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2022: The End Game of Unchained Capitalism (on Earth)

Dec
01

Dear Friends and Partners,

Many of you might enter the 2021 end-of-season festivities with mixed feelings. Bank accounts are loaded, profits from the never-ending investment boom got harvested and secured, black Friday shopping has pleased your loved ones and booster shots make you feel invincible. Only weaklings would care about the cough and sneeze around the corner with a triple Pfizer defense line in their bodies. Despite all the doomsters, scaremongers, and conspiracy preachers we can summarize, that traveling is once again possible, stock markets have not crashed, Governments have not gone bankrupt, Boris Johnson has not yet sunk the United Kingdom in the Irish Sea, Joe Biden is still alive and, believe it or not, even your Swiss banker produced this year more profits than fees. The Rolex well-being index of the rich and pretty, measured by the time and premium you have to swallow to get your hands on a Daytona, Batman, or Patek Nautilus is at an all-time high. Your neighbors and friends are boasting with the fortune they have spent for a plane ticket and a water bungalow to escape from lockdowns to a six-star Maldives beach resort. Yet, somehow between the Omicron déjà-vu, the saber-rattling of the US-China-Russia magic triangle and inflation rates of our forefathers, it also feels like the dance on a volcano, like a foreboding of a tectonic shift in the economic fault lines, like a devilish party without a moral foundation, responsibility, empathy, and heartfelt joy. Where will this lead us?

Whether 2022 will bring a continuation of the sweet song of need and greed or an abrupt end to the party, nobody knows. However, history and Newton tell us, that what goes up must come down. Here we are to share with you the areas of risk, concern, and hope for the coming months, the potential sparks to light the fire. We feel the pressure in the global kettle is rising:

  • Covid Reloaded: While we are writing this, countries are closing up again to a rising Omicron mutant risk and people ask themselves whether the covid shit show will ever end. Tired from lockdowns, travel restrictions, closure of our favorite waterholes, and the stubborn failures of governments to prepare better for the next wave of infections, we rub our eyes in disbelief. Get prepared for worse than expected forecasts in case that Omicron will break our vaccine defense perimeters with all the consequences and be sure that the taxman’s hand grabbing into your pockets will grow much bigger to finance the government goodies for the covid tired population and businesses. 
  • The Eco Revolution: It is the economy, stupid! 2021 has shown us, that the business world will save us from ecological disaster on this planet. Forget the COP and Greta song and dance shows. TESLA today is valued higher than all big traditional car companies together – with a fraction of their production and assets. Big finance and business are investing heavily into new green and blue tec, logistics, and transportation will revolutionize in the coming decade, healthy food is everywhere. And the consumers are asking for more and faster. Savings through energy efficiency, energy recycling, and decentral management systems are just starting. Investments in this area (next to space) will be one of the huge growth, innovation, and wealth drivers of the next 10 years.
  • Space Race: The space cowboy contest between Musk, Bezos, and Branson has initiated a global space race, that will bring not only humanity to a new level of interstellar reach but also set the foundation for the future trillionaires. The take-off reminds us of the first big issues of shares in Anglo and Dutch trading, shipping, and rail companies during the colonialization. The speed of the colonialization of space that has started will attract billions of investments from private and government entities. Mining of comets and asteroids by robots will create unseen wealth, next-generation weapons and spacecraft, housing and infrastructure, energy production and transport to Earth, space engineering, space services, and tourism, you name it. Get prepared to participate in the space boom and business. And do not forget: The nation that controls space and commands the biggest space armada will logically dominate our home planet.
  • Inflation, Wage Growth, and the End of Free Money: Finally, inflation has arrived. Whoever believes this is temporary, will be proven wrong. The time for holding back inflation has long passed for central banks and most governments will silently welcome it to deflate their legacy debt mountains. Whether it is big wage rises, shortage of labor, supply crunches: everywhere prices are rising, and the famous inflationary spiral has started. The overlaying developments of a) the de-globalization of value chains and end of deflationary effects through cheap China production, b) the abrupt end of the peace yield after the collapse of the Soviet Union, c) the additional eco premiums for clean and healthy production and living conditions, they all add up to a systemic return of substantial inflation. Interest rates might rise much faster than everybody believes now and will finally bring back sound investment reflections and herald the exit of zombie businesses. Change your mortgages for fixed rates now.
  • The Big China Experiment: In a surprise move and not really noticed by many China has started a huge re-distribution experiment of wealth and business power, aimed at achieving a broader distribution of wealth, limiting the influences of individual tycoons, communicating a clear message that there is no alternative to total obedience and China First & Only doctrine, and to cement the power and authority of the communist party for the coming decades. Anything unclear, look at the fate of the Hongkong opposition. Whether this experiment will work, and business and innovation continue to prosper in this setting, will be seen. If not, China will lead the global economy into a serious downturn with a further significant revaluation of Chinese property and financial assets and major turmoil in the corporate landscape. Next to geopolitical risk, further motivation to be defensive with China engagements in 2022.
  • End Game of Unchained Capitalism (on Earth): The golden trio of cheap and excess money, massive tax loopholes/free capital flows, and cheap labor have led to an enormous redistribution of global wealth to the top 1% earners and investors, to the emersion of a rapidly growing and crowded group of billionaires, who grow – sustained by national banks in any crisis – richer by the hour. The wealth and health gap (measured with life expectancy) between the poorest and richest of our countries is wider than at any time since WW2 and reminds us of the 1920s. Societies pay for this development with the erosion and destruction of their middle classes, polarization/anger/hate, hopelessness for many, exploitation of nature and infrastructure, sub-potential growth. The end of this unchained capitalism has come. Inflation is putting an end to cheap money, Governments are rediscovering taxation to finance infrastructure rejuvenation and ecological reforms, tax loopholes are addressed or closed, labor shortages will lead to significant pay rises.

