Pranav

SPACs make for worse investments than literal Ponzi schemes!

Pranav's second article.

Here’s a big challenge I have as a researcher: I'm much better at parroting data than at questioning it. If an economist gives me a number for something, I tend to take it at face value. That's a problem. One, this pushes you into believing nonsense - and I often do. Two, often, you often come across wildly conflicting sources of data, and end up not knowing what to believe at all.

I thought that was a me-problem. But it clearly isn't. Most people have no idea what’s happening. That became extremely clear when I heard Rama Bijapurkar (who I discovered through the excellent podcast The Core Report, which I discovered yesterday and plan to listen to quite often).

She talks about the recent (or perhaps, perennial?) discussion on how consumption is doing. Now, I've seen all sorts of answers to this question, and honestly, I don't know what to believe. The news tends to just devolve into a whole lot of noise.

In her short appearance and a similarly short article, Rama gives you quite a bit to think about. For one, consumption could mean all sorts of things—you can only really know what’s happening when you dig deeper into the drivers of consumption. Sometimes, high consumption is bad news. Two, if you rely on earnings calls or the results of a few listed companies, you will be blind to what's happening outside that business—and that can be a lot of stuff. Three, India’s basically as complex as an entire continent, and aggregate statistics like “urban” and “rural” club so many different regions that they basically tell you nothing. And so on.

Hearing her talk about the “middle class” was a big eye-opener. When I was a kid, there was a naive way I thought of the middle class: if you divided society into equal thirds, the middle third—the 33rd to 66th percentile—would make the “middle class." As I grew older, I figured that society was more like a pyramid. There’s a wide working class base, and the very tip of the pyramid is its elite upper class. The middle class sits somewhere in between. But where is it? How big is it? I had heard all sorts of answers—including one that said India’s middle class was made up of its drivers and domestic workers, and anyone that went to an office was part of the rich societal elite. That’s provocative, but it doesn’t really fit how people use the term at all.

Rama suggests that the'middle class’ is actually a sociological construct, not a numerical one. Simply put, middle-class people are those who behave like middle-class people—they're not just a random, disconnected chunk of people that statistically sit in the middle of society. Broadly, they are those that save a little bit of their money every year (30% or more of it, that is) and have enough of a cushion to get through bad times.

I haven’t read enough to know where this definition comes from, but it makes sense to me. “Middle class” is a useful analytical category when there is some basic similarity in its patterns of behaviour. If you define it in terms of savings and resilience, you zero in on a group of people that would generally feel safe, psychologically, to consume products or to make investments in things like houses or education. The behaviour of this cohort of people actually tells you something useful about the economy. If you widen this group, you end up clubbing together people that behave in vastly different ways. Your data then becomes noisy and tells you less.

Worth a read and/or a listen.

India’s Household Spending Crisis? Rama Bijapurkar Explains Consumption Trends

How not to discuss consumption

Bhuvan

This article depressed the hell out of me:

The report defined cash-poor as those living paycheck-to-paycheck, which some estimates believe is as many as 58% of Americans. SoLo found that the $39 billion that cash-poor Americans paid was on top of the advertised Annual Percentage Rate (APR) rates for short-term loans.

This reminded me of a misquoted stat about most Americans not having even $400 in their account to meet emergency expenses. Eventhough the stat is not totally right, theres some truth to it. There are a lot of poor people who live paycheck to paycheck and when you are poor, more often than not , the only option you have is predatory moneylenders and scammy fintech apps.

But, in my experience, there's also a class of people who live on paycheck to paycheck because they spend like there's no tomorrow. This is to say, there have poor impulse control. A lot of financial issues can be solved if people learn how to spend. Learning how to spend is skill just as much as saving is.

Krishna

The chip wars between the US and China have been intensifying, with the US taking a firm stance against any of its chip-making partners doing business with Chinese companies. TSMC, one of the world's largest chip producers, recently found itself in the spotlight when its chips were discovered in a Huawei processor. This revelation led TSMC to sever ties with a Singapore-based firm suspected of facilitating the transaction.

In response, the US has tightened its export controls, introducing stricter measures to ensure Chinese companies cannot access advanced chips through indirect or "shadow" routes. Key players like TSMC and Samsung are now required to ramp up their scrutiny and due diligence to prevent unauthorized access to sensitive semiconductor technology.

US Unveils New Rules to Curb Flow of Advanced Chips to China

TSMC cuts ties with Singapore firm over chip found in Huawei processor: sources

Tharun

Ruchir Sharma recently discussed on his podcast that the United States currently maintains a fiscal deficit of 6.4% of GDP, which stands as the highest among developed nations. He forecasts this deficit to increase to 7% by 2025, reaching what he considers unsustainable levels. According to Sharma, the U.S. has managed to sustain these high deficit levels primarily because the dollar serves as the global reserve currency. While the implications of deficits have changed significantly compared to 50 years ago, he argues that a correction is inevitable. This adjustment could have negative consequences, potentially leading to spending cuts that might affect welfare programs.

Everything You’re Told About Modern Capitalism is Wrong

Kashish

Whether you love them or hate them, you can’t ignore the impact of Hindenburg Research—that’s how I would describe them to anyone who asks. I’m in no position to pass judgment on the intentions or conclusions of their short-sell reports, but their tenacity is undeniable, as reflected in the depth of their research. I was pleasantly surprised to learn that Nate, the founder, plans to 'open-source every aspect of our model and how we conduct our investigations.' While I may not agree with everything they’ve written, it would be foolish not to study the research process behind Hindenburg’s work.

”This is my fear about AI – not its intelligence, but its ability to strip us of ours. By outsourcing every interaction to a machine, we lose something vital: authenticity”

A Personal Note From Our Founder

I love this bit from this article:

”This is my fear about AI – not its intelligence, but its ability to strip us of ours. By outsourcing every interaction to a machine, we lose something vital: authenticity”

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