and tainting his grasp on power. 

“You don’t understand South American problems because you’re not South American,” my “elite” friend would tell me.

The Rise of a Tyrant

The idea of a tyrant rising to power seemed so foreign to me, but now I see how it can happen. If a member of the political elite like Rafael Correa–who went to the University of Illinois–can convince the top 5% of the country that they’re better and more deserving than the bottom 95%, he can justify doing just about anything he wants. 

Of course, what he wanted to do at the time was hold on to power.

The following article has been written in collaboration with a 30-year-old mother living in Ghana to share her experiences and how she tries to navigate living in an inflated and unstable government.

Ghana’s economy suffers from excessive inflation, currency depreciation, rising unemployment, and other problems. Numerous demonstrations against the parliament have taken place from 2022/06 to lessen harsh economic regulations and political corruption.

The statistics are as below:

• Reported Inflation: 29.8% (06/22, Trading Economics)

• Government Debt (% GDP): 84.6% (2022, Bloomberg)

• Sovereign Debt Vulnerability Ranking: 2nd (2022, Bloomberg)

Likewise, the Ghanian Cedi has been reported to be one of the worst performing currencies in Africa.
'Ghana Cedi be worst performing currency among top Africa currencies'-BBC

Background

I am a 30-year-old stay-at-home mum of 2 living in Accra, Ghana. My husband works an 8 to 5 job which is the only source of income for the family. I would refer to us as a middle-income family. The increasing cost of living in the country keeps complicating our daily lives.

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Going Downhill

The rising inflation affects both individuals and businesses in Ghana. Ghana is an import-dependent economy as such, the worsening value of the Ghana cedis against the United States dollars (USD) has severely affected businesses, as more cedis is needed to be exchanged into dollars to import goods. The cedis depreciated from 7.7 to 8.3 against a dollar in a matter of days in July 2022.

Consequently, many businesses have downsized or even folded over the past few years.

Some friends have lost their jobs due to folding their places of work.

Effects of inflation

Fuel

We are most affected by the increasing fuel prices because this comes along with an increase in the prices of all other goods.

The hikes in fuel price are significant, as the price per liter of fuel pegged at 6.9 cedis in January 2022 has almost doubled in July 2022, selling at 11.95 cedis. I have had to limit my visits to my parents because of transport fares.

LPG; the main cooking fuel source, also keeps rising in price. Many have resorted to cheaper charcoal. Nonetheless, I am concerned about the environmental effects of charcoal and have tried my best to sustain my use of LPG.

Food

Most Ghanaian foods are made from maize or rice. Some are grown locally, and some are imported to support the growing demand due to population increase. However, the devaluation of the cedi against the USD, coupled with the increasing cost of fertilizers, has affected the prices of these items, whether locally produced or imported.

Pending now, the government has been subsidizing fertilizer prices for farmers since 2008, but the government has removed the subsidy, further exacerbating the problem.

Flour, sugar, eggs, and other essential food items have doubled or even tripled in price within this year alone.

Except for the kids, we adults mostly skip lunch. Also, due to high food prices, we sometimes have an unbalanced diet; forgoing protein or vegetables was not the case before.

Protests

Thousands of people were left stranded on December 6, 2021, as the Coalition of Commercial Transport Owners embarked on a sit-down strike to protest the hike in fuel prices.

Due to this strike, many had to walk to school or work that day. I was lucky to get an Uber to take my children to school, but I had to pay double the fare.

Also, on June 28 and 29, 2022, several Ghanaians joined a protest by a group named Arise Ghana and embarked on a 2-day protest against the high cost of living. This protest was marred in violence, leaving multiply injured.

Income

Incomes have remained stagnant though the price of everything is on the rise. Therefore, incomes have decreased in value.

Now the government has returned to IMF for support. This may come with conditionality which will not favor us as a nation.

