Global Supply Chain Crisis: The Impact on Investments & Future Economy | Peter Zeihan
Summary
TLDRIn this investment-focused discussion, the speaker emphasizes the importance of understanding the role of raw commodities in globalization and economic integration. With the current disruptions in supply chains, there's a looming risk of widespread shortages in essential materials, including food and semiconductors. The United States faces strategic choices regarding the control and distribution of resources like silicon, crucial for digitization. The conversation highlights the need for discerning investment in sectors less affected by these shortages, such as agricultural processing in countries with stable supply sources.
Takeaways
- 📚 The book covers a vast range of topics and is highly regarded by the speaker.
- 🌐 The discussion highlights the role of industrial commodities in modern globalization and economic integration, emphasizing their foundational importance.
- 🔩 The Industrial Revolution not only introduced electricity and manufacturing but also scaled the application of Renaissance lessons through the efforts of Germans, Brits, and eventually the rest of the world.
- 🚫 The current global situation is facing potential disruptions in supply chains, affecting not just finished products but also raw commodities that are essential for a modern lifestyle.
- 🌎 Access to raw commodities is becoming uncertain, which could lead to large portions of the world losing the necessary inputs for modern living.
- 💾 The speaker points out the critical importance of silicon for semiconductors, noting that 95% comes from a single mine in North Carolina, highlighting the vulnerability of digitalization.
- 🏭 The United States will need to make strategic choices regarding the control and distribution of critical resources like silicon in the coming decade.
- 🌾 The script discusses the impact of geopolitical events on agricultural commodities, with Russia's actions affecting global wheat and fertilizer supplies.
- 📉 The speaker predicts chronic shortages in base materials, including industrial commodities and food, due to various global factors.
- 💼 The financial sector is urged to be more discerning in investments, moving away from the previous era of abundant capital to a new reality of scarcity.
- 🌳 The speaker advises investors to do their homework, focusing on companies and sectors that are resilient or positioned to benefit from the changing global landscape.
Q & A
What is the main topic of the book mentioned in the transcript?
-The book covers a wide range of topics, including the impact of the Industrial Revolution, the role of commodities in globalization, and the challenges of modern economic integration.
What does the speaker mean by 'the core of globalization'?
-The core of globalization, as mentioned, refers to the ability of anyone to go anywhere to get anything, highlighting the interconnectedness and interdependence of global supply chains.
What is the significance of the Industrial Revolution in the context of this discussion?
-The Industrial Revolution is significant as it introduced electricity and manufacturing, and scaled the lessons of the Renaissance, leading to the discovery and manipulation of elements that form the basis of our modern world.
What is the current issue with supply chains according to the transcript?
-The current issue with supply chains is the breakdown at the raw commodity access level, which is the first step in creating finished products, and this is no longer guaranteed due to various global challenges.
Why is silicon important in the context of this discussion?
-Silicon is crucial because it is used in semiconductors, and 95 percent of it comes from one mine in North Carolina, making it a critical component for digitization and modern lifestyles.
What strategic choices does the United States need to make regarding silicon?
-The United States needs to decide how to manage its silicon resources, considering whether to continue mining and selling it to everyone, especially in a world with limited energy and food.
How does the speaker describe the current state of capital in the financial sector?
-The speaker describes the current state of capital as no longer being 'free,' implying that the financial sector can no longer invest in everything without discernment due to capital constraints.
What is the impact of the Russian invasion on global agricultural commodities?
-The invasion has affected the global supply of wheat and fertilizer, as Russia is a major exporter of these commodities, potentially leading to a multi-year shortage in agricultural products.
What are the implications of the current situation for investors?
-Investors need to be discerning and do their homework, focusing on companies and markets that are less affected by the current shortages and have reliable sourcing for their products.
How should investors approach the building materials sector?
-Investors should be cautious and consider the sourcing of materials and the geographical focus of the companies they invest in, particularly looking at regions with a boom in residential real estate.
What does the speaker suggest about the future of investment choices?
-The speaker suggests that investors need to disaggregate and carefully select investment choices based on the specific conditions and potential of different markets and sectors.