On the political side, unfortunately, things have turned ugly in 2021 and the risk of a severe political crisis or even armed conflict with the involvement of major military powers is higher than ever since the end of the cold war. We are witnesses to the launch of an epic battle between the US and China for the future dominance of the world order. Russia, though out of the game, is trying with shady means to secure as much influence or control on its neighbors, for now trending more towards China than the US. The main inflection points for a potential eruption are:

  • Eastern Europe: Russia has amassed assault troops on the Eastern border of Ukraine, in Donbas and Crimea, and in Belorussia. The ambition to re-integrate large parts of Ukraine into a larger Russian empire is well known and clearly directed against any self-determination of the Ukrainian state and people. Aggression will start the very moment, any weakness in the Western alliance to stand by Ukraine is shown and tips the balance of the risk/reward calculation of the Kremlin. With North Stream 2 getting operational and the resulting control of the European gas market Russia has already acquired a powerful economic weapon. The resulting self-confidence of Russia with continued hybrid and cyber-attacks and constant escalation of red lines in its communication does not bode well in that regard. Any aggression will turn bloody this time as Ukraine is much better prepared than in 2014. But in the end, neither the US, NATO, or the EU is ready or able to block any aggression by military means.  Also, watch out for developments in Belorussia – will Lukachenko repeat the survival miracle of Assad in Syria or go down? – and in the Balkans, where political heat in the relation between Serbia, Bosnia, and Kosovo has gone up to levels close to armed escalation.
  • China/US: With the open support of Taiwan by the US and the stubborn defense of the South China Sea by the US and its allies against Chinese hegemony, the reality of an Asian Pacific cold war has arrived. An enormous arms race between Korea, Japan, and Taiwan on the one hand and China, on the other hand, will be with us over the coming years. Too late did the West and its Asian allies wake up to the enormous economic powerhouse they helped to build with the rise of China, which will even dwarf the economic size of the United States in the near future. Now, the containment might be too little and too late. Any global disruption or show of weakness might tip the balance for China to think that the golden moment for a Taiwan grab has come. Generals already stare in disbelief at the speed, size, and capabilities of new generations of arms in China and the political leverage on third countries that have been built over the last decade. Technological innovation and winning the space race will be key for the West to stay relevant in this competition.
  • Iran: The coming months will show, whether any revival of the JCPOA is possible or not. While severely hit by sanctions and covid, the regime has used the absence of international unity due to the unilateral cancellation of the JCPOA by the Trump administration to increase its nuclear and ballistic capabilities and to escape from international oversight and control. Very soon the World will see a North Korea scenario in case that there is no success of the rebooted talks in Vienna. The options are clear: peaceful settlement or pre-emptive strikes of Israel and potentially the UAE against Iranian nuclear and military facilities with all the ugly consequences of a regional war involving Iran, Iraq, Lebanon, Syria, Jordan, and Israel – and more migration to come.
  • Cyber: We continue to believe that one of the biggest global escalation risks stems from attacks on critical IT infrastructure, both on national assets or on business players with critical importance for a country through sabotage, disruption, piracy, data theft, and blackmail. First, most countries have no experience in handling and reacting to these kinds of attacks, and there are no clear chains of command and de-escalation between countries. Often, attacks are too late identified, and the originator cannot be proven. Second, and driven by this feeling of not being held responsible, players could overplay their hand and provoke harsh and asymmetrical reactions, and third, countries in many cases utilize hackers and assets outside of government structures to be able to deny any responsibility for any attack (the Wagner factor), but these hackers and assets might develop separate and additional activities, often greed-driven and outside of any government control, which again can lead to unwanted damage and reactions. The IT attacks and demands for ransom payments on businesses and influential or famous individuals are exploding. It is shocking to see how many companies are entirely relying on their external IT providers and naively approach this mission-critical issue, while a critical data leak can upend the strongest business, especially in trust-based industries.
  • Migration: Last, but not least, images from the border between Belarus and Poland, and heated discussions between France and the UK on Channel crossings have brought back the urgency of migration from poverty and crisis regions. It is obvious that thanks to climate change and political chaos in post-war regions from Iraq to Afghanistan, Syria, Africa, South, and Middle America migration levels will once again rise. The border wall lobby is cheering, yet next to the human tragedy, there is no systematic and convincing answer drafted or even in the discussion. The distribution of covid vaccines in the world demonstrates strongly that solidarity and global thinking are non-existent. It is therefore inevitable, that very soon we will see the same or bigger refugee streams than in 2015, probably with more casualties, more ugly scenes, and more conflicts between nations and within societies of how to cope with the streams. Be prepared for more polarization, hate, and right-wing propaganda.

