To The Moon

My Investing Muse

Layoffs, closures and Delinquencies

• AirGas Declares Force Majeure On Helium Shipments As Qatar Production Collapses - MacroEdge

• Forrester found 55% of companies that laid off workers citing AI efficiency now regret it. More than a third spent more on rehiring than they saved. Klarna was the poster child. CEO said their chatbot was doing the work of 700 employees, then customer satisfaction tanked and they started quietly backpedalling. Goldman Sachs says stocks now drop an average of 2% after AI-attributed layoff announcements. - X user Hedgie

The price of war

A plastics shortage is emerging - X user Lukas Ekwueme

“Weekly fuel bills that ran to $13,800-$15,000 before the war are now heading toward $34,000 which amounts to a total value of a fish vessel, leaving no money to pay a crew” — Dutch Fishers Union - X user Lord Bebo

Space exploration and defence missiles rely on helium to pressurise rocket fuel tanks. It is completely irreplaceable because it does not combust or freeze in deep space. This is not a drill. Global supply chains are bleeding out, and you cannot just build a pipeline to replace this stuff overnight. The modern economy is having a cardiac arrest over an invisible gas. - X user Osint PK.

Prolonged War and Worldwide Effects

The ongoing war has now extended into its fourth week, causing the consequences to ripple far beyond the Gulf countries. Asia is particularly vulnerable, as the majority of its oil and gas supplies originate from this region. Although plans are being developed to ration resources and restrict consumption, the economic impact is expected to intensify if the conflict continues. What began as a military confrontation is rapidly evolving into a global economic crisis, affecting markets and communities far outside the immediate area of conflict.

Escalating Economic Distress

It is crucial to recognise that the longer the war persists, the greater the subsequent effects will be. There is anticipation that the upcoming harvest, six months from now, will suffer due to a shortage of fertilisers. Industries such as healthcare, semiconductors, and even those requiring helium for rocket manufacturing are likely to experience disruptions. Even if nations implement fuel rationing, these actions may not be sufficient to prevent the broader economic fallout that is expected to follow.

Inflation and Corporate Struggles

Reports suggest that some companies are struggling to manage rising prices, especially regarding fuel costs. This situation is likely to fuel inflation on a global scale, impacting economies around the world. Continuous monitoring of these developments is essential as the situation remains highly fluid and unpredictable.

Potential for Prolonged Conflict and Regional Threats

If troops in the region engage Iranian forces in ground combat, the war could become even more protracted. Another critical area of concern is the activity of rebels in Yemen, who pose a threat to the Red Sea, potentially disrupting vital trade routes and exacerbating the crisis further.

The Private Credit Risk

This sector presents significant visibility challenges, which may pose considerable concerns. Typically, borrowers resort to private credit when they are unable to secure loans from traditional banking institutions, where lending is governed by credit scores and risk/reward management practices. Consequently, loans in this segment are exposed to greater risk. Given these factors, it is reasonable to anticipate a higher incidence of defaults within the $3 trillion industry.

My Muse

The irony of AI replacement

When people are retrenched, they could be without income for a season. We hope that they can land a job soon. They will need to eat into their savings. Without a job, they have no income to spend. The market suffers with loss of revenue. Without a job, there is no tax revenue for the government. Is this an AI led vicious cycle?

When people are replaced, it spirals into other consequential issues of no spending power, affecting consumption (food, lodging, commute, and more) and with it, the government would have a reduced base for tax revenue. In fact, the government would need to respond to jobless claims.

Crude oil is essential for a range of products. It will cascade down to more areas like waterproofing, plastics, makeup, road paving, and more. The initial impact addresses shortages in fertilisers (affecting farmers, food supplies), helium (affecting MRI, rockets and semiconductors), energy (oil & gas) and others like supply chain, tourism, retail, insurance, affordability, hotels, supply of fresh food into the Gulf countries, the ships stuck in Hormuz and in need of replenishment and more.

Financial Strategy and Outlook

Let us spend within our means, invest only what we can afford to lose, and avoid leverage. Let us review our current holdings and divest from businesses that are losing their competitive advantages. Additionally, I will consider adding both hedging strategies and defensive positions to our portfolio to mitigate risk.

As we move forward, it is crucial to conduct thorough due diligence before assuming any new responsibilities.

Wishing everyone a successful week ahead.

@TigerStars

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