alt-think.com

2021 Q1/Q2 Ukraine Newsletter

Apr
13

Dear Friends and Partners,

VI2 Partners is happy to share with you our recent newsletter on the most important developments in Ukraine against the backdrop of COVID-19 pandemic. 

Kindly check our new section on important laws to support investors in Ukraine.

Ukraine Newsletter

Please check our website  www.vi2partners.com for more information. 

Best regards

Dr. Marc-Milo Lube

Ukraine Newsletter Comments Off on 2021 Q1/Q2 Ukraine Newsletter

MAYDAY or HEYDAY in May?

Apr
12

Dear Friends,

“komm lieber Mai und mache die Bäume wieder grün” or in English “come, dear May, and turn the trees back green again” is a world-famous classical folk song from Mozart. While markets are fully embracing these spring feelings, we might soon enter into more of a Wagner’s Götterdämmerung scenario both in economic and political spheres. A truly dramatic scenery is evolving. Do you remember the times when fundamentals counted? When did you need to read a balance sheet to understand a business? When analysts were driving stock prices and not influencers? When people bought Krugerrands and not Dogcoins?

Welcome to a global economy driven by central bank steroids and magic fiscal spending mushrooms, where the Elons and Robin Hoods are creating stock market frenzies in epileptic trips, where interest rates are non-existent, strong inflation reserved for Turkey, an economy dominated by millions of legacy zombies and tech billionaires who start to make the Vatican look pale on their inquisition track record. Welcome to a world in which billionaires are made overnight and billions of hard workers have no chance to ever afford homeownership. The mother of all bubbles is expanding until it will explode in a non-woke cancel-culture cataclysm. The simple business rule is still (hopefully) holding: when the economic facts are engineered and bent to explain the euphoria, and the euphoria is not nurtured by the facts, the correction is close. And when the societal gap is too big and widening too fast, a paradigm shift is looming with the pendulum swinging to the opposite.

Be prepared for a hot May, and digest the following food for thought:

  1. The Global Economy in the Covid-19 Endgame

The global narrative and reason for hyper-bullish markets is a bet on a repeat of the golden 1920s after the end of the Spanish flu. Economies that are on a nitro-boost from big-time Government spending, cheap central bank money, huge and accelerated digitalization thanks to Covid, spending spree from consumers and corporations to catch up on the forced lock-down breaks, and a relief and freedom rally that joyful life is back after Covid restrictions. And of course, an inherent belief with market players that both central banks and key Governments cannot let markets go down and interest rates up for the sake of their very own balance sheets. A little party never hurt anybody! But watch out for persistent party poopers. The moment of truth will come soon and bring heyday or mayday in May. Out top-ranked party poopers are:

  • Covid Help Programs including generous subsidies and support payments, furlough schemes and insolvency protection are running out in parallel to the progress of the vaccination levels. This is nothing else than a fiscal tapering which will happen simultaneously in all major economies. Job markets and consumer spending might suffer more than expected.
  • The corporate real estate market is in for a major setback with high-street retail, hotels, and office space segments heading for revaluation. This might turn ugly and critical for over exposed lenders and funds and put severe pressure on the loan market.
  • The US China economic cold war is expanding. It might lead to further distortions of global value chains, and for sure result in price increases and reduced competition/productivity. Many players might also be forced into a “Us” or “Them” decision.
  • Corporate earnings might be worse than expected and the economic recovery slower than expected. Despite many positive signs, the world is far away from pre-corona output and consumption.
  • We are still waiting for the first real China recession, which will rattle the World, once it occurs, as more and more countries are over-dependent from the Chinese market.
  • And finally, the forgotten Brexit. While buses are burning again in Belfast, and trade relations between EU and US are down in double-digits, the new trade agreements of the UK have yet to materialize. The Tory dreams of a soft-power superpower might be short-lived with the narcissist boy group from Trump to Bolsonaro out of office or reality check.
  1. The Potential Black Swans in May

While there is ample reason to believe in an ongoing party as into the beginning of a market downturn, it might be again the black swans forcing the hands and pockets of investors, governments and central banks. The new US administration will get seriously tested soon with an EU in complete disarray after a failed vaccine campaign, a lame-duck government in Germany, and humiliated by Russia and Turkey in foreign policy. 