2022 is promising to be a dynamic and super volatile year with lots of opportunities and strong risks to watch out for. Be strong.

We wish you and your loved ones wisdom, health, and luck for the coming months and a joyful start into the hugely successful Year 2022

Very best

Marc

Dr. Marc-Milo Lube

Partner

Smartcom Holding GmbH

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TALISCHMARRN: Why the US Strategy in Afghanistan Makes Sense

Aug
26

In Austria, there is a famous national dish called Kaiserschmarrn. The legend says it was one of the Austrian emperor’s most favorite desserts. It is actually a generous pancake, torn apart in thick chunks and then messed up, enriched with roasted plums or apricots and lots of icing sugar. This procedure of tearing something apart and messing it up is called a Schmarrn in German. If you follow media reports and political commentators on the current developments in Afghanistan and the US withdrawal, you are sitting in front of a perfect Talischmarrn. A lot of undigested pieces of unfounded, moralistic, and judgemental views without any coherent line of reasoning. An avalanche of internet memes mocking the US and the exit from Afghanistan. And, historic facts are neglected anyway.

Let us try to clean up with some of the wildest misconceptions of the current situation. Globally and instantly distributed pictures of refugees falling from planes, chaos at Kabul airport, revenge executions and locked-up women as well as the disastrous PR performance of the White House blur our view on the real situation and the effect on global politics. So, let us have a look at the main pieces of the Talischmarrn, where the media got it wrong:

