Beyond Mathematical Odds - The Human Nature
Happy Easter to you !
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First, I wish all of my reader a Happy Easter !!!
My three more opinionated pieces below.
Initially when system break down, tracking its cascade effects is not only possible, it is easily done if you have experience, or keen observational skills, but when it picks up speed, it becomes extremely hard. The more interconnectivity, its interdependency, and its patterns, and network complexity, the faster, and harder it gets. The reason I started this post with this, is that I am bound to miss some events.
Be warned this one will be probably really big.
Containers Pile Up At China Ports As Lockdown Blocks Trucks
By Ann Koh (Bloomberg) Containers full of frozen food and chemicals are piling up at China’s biggest port in Shanghai as a Covid lockdown in the city and compulsory virus testing means truckers can’t get to the docks to pick up boxes.
A shortage of trucks to haul containers from the port is impeding the clearance of imports, Ocean Network Express said in a customer advisory Wednesday. While the port is operating normally, there are a “critically high” number of refrigerated containers and items classified as dangerous goods piled up at two storage yards, meaning some ships carrying those types of cargo may not be able to unload any more boxes at the port, it said.
Shanghai is now the epicenter of China’s worst Covid outbreak in two years, with more than 21,000 cases reported just on Thursday. The shortage of trucks is also hitting companies in the city, which have been able to continue working through the lockdown, with chip giant Semiconductor Manufacturing International Corp. struggling to secure trucks to ship out finished goods.
“Not only does this have a significant impact on China’s domestic economy but also on potential regional supply chains, which could be more meaningful in Korea, Taiwan and Vietnam,” the analysts said.
Just to keep tracking the cascade effects of the (politically costly, economically insane) Shanghai lockdown in China, not really news if you have been following, and reading this series so far. The Chinese government made changes in some in the restrictions, from me perspective, too excessive, specially the ones aimed at truckers, looking around (the world), one could see what adding a mere 4 to 6 hours of wait time, cascading into a localized disaster.
Food going to waste, starving the people locked down, and creating civil instability, where even the tyrannical measures can’t contain your population. Per the article above, the situation will not only affect China, but neighboring countries, and of course, the entire global maritime logistics, and costs.
And China decided to lockdown Xi’an, which will impact everything else…again. As I stated multiple times on my Twitter, I actually am lost for words, and analysis to what is going on. In my Twitter page I indulge on conspiracies for the fun of it, but not here, so I can sincerely say I don’t know what is going on.
You should listen to this piece by the American Shipper, which align pretty well to everything I have said, and mentioned so far.
I just pray it is not a new pandemic raging, a bird flu one, have mentioned a few times this is my biggest worry short to medium term.
China's Xian imposes temporary, partial lockdown to fight Omicron flare-up
The northwestern Chinese city of Xian said on Friday it will temporarily impose a partial lockdown to reduce its 13 million residents' movement, after reporting dozens of COVID-19 infections this month, as China fights a record wave of cases
Europe’s Economy Braces for More Supply Snags, Faster Inflation
Supply snarls this year may make Europeans yearn for the days in 2020 when an occasional shortage of eggs or a delivery delay of a few weeks were mere inconveniences.
Stronger economic headwinds are converging — Russia’s war in Ukraine, rising inflation fanned by soaring energy and food costs, and prolonged Covid-19 lockdowns in China’s export hubs are all threatening to wallop companies from Germany to the U.K.
Russia’s invasion and the European Union’s corresponding sanctions have already led to production halts and components shortages for companies on the continent, particularly automotive manufacturers and their suppliers.
Basic things like shipping pallets — made of Russian nails and wood from Belarus and Ukraine — are getting more scarce in Germany, according to Transporeon, partly because of new sanctions.
Until before the war in Ukraine, the US got the brunt of the logistical nightmare, suffering much more of the impact, than other countries, but now, the supply shock will be global. I would like to remind the reader, in case you missed the other posts, that the current lockdown in China, is yet to affect the entire planet, the unwind of it will take at least 8 weeks to be felt.
As you are about to see, Europe has many other problems, and this is just adding to the pile. I will go further on it down below.