  • Russia is saber rattling and turning up the heat on Ukraine with massive military pressure at its border. Escalation can happen any day. Belorussia, Armenia, and Georgia will watch closely.
  • China is continuing to build up its military presence and pressure in the South China Sea, Taiwan is still on the wish list. Neighbours get more and more nervous.
  • Iran/US talks have restarted around the JCPOA revival. Serious sabotage to these talks can be expected from Israel (as seen in Natanz yesterday), Saudi Arabia, and the Republicans. Revenge actions will swiftly follow and we have lately seen in the Suez canal the consequences of blocked waterways.
  • A US cyber-attack and retaliation for Russia’s involvement in the US elections and SolarWinds intrusion is imminent. Depending on the target area and scale, there is a clear potential for escalation.
  • The golden capitalist era comes to an end. Reaganomics has brought us an incredible shift of power and wealth from citizens and governments to corporates and the top 1 % of wealth holders. The Biden administration is leading the world to a major paradigm shift. Taxes will rise and significantly, both for corporations and individuals on value gains, high personal income, and wealth. This will ultimately lead to lower corporate earnings, positive interest rates, and higher inflation. And a full revaluation of all asset classes. Turmoil insight.
  • And what about Covid? Thanks to failed containment in the beginning and the current egoistic national vaccination strategies, the World has created a perfect breeding and mutation ground for the virus. It has yet to be seen, whether the current vaccines will be stronger and smarter than the mutation dynamics of the virus, and there could still be a rough awakening in the winter season 2021/22.
  1. Will FOMO turn into GOMO?

As in politics, markets are also experiencing their post-truth investment reality. Trend and mood-driven markets, that are much more impacted by influencers than fundamentals. Events are digested instantly and compressed in very short time windows. In this environment, forecasts are naturally suicidal. Mayday or Heyday?

We believe in strong long-term growth, driven by technology, breakthroughs in health and aging solutions, an eco-boom, the restructuring of global value chains back to the consumer, and a redistribution of wealth to the middle classes. But we also believe, that a market correction and catharsis is over-due and might show up in May, with markets having fully anticipated and priced in an enormous post-covid boom of major economies, and the full defeat of covid. This mindset is very sensitive to any setback. The time for Zombies might run out.

So, if you are FOMO on booming stock markets, cryptos, or other assets, you might soon be GOMO.

And, if you have gained a lot in the covid crisis, we would definitely recommend going for the extra hedge.

Watch out for May. Stay liquid.

Best

Marc

State of the Nation Comments Off on MAYDAY or HEYDAY in May?

2021: Predicting the Unpredictable

Jan
03

Dear all,

what a most astonishing year is behind us, and what an exciting one has started. Deaf from all the corona noise around us, distorted from the constant media attention on Trump tantrums, and feeling imprisoned from the restrictions and admonishments by our governments with a profound impact on our daily routines, we tend to lose focus, while the financial markets are telling us, that all is great, and the party has just started. It is still unclear who will have to shoulder the corona bill which handed out trillions of helicopter dollars to citizens and corporations, the famous bazooka but this time on steroids, and loaded with the global “whatever it takes” bullets. All this additional cash will stay in the system, waiting to fuel an economic boom once the World will resume the play mode after the forced corona break, but will we really just go back to the past normal? Does it not already feel like nostalgia seeing movies where people party in restaurants without masks or travel around the world, and how banal is it to go to an office for work?

If 2020 was the year of pandemic firefighting, 2021 will show whether we (or who) will rise from ashes or whether we will simply rebuild old legacies. The world and all the main players and everyone will stand in front of a crossroad leading to a rapid boom or a descent into a painful recession. Arguments can be found for both directions, and luckily, we are not yet in auto-drive mode. While we tend to lean to the optimistic scenario, it might be wishful thinking too long for a 1920s style revival pushed by the astrological start of the Age of Aquarius or the ox taking over from the infamous pandemic rat with the Chinese New Year.

We have decided to abstain from bone reading and predicting the unpredictable, but to look into some of the factors and developments to watch out for in 2021, the factors that will play a decisive role in the global well-being:

  • New Marx on the Block: very soon in 2021 discussions will start who will have to shoulder the corona bill, especially in the case that the economy turns sour and we will no fast outgrow the additional pandemic debt burden. The current spending spree of politicians will be difficult to reign in, so governments’ share in spending will stay high, in some countries above 50% of GDP. Together with the rapid redistribution and concentration of global wealth in the hands of a combination of old-boys networks and tech billionaires, the nasty erosion of the middle classes, and the growing barrier for the many to afford homeownership, we have a perfect cocktail for new socialism to rise with less freedom for the individual, intense government control and unseen levels of taxation. The targets are already clear: real estate, big tech, wealth and inheritance, CO2, imports. Luckily, so far there is no charismatic leader of the radical left around yet but watch out for the New Marx to come.