Payment of utility bills, school fees, and all other things are done with our stagnant income. Over the past three months, my family has depended on our savings to supplement our household income. Therefore inflation has lowered our standard of life.

I have taken up online jobs to support the family, selling my skills as a freelance content writer and virtual assistant. I am still starting, and I am hopeful it will pay off. I am not giving up, and I think no one should.

How long will this last? Will we ever go back to our glory days? How long will we rely on foreign aid?

These are some questions that keep boggling my mind.

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By Ram

Backtested with Tesla, Shopify, NASDAQ, and S&P, and it works!

Investing during the inflationary period can be difficult, as the stock market is choppy. The S&P500 has returned a -13.6% and NASDAQ returned a -10.1% in the past year. Just when we thought there was doom in the stock market, the market has shown considerable strength recently. As a result, it is tough to predict the market's direction.

However, Chamath Palihapitiya, a legendary investor in Silicon Valley, has found a simple rule to gauge the best timing to buy and sell stocks. 

Chamath’s simple stock strategy is to purchase stocks when the VIX (Volatility Index) is above 30 and short the market when it is below 20. He revealed the system in a recent episode of the All-In Podcast, a must-watch if you guys have not watched it yet. 

It is systematically true that when the VIX is in the teens, you sell or short stocks. And when the VIX is in the 30s, you buy equity because you think it's the bottom. If you’ve been doing that for the past year you would have made a ton of money. — Chamath Palihapitiya, All-In Podcast 08/05/2022

Simply put, the strategy is to buy when everyone is freaking out and sell when everyone thinks the market is back. Sounds familiar? Yup, Warren Buffet said it as “be fearful when others are greedy.”

This article will look at the strategy and the potential returns you would have made if you followed this system.

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What is the VIX?

The volatility index, a well-known indicator of the implied volatility of S&P 500 index options, has a trademarked ticker symbol called the VIX. It is frequently referred to as the fear gauge or the fear index, which indicates how much the market anticipates stock market volatility over the coming 30 days.

The VIX is calculated using several factors, including the price of options on the S&P 500 index. The higher the price of those options, the greater the implied volatility and the higher the VIX. 

When markets are calm, the VIX will be low. When markets are volatile, the VIX will be high. Investors can use the VIX to gauge market sentiment and make investment decisions. For example, when the VIX is high, it may indicate that stocks are overvalued and that now is an excellent time to sell.

You can see that the VIX has been trending upwards since early this year and has crossed 30 a couple of times. In 2022, it happened 32 times. 

Recently with the market showing strength and investors gaining confidence, the VIX is approaching the high teens.

Back-testing the Strategy with S&P500

Let’s try the strategy with the S&P500 and keep it simple by narrowing the scope to 2022/01~.

The below graph shows the S&P500 stock price, with blue dots showing sell signals and red dots indicating buy signals.

The statistics of this strategy are staggering!

• Average buying price of S&P500 (red dots): $4,121.3

• Average selling price of S&P500 (blue dots): $4,664.1

• Average upside: 13.2%

I know what you are thinking: if you followed Chamath’s strategy, you could only sell on two timings: mid-February and mid-March.

Even if you did that, your return is 6.8%! You would not have lost money in this ridiculously choppy market. The results get more significant as the asset class becomes riskier.

Back-testing the Strategy with NASDAQ

Yet again, the chart looks great.

• Average buying price of NASDAQ (red dots): $12,445.2

• Average selling price of NASDAQ (blue dots): $14,896.8

• Average upside:19.7%

Even if sold twice in mid-February and mid-March, your return is 8.4%! Slightly higher than the S&P500. 

Back-testing the Strategy with Tesla

More volatility than the NASDAQ, but still, the chart looks impressive. 

• Average buying price of Tesla (red dots): $757.9

• Average selling price of Tesla (blue dots): $1,083.7

• Average upside:43.0%

Even if sold twice in mid-February and mid-March, your return is 26.5%. Not too shabby for a bear market.