  • Wrong #1: The Taliban is acting against the will of the people of Afghanistan. 
    In reality, multiple polls today and over the past years show, that a majority of Afghans support both the Taliban as leaders and Sharia rules as a basic legal and constitutional framework of running the country. The Taliban has ended a decade-long war and a regime, that was not built on the will of the Afghan people, but on a sponsored kleptocracy, that lived on Western subsidies, massive corruption, and crime. This kleptocracy crumbled at the first signs of resistance and danger. The West has kept alive an illusion of democracy, minority rights, and women equality, that was not congruent with the societal development and cultural foundation of most Afghans and ultimately had to fail. Yet, it has to be seen how stable the Taliban support will be when the country wakes up to dwindling resources and cash streams (up to 80 % of the state budget was based on foreign aid) and famine will hit.
  • Wrong #2: The US has lost the war in Afghanistan
    The US together with its allies has won the war a long time ago by crushing the terrorist structures in Afghanistan, and by sending a clear signal to the World that hosting terrorism ends badly, taking the strongest possible revenge for the 9/11 attacks. The execution of Osama bin Laden was the climax of victory. It should have led to immediate withdrawal from the country. Unfortunately, and as it happened so often in the past in countries from Libya, Syria, Iraq, or Egypt, the West did not stop, but continued with its efforts to install democratic and Western-minded political structures and systems in Afghanistan. In reality, this was an enormous uphill battle against the country’s culture and traditions, proved to be a gigantic waste of taxpayer money, and was horrendously abused by the ruling elite and some Western contractors and advisors for self-enrichment. Hopefully, we understood from the final Afghan episode, that democratic development has to come from within, has to be earned, conquered, fought for by citizens of a country, and cannot be donated or sponsored by foreign forces.
  • Wrong #3: The US status as a global world power has diminished
    Often quoted, still completely wrong. The status of a world power is primarily linked to its economic power (GDP) and its domestic technology skill base. Thanks to the Trump administration, the US has effectively started to take on China’s development as the only credible challenger to US supremacy (both through economic (tariffs) and technological (Huawei ban) measures). The freed cash, hundreds of billions of dollars from Afghanistan (and soon Iraq) adventure will be well deployed for the further development of the US economic and technological basis. Should US relative power diminish, it will only be due to the rise of China, surely not to Afghanistan.
  • Wrong #4: The US withdrawal was too hasty and not announced
    The withdrawal was overdue as the main objectives of the invasion had been reached long ago, and the remaining forces did not achieve anything else than keeping a ruling elite in power. That the withdrawal was coming was also clear to the World since the Trump administration negotiated the withdrawal deal with the Taliban in Qatar, and it was transparent, that both the Trump and Biden administration wanted to be out of Afghanistan by the twenty-year anniversary of the 9/11 attacks. All the countries involved could have prepared for the withdrawal for more than twelve months, secured critical assets, destroyed sensitive data, and evacuated local supporters from Afghanistan. The lack of preparation is the main failure, not only of the US (partially here the change of administration and Trump’s election fraud chaos can be blamed) but of all allies. My guess is, that while political leaders are joining now cynically the outcry for the suppressed women, translators in danger, and local support staff threatened with execution, in reality, all these leaders and especially in Europe did not want to lead an Afghan refugee discussion in their respective countries prior to the withdrawal. And while there is publicly stated solidarity of state leaderships with Afghan people at risk of being slaughtered, in reality, most governments are not keen at all to take in additional refugees from Afghanistan.
  • Wrong #5: China and Russia will profit from the situation
    Very doubtful. While China and Russia have welcomingly exploited the opportunity of a propaganda blitz and actively try to sow doubt with US Allies in their neighborhoods from Taiwan to the Baltics, reality might bite them back faster than they wish for. Examples of countries that were able to make lasting profits with Afghanistan are rare and it was very comfortable for the rest of the World, that the US and its allies kept radical elements at bay in that region at the cost of living and taxpayers’ money. Given the geographic proximity to their own countries and their domestic issues with radical Islam, both countries will have a very close watch on the further developments in Afghanistan and a potential spread of Taliban or related ideology into their own countries. The US weapons and military equipment arsenal left behind by the US and the dissolving Afghan army should give more headaches to the immediate neighbors than to US citizens.
  • Wrong #6: Other countries might lose trust in the US
    The argument goes, that the US has abandoned the Afghan people, and countries from Taiwan (against China?), and the Baltics (will NATO Article 5 be honored in an attack?) to Ukraine (protection from further Russian land grabs?) will doubt the decisiveness of the US in protecting them from the aggression of bigger neighbors, i.e. China and Russia. Already the basis of the argument is wrong. The US has supported the Afghan people for 20 years, but they have not taken charge themselves. There was no external enemy who wanted to change borders, but a society that decided that life under Taliban rule might be better and more stable than under a corrupt regime and eternal occupation. The situation of all the other mentioned countries is profoundly different. First, they face an external threat, they are ready to defend their homeland against this threat and the US will stand by them – Second, they have no choice but to rely on the US because the alternative is to bow to the bigger neighbor. Turn the question around and it gets more relevant. Will the US lose trust in the leadership of the supported countries? For sure, after all the useless money dumped on the Afghan leadership and infrastructure, the US will apply bigger scrutiny on foreign and military aid and question the sustainability and worthiness of any support to corrupt governments.
  • Wrong #7: A new Afghan refugee wave is coming
    This is indeed the biggest question mark. For now, the Taliban strategy seems to be more orientated towards keeping all citizens in the country. At the same time, the obvious target countries have all learned their lessons from the 2015 refugee crisis and know better how to protect their borders. Still, once famine and depression occur, this situation might change fast and prove not to be sustainable on both sides of the fence.

In a nutshell: the US might exit even stronger after the withdrawal from Afghanistan, despite all the doomsters and gloomsters of dwindling US dominance as a world power. We do not expect a major political impact in the long term and Western countries should be better prepared today to prevent terror attacks than back in 2001. China and Russia might soon have swallowed a poison pill of more presence/interaction with Afghanistan which can prove dangerous and costly, and the European populations will soon call the solidarity bluff of their leaders should significant refugee streams reappear at their borders. Once, the admittedly chaotic and badly prepared Afghanistan exit is over, and the fifth vaccine-breaking Covid wave has arrived in America and Europe, the topic might disappear from our radars altogether (at least for some years).

Very best

Dr. Marc-Milo Lube

Partner

Smartcom Holding GmbH

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2021 Q3 Ukraine Newsletter

Jul
29

Dear Friends and Partners,

We are pleased to announce that Smartcom Holding has taken over and integrated all activities from VI2 Partners. We will continue to offer prime investment and consulting services with our key offices in Vienna and Kyiv and liaison offices in South Korea, Qatar, Georgia, and Romania.

Please find attached our latest Ukraine quarterly newsletter.

We stand ready to support you in your investment undertakings,

Best Regards

Dr. Marc-Milo Lube

Partner

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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

Best regards

Dr. Marc-Milo Lube

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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

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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

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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

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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