  • Bad Debt Avalanche: In 2020 government aid programs, furlough schemes and state-ordered bankruptcy breaks were holding back a large wave of corporate insolvencies. All of these barriers will end in the late spring of this year. Next to the real business hit that many companies had to take, especially in the services industries, the pandemic led to turbocharged changes in industrial value chains, consumption patterns, and the digitalization of service offerings. Weak and slow competitors, zombie corporations that could survive so far in a negative interest rate environment will go down in a necessary wash-out of evolution, but the sheer amount will drive the financial system to its limits. This is in our view not sufficiently accounted for in current market sentiment and the existing amounts and level of corporate borrowing has all the potential to trigger a bad debt avalanche. In our view the biggest threat to economic development in the coming 12 months. Watch out for banks and lenders, commercial real estate developers and investors in retail/office/hotel, travel, and tourism, entertainment, on-premises retail, emerging markets.

  • Techfrenzy: Rocket fuelled by a huge global liquidity surplus, accelerated digitalization in sectors from education to sports and the zooming of the professional work environment, and driven by a new generation of entrepreneurs, we might experience a huge wave of innovation and another shift of big money from old industries into technology. Academic and school education that experienced only marginal changes in their processes and systems are prone to see tectonic shifts in business models, curricula, and access or participation modes. The re-inflamed blockchain and crypto boom might be a leading indicator for things to come.

  • Chinaphobia and the Wuhan Factor: For now, it looks like China is the big winner of the corona pandemic. First one out of the corona woods, infections under control, provider of support and vaccines to poor countries, and most important – economy already back on track; with Trump out of office, China is projected to become even faster and within this decade the economic leader of the world. But hold on. Will the rest of the world really just get back to normal and forget the virus lab in Wuhan. We don’t believe so. Once, the emergency state is passed, more citizens, states, and governments will want to investigate responsibilities and seek a scapegoat for the billions of dollars spent and apparent own mismanagement of the corona crisis. Combine this with a profound anti-China stance in the US, that will not pass away with the incoming Biden administration, but on the contrary, might be re-enforced by a joint US-EU axis. This axis will try to slow down China’s ascent, aggressively seek the truth on the virus origin, and ask for corona reparations. For sure, China’s appeal to the Western world has suffered.

  • Climate Change Cartel: One of the first executive acts of the Biden administration will be a reversal of Trump’s exit from the Paris accords on climate change. In order to cement the progress in the environment and climate-oriented processes, we expect the pendulum to massively swing in the opposite direction of Trumpism, leading to intense rules, regulation, and taxation regime with the objective to change profoundly and permanently corporate and consumer choices for the sake of the climate. The EU, which has just voted to put climate on the top of its seven-year planning period, will greet this political agenda with open doors. And this newly formed climate cartel might soon agree on new corporate reporting standards, auditing, enforcement, policing, and even spying. The times of pollution go easy are definitely gone.

  • RIP UN: Unfortunately, the UN bears more and more likeness to the League of Nations in the late 1920s. Ineffective, without impact, toothless, hugely politicized. From the covid crisis to the JCPOA on IRAN and Trump’s sanctions warfare on the world, and from climate change to the recent Karabakh conflict, the UN in 2020 had no say whatsoever in the resolution of any major global conflict. It is very unlikely that the UN will regain its post-WW2 position and influence. This unfortunately in a time of rising needs for conflict resolution and de-escalation.

  • The Empire Strikes Back: One of the most interesting things to watch in 2021 will be the US response to the SolarWinds hack into US federal systems and Microsoft by assumed Russian cyber forces. In order to stay credible in the global cyber battle, the US will need to show the strength of the force and this even publicly. We expect a massive cyber attack on Russia by the US and its five eyes allies in the coming months.
  • Game of Drones: The Karabakh conflict between Armenia and Azerbaijan has put the potential of drone and unmanned warfare into the spotlight beyond the known lethal surveillance and anti-terror operations of the US and Israel. Next to an unseen boom of the development and sale of weaponized drones and drone control systems, we expect this decade to be the final turning point from manned to un-manned military and lethal combat. The real-world Tony Starks (from Avengers) and their governments will hurry to develop, produce and market advanced drones, self-driving tanks and armored vehicles, underwater drones and androids, and the accompanying steering systems. An enormous industry on the rise. The succeeding nations might find themselves in similar strong political positions as the nuclear powers today.

Many additional and other things will be fruitfully watching this year, from the UK enjoying its new liberties as the not so hot single in the global village, the progress of the vegan food revolution, the post-Trump development of the GOP in the US, China’s military build-up or the development of the new halal-kosher friendship. Last but not least we will miss the Twitter tirades of @Potus, and it will be interesting to watch media outlets fill the sudden content vacuum. Luckily, there is hope for some political gossip in 2021: Paparazzi should most concentrate on a) Boris, as he needs to find a new best buddy and might soon post his profile in the political tinder game, b) on Ivanka preparing her senate run in Florida as NYC has turned sour on the Trumps and Kushners, c) on Vladimir’s successor following the granted lifetime immunity for himself and his friends and family (something Donald is craving for), and d) the inheritance battle in Germany to succeed Angela and become the most powerful leader in Europe.