Back-testing the Strategy with Shopify

Shopify has gone down from $130 to $40. A drop of about 75%, and still, if you had used this strategy, you would have been able to cut losses. 

• Average buying price of Shopify (red dots): $47.6

• Average selling price of Shopify (blue dots): $101.0

• Average upside:111.9%

Even if sold twice in mid-February and mid-March, your return is 14.3%. Can’t complain about a stock that has plunged about 3/4s. 

Chamath keeps the investing strategy as simple as they come. One indicator, one action. The VIX seems to be decreasing (currently at 21) and may hit the teens again. So perhaps it will be the time to shed a few shares off your portfolio.

Of course, no investing strategy is perfect, and some risks will always be involved. However, this strategy may help you to avoid some of the pitfalls that can occur during periods of inflation. Investing is never easy, but hopefully, this article has provided some helpful guidance. 

This is not financial advice. I am not a financial advisor, and you should do your research and not just listen to anyone on the internet. Nothing contained in this publication should be construed as investment advice.

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The United Nations population projections recently came out.

They forecasted that the world’s population would be 8 billion by November 2022 and grow to around 10.74 billion by 2100.

This forecast largely contradicts Elon Musk’s tweets about the greatest threat to humanity.

Does Elon have ground? Or is he just trying to justify the number of kids he has with multiple partners?

The UN Prospects

The UN Prospects for Population report is prepared based on the member states' information and other sources, including UN agencies, international organizations, and academic institutions.

The UN aims to provide a consistent set of assumptions and methods for estimating future population size and structure. Their first population projections were released in July 2002, including estimates for 2050–2100.

Projections for Population

The population projections provided by the UN are based on various past and present patterns, including demographic, economic, and social trends.

The projection scenarios range from high growth rates with an increase from today’s 7.7 billion people to 10 billion by 2100 (scenario A1) to meager growth rates with little change from today’s levels at 8 billion people throughout 2100 (scenario B1).

Estimates for the human population and growth rate:

• The United Nations estimates that by the end of 2022, there will be 8 billion people on Earth

• By 2050, the UN estimates that there will be 9.7 billion people on Earth

• By 2100, they predict there will be 10.4 billion people on Earth (a net gain of 900 million).

Therefore, the UN does not think our population will ever peak in the next 80 years.

The new report provides a vivid picture of how Africa’s and Asia’s populations will grow over time, with some countries experiencing significant increases in their youth populations (those aged 15 to 24) while others continue to see a decline or stagnation in this age group.

Just look at the light blue and pink lines! Their growth is astonishing.

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More than just birth rates

The main factors affecting population projections are fertility, mortality, and migration. Therefore, these three factors are usually combined in a model to calculate the number of births and deaths for each country.

Fertility Rates:
The average number of births per 1000 individuals per year is called the total fertility rate (TFR). A TFR of 2.1 children per woman is the replacement level needed to keep a population stable without migration or other factors influencing it.

In 1950 the fertility rate was at 5.0; by 2022, it has declined significantly to 2.3 and is expected to decline further to 2.1 by the year 2050.

It seems that the world will reach in conjunction with high-income countries.

However, this is the data that seems to be contradicting Elon’s thinking. If Japan, Spain, Italy, or South Korea are as low as 1.3 births per woman, why should we estimate that the fertility rate will not drop even further?

China is lower at 1.1 births per woman! If birth rates decline even further, it is correct to think that the population will collapse.

Mortality Rates:

Mortality rates measure how many people die per thousand individuals in a given year; this means that mortality rate directly affects both birth rate (because more babies will be born if fewer older people die) and age structure (because it determines where those babies come from).

If there are more elderly living past 65 years old, then we see an increase in life expectancy at birth. According to the report, the mortality rate is likely to go up from 67 million annual deaths to about 97 million annual deaths by 2050.

Migration:

Worldwide migration has become a significant part of populace change in some areas. 