Suspected Chinese Hackers Collect Intelligence From India’s Grid
Recorded Future finds ‘prolonged targeting’ of power sector
Hacking may be linked to Chinese government, analysts say
Suspected state-sponsored Chinese hackers have targeted the power sector in India in recent months as part of an apparent cyber-espionage campaign, the threat intelligence firm Recorded Future Inc. said in a report published Wednesday.
The hackers focused on at least seven “load dispatch” centers in northern India that are responsible for carrying out real-time operations for grid control and electricity dispersal in the areas they are located, near the disputed India-China border in Ladakh, the report said. One of the load dispatch centers previously was the target of another hacking group, RedEcho, which Recorded Future has said shares “strong overlaps” with a hacking group that the U.S. has tied to the Chinese government.
I often wonder if some of the attacks made by (allegedly) Chinese hacking groups are really offensive, rather then Intelligence gathering, alas, not really the big one lately. Finland, the Insurer Baloise, Nordex (one of the world biggest wind turbine producers), and India Oil OIL have been cyber attacked the last few days, and let us not forget…
Microsoft warns Windows is under attack from Chinese threat actor group
The alert this time is for Tarrask, a “defence evasion malware” that uses Windows Task Scheduler to conceal a device’s compromised status from itself, according to Windows Central.
The attack is the work of Hafnium, a state-sponsored, Chinese-based group that users may recall as a major player in the 2021 Microsoft Exchange meltdown.
According to the report, the data gathered during that ordeal is thought to be fuel for the Chinese government’s AI innovations.
The company stated that it is currently monitoring Hafnium’s activity in terms of novel exploits of the Windows subsystem.
Good old cyber espionage, and IP theft, as everything accelerate, I expect more, and more attacks, and attempts to cyber disruption, before countries start thinking in secluding their internet as a last resort (low probability).
CF Industries: Union Pacific Curtails Fertilizer Shipments, Delaying Deliveries and Preventing New Rail Orders from Being Taken
CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today informed customers it serves by Union Pacific rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future. The Company understands that it is one of only 30 companies to face these restrictions.
CF Industries ships to customers via Union Pacific rail lines primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa. The rail lines serve key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas and California. Products that will be affected include nitrogen fertilizers such as urea and urea ammonium nitrate (UAN) as well as diesel exhaust fluid (DEF), an emissions control product required for diesel trucks. CF Industries is the largest producer of urea, UAN and DEF in North America, and its Donaldsonville Complex is the largest single production facility for the products in North America.
“The timing of this action by Union Pacific could not come at a worse time for farmers,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all. By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”
A few months ago I made the joke, “How many black swans can we fit inside 12 months ? Let’s find out.” CF Industries is not the only one scratching their heads about this unilateral, insane decision to limit shipping from certain companies, one of these being one of the biggest fertilizer suppliers in the United States, at the worst possible time, with a very unreliable, erratic weather.
Fertilizer prices are already squeezing a decent portion of farmer, and this will make the situation worse, and affect yields down the line further. Not only this is a big problem for inflation, and global food security, China literally has 0 care about internal struggles inside any country, and has hording corn for the last 2 months. Well, hording all foods for the last 16. Watch the video where the quote below came from, here.
“We don't need to find demand in any of the grains right now. We need to find a way to ration what we've got out here. The demand is there. It continues. Is there going to be as stout as some would like to hope? I don't think so. But when I look at it, we've got good margins on feeding livestock. We've got good margins just about all across the board. So, I don't see that price has rationed any demand out here…. We don't need more demand with prices where they are right now.”
Given the state of food security in both the Middle East, and the entirety of Africa, demand won’t go down anytime soon, if anything, it will keep increasing, which will put pressure on China to keep hording, and given they are the country that grew most lately, they can afford it.
In one of the posts in this series I mentioned the UN report, and how the current global events, not only the war in Ukraine, but everything else was already fueling inflation, specially the logistical disruption, and sky rocketing freight costs, the war just send everything into overdrive.
Superficially mentioned this a couple times in my Substack, and on Twitter, but these events will create the greatest human migration in human history, and there is no feasible way the European Union will be able to hold, and this will give Turkey massive leverage, like the did other times when they got flooded with war migrants.