We start this year with many positive vibes, hoping that the financial markets got it right, and see currently clearly more of the early 1920s than of 1929. But beware, we are also living through turbo times, so parties and hangovers might be time-wise closer tied to each other than ever before, and potential black swans there are many.

VI2 stands ready to support you and your organizations in profiting from these trends in 2021.

To all of you, a cheerful, successful, and healthy year 2021 with fewer masks, more freedom, and huge cashflows.

Very best,

Dr. Marc-Milo Lube

State of the Nation Comments Off on 2021: Predicting the Unpredictable

POTUS 45: Season 2 Cancelled

Nov
08

OMG. Four years of the White House show on steroids are coming to an end. No season 2, no prolongation. At least we are promised to have a spectacular last episode, a finale furioso with a crescendo of Presidential tantrums, pardons of criminal friends, calls to the arms of the Proud Boys, financial benefits for family and friends, humiliating firings, and an all-time high of a sitting US President arguing that a putsch might be reasonable to defend his stolen big win. The openly stated dream of installing the Trump dynasty for life in Washington following the shining example of the KIM dynasty in Pyongyang has to be put on the shoulders of the next generation.

For all of his personal defects, the one and only RealDonald will soon be missed, when the Gerontocracy has taken over. No more tweets in BOLD LETTERS, no scandalous press conferences, no mafia talk, no more love letters from the shady dictator club, no Trump merchandising, no more public shaming, no viral rants – and how will we miss the great nicknames. How boring will political life be without these big emotions and personal feuds? We will all feel like traveling back in time, twenty years or more, and like moving in slow motion.

And then the Schadenfreude. The bitter revenge of people who have been called morons, human scum, rats, and disgrace; or of countries labeled as shitholes, rapists, and others. No pity for the Narcissist-in-Chief, trapped in his “me, myself and I” corner. Yet, it is pitiful and sad for the great American nation. Once, the winds and waters of this ferocious election have calmed, the afterpains of malicious transfer of power have faded, and the battle cries of the Squad grow louder, we will be able to get a real picture of Trump’s legacy and the prospect of the Biden/Harris Presidency.

Trump Tribute

Thanks to his defects in character and hyper-charged ego, his joy in disruption and destruction, all real achievements of the Trump Presidency have been blurred by countless lies, exaggerations, and the immediate anti-allergic reactions of a hurt, offended and truly biased media world. Looking back one day in the not so distant future, we will have to pay tribute to the Trump Presidency among others for

  • Breaking up the Middle East deadlock and opening new chapters of peace between Israel and at least early movers in the Arabic world. Other leaders would have received the Noble Price of Peace for brokering this breakthrough;
  • Liberating economic forces and strengthening the US economy and business landscape with wide-ranging deregulation and tax decreasing efforts;
  • Questioning and partially reversing unchained globalization;
  • Establishing a conservative majority in the Supreme Court for the foreseeable future;
  • Taking on and challenging China, its military ambitions and unfair business practices like no other world leader dared to do;
  • Jolting the Europeans from their comfortable and everlasting political and strategic hibernation and forcing them to rethink their future priorities;
  • And probably most profoundly: making people interested in politics again through personalizing discussion, adding entertainment elements, polarizing topics, and destroying political correctness. Political debate has changed enormously, millions of people engaged in discussing the future of their country and constituency, historic voter turnout. Blind and deaf pollsters, who never understood how to model the power of emotions, will have to re-invent their methodologies.

The Rude Awakening of Biden/Harris

After the post-election euphoria and the celebrations in the streets are cleaned up, and with a challenging transition and handover of power digested, the Biden/Harris team will face a rude awakening to reality. Expectations of the radical left wing are high, spending desires unlimited while public accounts are empty, unpopular and large-scale tax increases will sour the party mood. All attention will be put on Senate elections in Georgia to conquer a majority and with it the political power for profound changes. Someone will need to carry McConnell and Pelosi out of their office to make space for younger and fresh politicians who can reboot bipartisan initiatives in Washington. International relations are in shatters and while the team will be met open-hearted and welcoming by all the leaders who had suffered from Trump’s bashing, the World has profoundly changed and will not give anything for granted to the US. The elections were a welcome distraction, yet there is a nasty and merciless pandemic raging with dark and depressing wintertime ahead. Political and economic consequences of this election will soon be seen, and we will have a clear picture after the first decisions on key Government positions and after determining Senate elections in January.