During 1980–2000, population increase in high-salary nations was mostly because of the standard increment rather than migration(104 million).

For high-salary nations between 2000 and 2020, the commitment of global migration to populace development (net inflow of 80.5 million) surpassed the equilibrium of births over passings (66.2 million).

For the following couple of years, migration will be the sole driver of populace development in high-income nations, as the number of passings will logically surpass the number of births.

High-income countries need migration!

Which Countries are Growing?

Despite the population growth, only a few nations are expected to shoulder the increase over the next 40 years:

India, Pakistan, Nigeria, D.R Congo, Egypt, Tanzania, Ethiopia, and Philippines

These 3 nations are projected to add more than a billion people.

• India is projected to add 700 million people

• Philippines should add 240 million more people

• Nigeria’s population will add 200 million more people

The UN projects that India will become the world’s most populous country by 2022, overtaking China which has held this position for more than 35 years.

Which Countries are Shrinking?

The majority of countries will see a decrease. Below are some of the countries that are expected to see their people shrink over the next seven years:

• China (300 million fewer people)

• Japan (23 million fewer people)

• Russia (22 million fewer people)

• Switzerland (7 million fewer people)

• Singapore (3 million fewer people)

• South Korea (1.9 million fewer people)

Other countries listed as shrinking include Taiwan, Norway and Sweden, Finland and Denmark, and Australia/New Zealand.

Implications 

The UN expects a world population of 10.4 billion by 2100, up from 7.9 billion today, but the report also says that “there is substantial uncertainty about the future course of demographic change.”

Any slight changes in the birth rate, fertility rate, and mortality rate bring considerable disparities in the population projections. So far, the UN still thinks we will have our population keep increasing, which poses two main risks.

• Overpopulation: This is one of the biggest threats to our planet. The more people there are, the more resources they use up and the more pollution they produce. This can lead to water scarcity and food scarcity. It also poses the threat of poverty since a rise in population results in several problems such as unemployment and inflation. 

• Climate Change: Climate change has its roots in human activities like burning fossil fuels or deforestation (clearing land for agriculture).

But is this the case? 

These numbers have grave meaning because it skews the general population's mindset and policies. For example, Elon thinks we need more babies, while the consensus believes overpopulation is a serious problem, and people think they should adopt rather than give birth. 

What do you think of these numbers? Where do you stand on overpopulation? Do we seem to have a problem, or are we headed to underpopulation?

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The following article has been written in collaboration with a 23-year-old living in Kenya to share his experiences and how he tries to navigate living in an inflated and unstable government.

Inflation Rates in Kenya

The inflation rate in Kenya is 8.3% and has been increasing since the beginning of this year.

When I was in high school, I recall my parents always saying, “Back in our day…” they’d tell me stories about how they paid pennies for things like a gallon of gas or milk. They also seemed to live by the belief that everything was cheaper back then and life was simpler.

Now that I’m out of college, 23 years of age, and staying on my own, I need to buy my food, gas, clothes, electronics, and other necessities; I realize that things are not as cheap as my parents said were, and some things are more expensive.

For example, let’s say milk. In high school, a liter of milk costs around 55 Kenyan Shillings, and today the national average is about 110 Kenyan shillings, double the price of when I was in high school.

I also have noticed this inflation with clothing items, things like pants and shirts used to cost around 200 Kenyan Shillings in high school, but now they can be over 500 Kenyan Shillings depending on where you shop.

The inflation rate has had me adjust some of my lifestyle norms to conform to the harsh economic times. For instance, now I buy food commodities at wholesale shops at a cheaper rate instead of the supermarkets, where the prices have skyrocketed exponentially, especially over the last couple of months.

In addition, I now also have to buy second-hand clothes, locally known as “mitumba” in the local dialect. Since affording new clothes from shops is difficult due to the rise in prices.