The problem is compounded by the global energy crisis, more on that in a few moments.
Ukrainian Railways limit exports of some food staples, consultancy says
Ukraine's state-owned railway company has temporarily restricted the transportation of some agricultural goods through border crossings to Poland and Romania, consultancy APK-Inform said on Saturday.
To the surprise one no one that reads me for a while. The Ukrainian government, and other European countries at the started of the war resorted to Resource Nationalism to secure the stability of their societies, and a (fools) attempt to hold inflation. Other countries will continue to resort to this, as the inflationary trends, and the poor yield in some countries affect global grain prices.
Brazil, and Latin America itself are now experiencing a out of season drought, that will affect the famous Safrinha, the season between bigger crops, usually corn. Last year Brazilian safrinha also got hit by erratic weather, this year there is a compounding problem, less fertilizer, and more severe shifts.
As an example, 2 days ago I was experience 30 degrees Celsius. Now ? 15, and windy, it hasn’t been windy here for years, so it feels like 12, and affects the crops too… Wishing the weather to help your crops, and functioning of your supply chain is insane, and this what both hemispheres are banking on.
If you read my Year Without Summer 2, you know what I expect from the weather. No reliability, and natural disaster here, and there. Look up South Africa right now, other places are also experiencing severe rains.
Russia halts movement of wheat ships to Egypt: Ukraine
The Ukrainian embassy in Cairo said that Russia is preventing the movement of four ships loaded with wheat and corn in Ukrainian ports from sailing to Egypt.
In a post on its official Facebook page, the embassy said: “Russia prevents the movement of four ships loaded with wheat and corn in Ukrainian ports.
The ship “Riva Wind” is ready to transport 27,000 tons of corn to Egypt, enough to feed more than one million people for a month.
“Russia has planted mines in the Black Sea, which prevented this ship from sailing to Egypt from the port of Bilhorod-Dnistrovsky in Ukraine,” said the statement
Read older posts, and the text above. I
This will be a global tipping point, conflicts will be born from the food, and energy shortages in Africa, which will push people into starvation, and despair, and no other choice but to go “somewhere else”, even if, in reality, somewhere else is in a precarious situation in regards to what you are running from, and factually speaking, will not be able to accommodate you, which will lead to hordes of angry, desperate, out of choice migrants.
I don’t mention this merely for forecasting, complex system analysis, or threat mitigation from a policy POV, but for the average Joe. You need to keep these events in mind, to prepare yourself. If you can work remotely, or have some money, my professional opinion is to either move to a rural area, or to literally, get out of Europe.
The EU will NOT be able to deal with the migration that is about to happen the next 2 years. No country will.
Tough to find alternatives for Russian thermal coal, says Japan utilities group head
Alternatives for Russian thermal coal are difficult to find as the market is getting tighter, the head of a group representing Japanese utilities said on Friday.
"We want the government to provide maximum support (on the issue)," Kazuhiro Ikebe, the chairman of Japan's federation of electric utilities, told a news conference.
The Japanese government said earlier this month that it would ban coal imports from Russia in a broad escalation of sanctions after gradually reducing imports while looking for alternative suppliers.
There is not enough “coal” in the market right now, dem and is high, prices are high, and supplier don’t have the logistical capacity to move enough to meet the demand, and if all this isn’t the problem, countries that could do all this, are facing their own energy problems, which affects their ability to export the much sought after dirty fuel.
Shunning away from Russia coal (third largest exporter) has its prices, not only for energy, but industry.
Japanese Steelmakers Raising Prices and Warning of More Hikes
JFE increases prices across all products by 20,000 yen a ton
Companies are passing on surging coking coal, iron ore costs
And the cost is this. Steel prices are already at global highs, because of the months long energy woes in Europe, now fueled by the conflict in Ukraine, steel is one of the most used, and needed materials world wide, to build everything, specially things that the world need right now, like semiconductor factories, LNG carrier and plants. Lower supply, or higher prices will invariably affect costs, prices, and inflation.
Japan is one of the world biggest crude steel producers accounting to over 5% to the total global production. And Japanese steel is among the ones with the best quality in the planet.