Challenging tasks and challenging times ahead. Expect a distribution of responsibilities with Joe Biden acting as Chief Healer and Kamala Harris as Chief Innovator. The new team deserves full of national and international support. The World needs a strong, prosperous, and reliable US to weather present and upcoming global turbulences.

For now, it is recommended to lean back and to enjoy the final episode of Trump leaving the White House. Be mild to Donald, he deserves more credit than he is currently given. And relax in the soothing effect of the new normalcy, which will hopefully bring down hate, aggression, and verbal abuse. I would take bets that Kamala Harris will be the first female President of the United States by 2022, preparing for re-election in 2024.

God bless the United States of America

State of the Nation Comments Off on POTUS 45: Season 2 Cancelled

#STOPTHESHITSHOW

Sep
30

Dear all!

The long awaited first Presidential debate is over. And that is already the best you can say about it. But what to expect from an old, angry liar fighting an old, tired and confused retiree?? A lot of commentators today mention that the real loser was the American people, the undecided voters, the people who do not know yet, whether to vote at all. That is of course intellectual bullshit.

The people always get the leaders they deserve and which system if not the American is scrutinizing its political candidates more intense and more in public than Uncle Sam? No. The two candidates have fought their way through the political system, publicly and in lengthy processes. Everything is known about them, their strengths and their weaknesses, their beauty and their ugliness. The candidates are the chosen banner leaders of their respective political camps. The American people cannot be the losers. 

The debate is a perfect reflection of the current mental and societal state of the United States, a nation in civil-war with itself. It is therefore no miracle, that polemics and propaganda are reigning the debate and not content and concepts.

Already the choice of topics shows us, that we should be prepared for four further years of US isolation and concentration on internal topics, the World will further suffer and grow more chaotic with the absence of US leadership on the international stage. The topics were set to give Trump the chance for laps of honorand to Biden the chance of putting his record in doubt. In reality, the content was boring, past oriented and meaningless for the future of America, in big parts simply irrelevant for a Presidential election. A pompous show of arrogance, anger, lies and accusations.

The debate circled around the supreme court nomination (useless, it is a done deal), Covid-19 measures (but more on past than on future policies), the economy (how to spend it), race and law enforcement (a populist pandora box opened), and election integrity (a campaign scam topic). You want to know, how the next President wants to contain the Chinese military in the Pacific and ensure that the US stays the #1 economic power, or how the World can stay peaceful with dysfunctional international organizations, alliances, and supranational bodies, how the US can counter the rapid monopolization of the IT, internet and entertainment world, or understand, how the money will be raised for paying off the ever-increasing debt mountain? Not the slightest indication on these topics during the debate. And the feeling grows, that one of the candidates simply does not care, and the other one is too tired and not up to the task.

The real and obvious loser from this debate is the political and media establishment. They finally harvest, what they have sowed. Over the last decade both political parties turned into election camps and lobbying swamps. The Democratic Party chose twice a candidate of the past instead of a young, future oriented and fresh leader, both times in a supposed no-balls strategy, which could prove to be deadly again. The GOP threw all standards of moral and integrity under the bus and followed a notorious liar, populist and egomaniac, against all inner convictions in many decisions and just to keep power in the Senate and to grab the power in the Supreme Court.

What a shame. A day of reckoning will come one day. The media have equally given up on content and fact-based reporting. They have become propaganda tools for the right and the left. The people who blame Fox should also blame CNN, NYT, WaPo, and others. Trump for once is not to be blamed. He has not created this arena, he was voted into office because of these developments. 

Now, the American people face a difficult choice between two evils. Result open, probably contested, the Proud Boys in stand-by, societal wounds wide open. Leader of the Free World no more. Other forces in the World will profit in any case from this phase of internal and external American soul search. Some will abuse potential turmoil and power vacuum after the US election and the foreseeable Covid-19 autumn/winter peak and hysteria for political and military gain. 

For the mental health of all of us, the coming debates should be canceled. The characters of the candidates are widely known, they have demonstrated in office for many years what they can do, and what they cannot do. Here is our voting recommendation: Whoever believes that the US needs further polarization to fulfill its soul searching and to find its place in a multipolar world, who appreciates Trump’s policies (and he did indeed get too little credit for many achievements and the execution of campaign promises) and political brutality and can live with his bloated ego: vote Trump. Whoever believes that the US needs societal healing and balancing to fulfill its soul searching, believes that leaders should have a minimum of integrity and honesty, that the US should play a significant role in the World beyond sanctioning the hell out of everybody else and can live with a (re)tired leader: vote Biden and hope for Kamala.  #stoptheshitshow

God bless America and all of us

Best, Marc

Dr. Marc-Milo Lube
Managing Partner

State of the Nation Comments Off on #STOPTHESHITSHOW

2020 Q3/Q4 UKRAINE NEWSLETTER

Sep
22

Dear Friends and Partners,

VI2 Partners is happy to share with you our recent newsletter on the most important developments in Ukraine against the backdrop of COVID-19 pandemic.