Outlines
🚀 Globalization and the Impact of Industrial Commodities
The first paragraph discusses the broader implications of globalization and the role of industrial commodities in the modern world. It highlights the historical context of the Industrial Revolution and how it led to the current state of economic integration. The speaker emphasizes the importance of raw materials and the potential issues arising from supply chain disruptions, particularly in the semiconductor industry. The focus is on the strategic significance of controlling these resources, with a specific mention of silicon's role in semiconductors and the reliance on a single mine in North Carolina. The discussion also touches on the geopolitical aspect, suggesting that countries may need to prioritize their own manufacturing and resource allocation in the face of global shortages.
🌾 Investing in a World of Scarcity: Agriculture and Building Materials
The second paragraph delves into the challenges and opportunities in investment amidst global shortages, particularly in agriculture and building materials. It points out the current geopolitical conflicts affecting the supply of wheat and fertilizers, and the potential long-term implications for food security. The speaker advises investors to be discerning, avoiding broad market investments that lump together disparate economies and instead focusing on specific sectors and regions less affected by shortages. The paragraph also touches on the complexities of investing in building materials, emphasizing the importance of understanding sourcing and regional demand, especially in the context of population shifts in the United States.
Mindmap
Keywords
💡Investment Show
💡Industrial Revolution
💡Globalization
💡Supply Chains
💡Semiconductors
💡Strategic Choices
💡Agricultural Shortages
💡Financial Sector
💡Sourcing
💡Palladium
💡Residential Real Estate
Highlights
The book covers a wide range of topics and is highly praised for its excellence.
An unexplored chapter on industrial commodities and their role in the Industrial Revolution is mentioned.
The discussion emphasizes the importance of components and elements in modern globalization and economic integration.
The potential breakdown of supply chains extends beyond consumer goods to include raw commodities.
Concerns are raised about the future access to raw materials necessary for a modern lifestyle.
Silicon, crucial for semiconductors, is highlighted as a significant raw material sourced from a single mine in North Carolina.
Control over silicon could have profound implications for digitization and modern quality of life.
The United States faces strategic choices regarding the future of silicon mining and sales.
The conversation predicts chronic shortages in base materials, including food and industrial commodities.
The agricultural sector is expected to face a multi-year shortage due to geopolitical events.
Russia's role in the aluminum and copper markets is discussed, along with the impact of recent events on these sectors.
The importance of sourcing in investment decisions is emphasized, especially with capital becoming less available.
Investors are advised to be discerning and avoid broad market investments that do not reflect current realities.
Agricultural processing is identified as a growing sector, with specific regions less affected by shortages.
Investment in building materials is recommended, but with a careful consideration of sourcing and market demand.
The United States' residential real estate boom is predicted to be concentrated in warmer, cheaper regions.
The complexity of sourcing building materials and the need for careful investment analysis is noted.
Transcripts
Peter what else do you want us to know I
the book is it just covers so much and
it's uh it's excellent by the way what
else do you want to say to our listeners
and let us know about any any component
sure so since this is an investment show
I think the best way to do is to talk
about a chapter that you haven't made it
to yet there's an industrial Commodities
chapter so anything that goes into
anything that's not energy in food the
Industrial Revolution did more than just
introduce us to what we now consider to
be electricity and Manufacturing it also
took the lessons of the Renaissance and
applied them at scale first through the
Germans and the Brits and then
eventually for the rest of the world and
we figured out all these components and
elements that make up our world and we
figure out how to purify them and then
recombine them in ways we found useful
what we haven't missed in the discussion
of modern globalization and economic
integration is their role because the
very core of globalization is anyone can
go anywhere to get anything
and when we talk about the breakdown of
Supply chains we're thinking of
semiconductors and tires and widgets and
that's true but that's not the whole
story we're entering into a world where
the raw commodity access that then goes
into the process material that then goes
into the intermediate products that goes
into the finished products that very
base First Step that is no longer
guaranteed so we can look forward to
large portions of the world losing
access to the inputs that are necessary
to attempt a modern lifestyle and if you
want to talk about the sexiest of all of
them
silicon not for panels
silicon for semiconductors because 95
percent of it comes from one mine