I wouldn’t be surprised with some of the world “councils”, “forums”, “groups” were pushing countries to not deal with Russia, at the cost of global recovery, growth, and their own economies.
Starving for Natural Gas, Argentina Gets Relief From Bolivia
Andean neighbor to boost flows during Argentina’s winter
Argentina competing with U.K., Japan for pricey LNG cargoes
If you read any of my previous opinion pieces, or the last 2 pieces of this series, you will be aware that I forecast, and others did the same, sanctioning Russian natural gas, and attempting to source elsewhere would cascade into higher global prices, and a shortage in poorer, third world economies, and we are already seeing such.
These events have bigger ramifications than prices, they will affect production of raw materials in exporting countries, fuel inflation in poorer countries, and the worst of all, affect their own energy production.
Electricity shortfall hits 6,000MW
Power plants ceased operations due to lack of fuel, technical reasons, NEPRA told
The electricity shortfall in Pakistan has been recorded at 6,000 megawatts (MW) as the country is producing 15,500MW against 21,500MW demand.
They said that the system was incurring a loss of Rs10 billion on a daily basis due to low production, while power outages of 10 hours per day were being reported across the country. They added that some power plants were receiving capacity payments even after the shutdown.
Midwest Power Capacity Cost Soars 47-Fold on Supply Shortfalls
Households and businesses will feel the price hikes most
MISO says some areas may be forced into controlled outages
Midwest consumers are facing higher electricity costs amid looming supply shortages that increased payouts to generators by 47-fold in an annual auction.
The capacity price for generators serving 11 states in the region that are part of the Midcontinent Independent System Operator jumped to $236.66 a megawatt-day for the year starting June 1, the grid operator said in a statement late Thursday. The price was $5 a megawatt-day in the previous auction
Mentioned superficially on Twitter, and will repeat here. I expect global outages, and blackouts for different reasons, from price, to not enough fuel, to Mother Nature rage. Right now, solar panels, both for home use, and portable ones are affordable, but when “normies” wake up to the fact that short term, energy will not be as constant as they previously experienced, things will change.
And I covered before, because of numerous variables (I analyzed them all here, and in other pieces), the solar panel industry can NOT accommodate the demand right now, and if demand spike because of outages, and blackouts, what do you think it will happen ?
We find ourselves at a crossroads in history, the choice made in 2020, created today, the choices this year, will dictate the next decade or so. While the death of globalization is clear, and think tanks, politicians and elites run around headless, in the search for the system to take its place, its death will not be painless, its economical cost singular.
I was one of the biggest critics of globalization, not only from a complexity standpoint, but from a socio-cultural one, globalists tried to homogenize culture for various reasons, but the most superficial and easiest to understand is “profits”. Atomization of globalism, breaking itself into its smaller (individual, tribal parts), will often leave it to social strife, and conflict of a tribal nature.
I often say to people who directly talk to me, historical trends are inescapable, and cyclical in nature, and mathematically, but per the title of this series, this truly defies Mathematical probability, because by mere observations, it looks like someone shoved every historical trend inside 3 years. Might expand on these, and other aspects in another piece.
As a final note, for people who often interpret any of these as a “black pill”, as hopelessness, it is the exact opposite. You should read, and analyze the text yourself, and see the opportunities hidden in every corner, as much as it does not look like it. Adapt to your own situation. The world needs new, disruptive technology right now, and all the “money” is looking to invest on it.
For the investor, it is pretty obvious what you should invest. Commodities, specially grains are the safest bet, the market will continue as it is for at least 24 months, the UN, and other market analysts expect 5 years of inflationary trends in regards to food.
Anything that helps solve scarcity will be heavily sought after. Of course this leave us with other problems to solve. Which I am still deciding if I should write my opinions about it, or not.
This piece is long enough as it is, so I will end this here.
Buy me a coffee whenever you feel like it.
Deep appreciation for all the supporters !
Couldn't be that Union Pacific is being threatened by DoT or DoA or somebody more powerful.
Hi John,
Superb post!
What numbers are you looking at in terms of the mass migration from Africa and the ME to the EU over the next few years?
Do you think places like northern Europe, e.g. Nordic countries, Denmark, UK and the most northern bits of France should be able to avoid the bulk of the disruption?