Kindly check our new section on some interesting key assets to be put up for auction by the State Property Fund of Ukraine.

Ukraine Newsletter

Please check our website  www.vi2partners.com for more information. 

Best

Dr. Marc-Milo Lube

Ukraine Newsletter Comments Off on 2020 Q3/Q4 UKRAINE NEWSLETTER

2020 Q1/Q2 UKRAINE NEWSLETTER

May
18

Dear Friends and Partners,

Please find attached our current Newsletter on Ukraine. We have hesitated with the publication of the Newsletter as current developments of the COVID-19 pandemic lead to a very dynamic situation of key political and economic parameters. While Ukraine has been hit severely by COVID-19, it has managed the pandemic until now convincingly and with early countermeasures. Once the COVID-19 storm has passed, we expect a V-shape recovery in Ukraine, as both local reforms (like the reform on agricultural land), international investors, and supranational institutions stand ready to support the political leadership and the business community.

Ukraine Newsletter Q1/Q2 2020

Please check our new website  www.vi2partners.com and our blog www.alt-think.com for more information. 

Best

Dr. Marc-Milo Lube

Ukraine Newsletter Comments Off on 2020 Q1/Q2 UKRAINE NEWSLETTER

WELCOME TO A DECADE OF SOCIALISM

May
13

The sudden and unexpected detonation of Covid-19 in our societies has turbo-charged the reverse of the unchained globalization of the last decades. And regardless of vaccines, cures, V-shaped or U-shaped recoveries, or whether we will be able to spend our summer vacation at the sea-side, regardless of trillions that will be uselessly spent on failing businesses, countries that might go bankrupt, regardless of financial bubbles being further bloated by central banks who have long lost control, some developments are here to stay, to expand and to take control of us and the communities we live in – with huge implications for the global political world order and the economic foundation of each country.

It will also lead to an end of political and economic absurdities that have been kept alive on ventilators over the past years and typical for the final stage of an era, e.g. useless mass movements of people and goods at costs that do not reflect the real cost for our environment and health; provision of money for free and the abolition of the cleaning and efficiency effects of recessions and downturns; allowing big capital to evade taxation; letting other countries take possession of our technologies and markets; and many others. 

Having talked to many political and economic leaders and having looked at all the business and academic discussions, analysis, and gossip, we see five big game-changers for our personal and business lives. And while many will not be happy about these game-changers or even try to deny them, we believe it is only a question on how intensely they will materialize, not if they will be there at all. And while many go against our own values and political belief, we have to acknowledge them to adapt and to fight back. Even to benefit and to exploit them commercially. Freedom is not for free.

Nationalism is back

The complete and unprecedented failure of both UN and EU institutions to play any, even insignificant role in coordinating efforts to contain, control and steer activities in the Covid-19 fight, on medical, regulatory and economic levels has proven to citizens that in the moment of need and crisis, there are only your own national Government and state bodies who protect you. While supranational agencies are used for partisan and propaganda battles, friendship and solidarity between nations are forgotten when the virus comes to town.

Incredible how fast EU states were closing borders, hoarding medical equipment, and prohibiting export, everybody fighting his own individual battle. The UN is in for a massive overhaul once the virus has passed to stop falling into complete insignificance. The EU will have to prove whether there are a long-term added value and any political purpose, having failed in the two most important events of this decade in a row, the refugee crisis, and the corona pandemic. Clearly the nation-state is on a further rise, and once the economic price to pay for the hysterical lock-down will be transparent for the taxpayer, nationalism will see a rapid comeback.

Big Government to stay

The sweet drug of big government that was quickly introduced by most of the states will be with us for the long run. Never in living memory was it easier for governments to restrict individual freedom, to rule into our daily lives with regulations, to spend money unchallenged, and to put future tax burdens on generations to come.

Our basic rights of movement, convening, working, praying and spending was severely restricted, harmed and our activities closely monitored. Nearly unlimited and unchallenged powers for authoritative and neo-authoritative regimes to control and limit us.

Do not believe that governments will hand back these powers fast or without contest. Fear and panic will be kept alive with the populations to cling to these powers. Government influence in all social areas will stay with us for the long-term, camouflaged in a PPE suit, pretending to protect us.

Value chains repatriated

Many citizens and also governments had an abrupt and rough awakening. Thanks to corona we have realized how dependent core value chains for our national security and for our supply chains with critical goods have become over the past two decades. It is incomprehensible how the supply with life-saving antibiotics or anesthetics, spare parts for nuclear power plants, or key parts in the aviation or machine tool industries can be crippled within two weeks of a pandemic.