Transportation to various places has also been affected and my daily transportation costs are higher. The public transportation stakeholders have hiked the prices, saying it is due to the rise in fuel prices. In truth, no one can blame them since they are also in business and trying to make a living.

The war between Ukraine and Russia has hurt the current world economic situation and has also had a detrimental effect on Kenya, especially in essential food prices like wheat and cooking oil prices have skyrocketed, making life very difficult.

Also, here in Kenya, we are in the election period. For some reason that many other Kenyans and I are unaware of, prices of goods and commodities always seem to rise above the usual period during the election, which occurs every five years.

The State of My Friends and Family

My friends and family are not immune to the harsh economic situation; they are also victims of the rises in prices of goods and services they buy; hence this causes a decrease in their purchasing power.

Reduced Purchasing Power.

Purchasing power is the capacity to purchase labor and products, and this can be measured in terms of what you can buy with $1, or it can be counted as a percentage increase or decrease over time. For example, the current exchange rate for the US dollar to Kenyan Shilling is $1 = 118 Kenyan Shillings.

The current inflation in Kenya has decreased purchasing power because it reduces the number of goods and services you can afford with your money.

When the price of something goes up, but your paycheck doesn’t go up at all, then this means that your salary will become worth less over time because there’s not enough money in your pocket to pay for everything you need to pay for now and later on down the road (like retirement).

Reduced Profit Margin.

Reduction in the profit margin is one of the adverse impacts of inflation on a country, and my friends and family are also facing this. This reduction in profit margin is due to an increase in the cost of production, which may result from an increase in the price of inputs such as labor and raw materials.

An increase in the cost of production is a result of an increase in input costs or decrease in productivity, or both. This increment can be ascribed to more significant costs for labor and raw materials (as they are primary inputs), resulting from an accelerated rate of inflation that has occurred over time. Thus some of my friends and family’s businesses are not doing well.

Despite everything, my friends and family can still cope with the current situation. Inflation impacts everyone, even if you don’t realize it. Inflation has affected my life and my family and friends in many ways, including your financial stability, purchasing power, and overall happiness.

Ways of Combating Inflation

All I can do now to help combat inflation in Kenya is to perform my duties as a patriotic citizen by paying my taxes, enabling the government to get revenue, and providing the ordinary people with essential services and commodities during these difficult times.

Since it is during the election period in the country, and without a doubt, we as Kenyans will elect a new government. Hopefully, the government that comes into power puts the matter of regulating inflation as one of its top priorities.

People have it tough with the harsh economic times, and it would mean a lot if the incoming government could deal with this issue and formulate a long-lasting solution.

I would also like to urge the Kenyan government to update some policies they use to combat the current economic crisis in the country to be able to deal with inflation. One of these policies is:

Monetary policy.

This involves the manipulation of interest rates and money supply levels to stabilize inflation rates and promote economic growth. The Kenyan Central Bank introduced a new monetary policy framework in 2012. It controls inflation by keeping short-term interest rates at 8% while reducing long-term interest rates through a program called “tied lending” (where commercial banks have to lend specific amounts of money at low-interest rates).

So far, this strategy has successfully reduced inflation from an average annual rate of 10% between 2007 and 2011 to 6% between 2012 and 2017. However, it has also led to slower economic growth and higher unemployment rates among Kenyans with limited access to credit due to their lack of collateral assets like land or buildings needed for collateralized loans from commercial banks.

Conclusion

I have nothing left but to trust that things will turn out okay shortly, especially now that we are very nearly choosing new leaders for the government. I remain optimistic that they will be able to change the current situation for myself and many other Kenyans.

Inflation is not suitable for the economy, affecting people in many ways and making their lives difficult. It is a hidden tax that hurts everyone long-term by making things more expensive and reducing purchasing power.

Inflation is a big problem in Kenya and around the world, but it can be solved with better economic policies and control over how much money is available to buy goods and services. The public authority needs to take care of this problem urgently.