in North Carolina
wow so it's one thing to control Global
food or Global energy yeah it's another
thing when you can control the only
input that allows digitization to even
theoretically happen
and the United States is going to have
to figure out what to do that with that
over the next decade
well why are we gonna have to figure out
what to do with that we're going to
continue to mine and right but will we
sell it to everyone oh we're entering
into a world where there's not enough
energy and there's not enough food right
and where we're going to prioritize our
own manufacturing these are all
strategic choices that we're going to
make either by choice or failure to make
one
when you get to semiconductors though
when it's all coming from one place
that's an entirely other level because
if you can't get enough energy yes your
car stops yes the lights go out this is
bad
but if you can't get any microchips you
can't even pretend to catch up in any
sector at all yeah
well that's why countries like Russia
shouldn't do what they do you know the
Russians have a very different
definition for what modern quality of
life means that is one of their biggest
negatives that's one of their biggest
strengths it all depends upon how you're
measuring it
what it is they're trying to do at the
time yeah yeah so so what's the
investment I mean what do you think is
coming next in the economy we we alluded
to that of course with the capital
drying up and and the worker shortage
continuing and so forth but just give us
like the the what do we do with that
well I'm not a CFA so let me just start
with that it's okay neither am I
let me rephrase that investing is not my
world I can tell you though that we are
looking at Chronic shortages and a lot
of Base materials that make up our world
not just the industrial Commodities I
just kind of went through uh but food
you know we've the world's top wheat
exporter has invaded the world's number
four wheat exporter and the world's top
leader exporter also is the world's
largest export of fertilizer and the
components necessary so people can make
their own fertilizer so we're in the
early ages of a multi-year shortage in
all things agricultural Russia is also a
big player in the aluminum Market or it
was not anymore they also have been
copper that hasn't gone to zero yet it's
on its way down Platinum Group materials
for example especially uh Palladium
which does double time with silicon and
semiconductors the problem as you're
looking at all of these however is that
sourcing is critical one of the biggest
disservices in my opinion that the
financial sector has done for us all
over the last 20 years it's become used
to this environment where capital is
flush and liquid and we can invest in
everything and we don't have to be all
that Discerning right because if the
money is free why the hell not well the
money's not free anymore and so the
financial sector has to actually provide
value-add in the old system the entire
developing world was in one maybe one
exchange traded fund that's asinine to
think that India and Brazil and China
and Russia have anything in common aside
from size their markets are completely
different the sectors they play in are
completely different investing in them
and it's completely different and yet
there they are all together same with
Frontier Marcus which makes even less
sense like what in the world do
Argentina and Vietnam have in common
yeah we have to disaggregate all that
now
and that goes not just for the markets
in general but for the specific products
so for example if you want to invest in
agricultural processing that seems like
the big business right now it's probably
going to get bigger
but all the major agricultural processes
that operate in the economies that are
not getting hit by these shortages I
think France Canada Australia the United
States they're also in Russia and
Ukraine
so you really have to do your homework
to carve out the parts of the world from
your investment choices that just aren't
playing anymore and that means you have
to remove companies that had been
household names I'm thinking just bungee
here to pick one out of the air that is
not an appropriate if you want to take
advantage of the kind of this boom we're
going to see in demand for those
products in a narrow of scarcity how
about building materials
uh that's messy because a lot of them
are closer to home overall I think
that's a great idea but you have to be
really really careful of what the
sourcing is and where the companies that
are producing that material are selling
into so for example if you're selling
into the United States particularly in
the Mountain West the Southwest or the
South that is where the Boom in the
United States is going to be in
residential real estate for at least the
next 15 years people are moving there
because it's warmer that's the Boomers
people are moving there because it's
cheaper that's the Millennials having
families and nobody wants to be on a
Metro where they might get coveted again
so you know everyone's moving into those
that kind of Arc that's
as a rule not how we decide where we get
the stuff that goes into it you either
have local companies that are not
publicly traded or you have
international ones that are like
bringing in wood from Canada and
untangling that mess requires a brain
that's bigger than mine
[Music]
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