And how it was possible to hand out the production of these crucial parts beyond our own borders or beyond the borders of our close allies. The global just in time machinery is based on a seamless and cheap transportation framework keeping production overseas and warehouses on the ocean, the road or in the air; and assumes operations in a non-political, friendly geopolitical set-up. Proven wrong.

It is clear that this pandemic will lead to a major re-think of global value chains and lead to the repatriation of critical products and production capabilities within the borders of major nations. The next wave of industrialization with decentralized, localized, and smaller production units driven by robots and AI will arrive faster. 2019 might have been the year of peak transportation. RIP globalization.

Socialist decade coming

Today, the municipal government of Vienna decided to hand out restaurant vouchers to the citizens of Vienna. And while appealing at first glance, you tend to ask yourself: “Hey, they are giving me the money that they first take in taxing me.” Basically, they are giving you your own money, but with a regulated utilization and brand it in addition as a generous act. Welcome to a decade of socialism.

The politician’s paradise of taxing more, redistributing and self-branded beneficence is coming true after a long period of prevailing lean state and austerity paradigm. We will see massive taxation of income, wealth and inheritance to finance the current spending sprees, massive public shareholding in key assets as a consequence of bailouts and the build-up of national productions of key products, a “justice”-driven setting of wages rather than a market-driven one, general income concepts will be implemented and regulation, regulation, regulation.

The state-controlled share in GDP will rise substantially. A thirty-year era of dominance of capital has ended, which led us to an amazing growth of global wealth but admittedly also to huge wealth imbalances, destructive exploitation of our environment, and a too-high share in GDP of banks/financial services. Welcome to a socialist decade or more. We will see higher wages, a re-valuation of public servants, nationalization of key assets, increased taxation of higher incomes and wealth, the end of cash payments, and a strong determination to end tax loopholes for the corporate and private sector.

It will need time, the clear materialization of limits and drawbacks of socialism, and last but not least the rise of the next generation Reagans and Thatchers to swing back this dynamic pendulum.

Adieu Liberté

Tracking and tracing all your moves is the new accepted standard of society. Piggybacking on fears, national defense and justice and exploiting new technological possibilities and behaviors, governments will eagerly embrace the once in a generation opportunity to get transparency and control on citizen moves, activities, and contributions.

For the greater good authorities will acquire and build full transparency of how, when and where you use your money and other resources, where and with whom you are and what you are doing and be able to rate your fulfillment in line with a set of social standards (your individual social score). The reality in China and other parts of Asia, and heavily knocking on the doors of our societies. Individual freedom as we have known it in the past is history.

The ever-swinging pendulum of history and societal development has changed direction. Therefore, we are indeed entering a new era. New thinking and new business models will be needed to ride this trend successfully and to profit from the new risk/rewards constellations. Every risk is an opportunity. And every single one of the above-mentioned areas will unleash enormous economic and political potential!

State of the Nation Comments Off on WELCOME TO A DECADE OF SOCIALISM

CORONA PANIC

Mar
11

Dear all!

Who would have thought that a small virus from a wild animal market in China could lead us rapidly into a global health, economic and political crisis? Not so many.

This is a crisis of uncertainty and fear, the unknown that ordinary people in the streets fear the same as global financial markets. While first ones go for a toilet paper shopping frenzy, the second go for an equity sell-off. Promising not to bore you with another instruction how to wash hands effectively or what the required physical distance should be to avoid infection, here are some observations from the tumultuous beginning of 2020 (btw the year of the rat, remember which animals brought the plague …):

  • CHINA did the right thing to lock down rigorously the region where the epidemic started and spread. It saved the country and the World from a much larger scale infection rate by sacrificing an entire region and risking its economy. It was also able to provide medical support with a unique ramp-up of medical infrastructure, including building new hospitals and reorganizing health workers with speed and efficiency unheard of so far. By doing this, China also granted the rest of the World a preparation time of ca. 6 weeks. Sadly, this time was not used efficiently by most of the countries. Current new infection and death rates seem to confirm the success of China’s strategy and emergency management. The Chinese victory lap would be justified, but will not be granted.

  • The second wave hit Korea, Japan and a little bit later Iran. While Korea was hit by a master spreading event, it was able to contain the consequences for the country, again through hard lockdown, control, and mass-testing of the population in the affected area. The numbers are going down, finally. Japan was less hit and showed one of the lowest growth rates of new cases and one of the lowest mortality ratios. Might it be the notorious fear of microbes and viruses in Japan or the good health management (hopefully not fake numbers), they must have done something right. To be seen. Finally, Iran. A classical example of how denying facts and truth, a lack of resources, determination and transparency to avoid political backlashes are backfiring badly in a health crisis. Late, for too many people too late, also Iran and the surrounding countries have finally started to attack the epidemic. Success not guaranteed.

  • Comes Italy. The Corona Virus (ironically corona means crown in Italian) does not love Italy. Yesterday there was a number of 10,149 confirmed Corona cases and a fatality number of 631. That is a mortality rate of 6,2 %. There was no other epidemic in Europe since the Spanish Flu in 1918 that had a similar mortality rate. That is frightening numbers. What is more frightening: nobody knows why the mortality rate is so high in Italy. Since yesterday Italy is in total lock-down. Probably much too late, and much too porous. Other countries should learn from this failure rapidly.

  • Germany, France, Spain, and the UK: Numbers are rising fast. An analysis of infection numbers and clusters (most originated from Italy) from the University of London shows that Germany and France are probably 9 days behind Italy in the spread of the virus, Spain 10,5 days, USA 11,5 days and Switzerland and UK approximately 13 days. The lock-down of these countries is a matter of days.

  • US: The big virus deniers will be hit hard. Much too late US authorities started to take the potential spread in the US seriously. Even today there are not enough testing kits and the process seems to be in chaos. Yesterday more than 1.000 cases have been reported, but the real number must be significantly higher. And we are still 11,5 days behind Italy. 

So big-time for doomsters and gloomsters. And this time they might be right. We face the following situation and potential outlook:

  1. Nobody knows where the future spread of the virus will lead. We still do not know with certainty where the virus originated. We have no idea why the mortality rate in Italy is currently above 6% while below 1% in South Korea or Germany.
  2. Vaccines are a minimum of 12 months away from us. There is no certainty on how fast the virus is mutating and to what degree.
  3. Hopes that the virus will spread less with spring and summer season are based on comparison with flu waves, but not based on any scientific proof or evidence. In any case, it would come back to us in autumn.
  4. Comparisons with flu are completely out of logic. First, it is a different type of virus, second for flu we have both vaccines, medicines and decades of proven therapies. Third, we have a much higher mortality rate with Corona, only matched by the famous Spanish flu 1918. And last, but not least, numbers show that up to 10 % of the Corona cases need treatment in ICU units. That is why the medical system in the countries with high infection numbers are collapsing, and that is why it is so important to contain or stop the spread of the virus in its early stage. And, not every country is able to build new hospitals in 10 days.

The consequences:

  • All countries who are not yet hit hard, should go as early as possible into lock-down, take the economic hit early, but contain the spread. Do not wait until the virus is spread too much and containment no longer an option. Italy and Iran show the result of that strategy. Follow Israel’s lead, be smarter.
  • Recession will hit most countries, at least those who have high infection rates.
  • Forget V Shape theories of economy and stock exchanges. This is an overdue correction of an overvalued, monetary policy-induced asset bubble, that was in urgent need of an event like Corona to get back in touch with reality. Unfortunately, brutal corrections like we are facing now, do always lead to distortions in both debt and equity markets (and we have high volumes of doubtful assets in circulation) and to collateral damage in many areas.
  • IT Industry, Media and Video conferencing, Online and Automated Sales to profit.
  • Fear and panic in the population will rise and questions on more strict measures will have to be discussed. The next 12-18 months will be turbulent and painful.
  • Managed democracies seem capable of dealing much better with this emergency than open societies.
  • Trump will soon be in quarantine and/or political history.
  • The good news: Mankind will survive, we are much faster today to develop vaccines and therapies than at any time before, our innovation power will beat the virus soon.

Ironically, a little virus has proven more effective to start a re-think of global value chains, national sovereignty, need for an independent supply of the population with critical goods, transportation and travel overkill than any of the Trumpian tariffs, impeachment processes or anti-globalization and climate change movements. And it might prove more effective to bring down regimes than the CIA who tried for decades.

Get prepared for rough times and stay away from Corona.

Best

Dr. Marc-Milo Lube
Managing Partner

Investment Company VI2PARTNERS
Goldenes Quartier, Tuchlauben 7
A-1010 Wien

State of the Nation Comments Off on CORONA PANIC

2019/Q4 Ukraine Newsletter

Dec
16

Dear Friends and Partners,

VI2 Partners is happy to share with you our recent newsletter on the most important developments and economic trends in Ukraine.

Please check our new website  www.vi2partners.com and our blog www.alt-think.com for more information. 

VI2 Partners would like to express the warmest season’s greetings and to wish you and your families a successful and healthy 2020!

We look forward to our continued co-operation in the New Year.

Ukraine Newsletter Q4/2019
Ukraine Newsletter Comments Off on 2019/Q4 Ukraine Newsletter