Speaker 1: Welcome to Boomberg Opinion. I'm Vanny Quinn. This week Stephen
Speaker 1: Mim on the Bahamas behn and maybe more senses than one,
Speaker 1: and in less the geopolitics changes, and then the reliability
Speaker 1: of Kazakhstan as a source for most of the world's
Speaker 1: uranium is going to be contest or David Fickling on
Speaker 1: how the uranium supply chain is a little too dependent
Speaker 1: on one nation for comfort. And later we'll speak with
Speaker 1: Juli Ran and China system of taxation, But first to
Speaker 1: the markets, and John alters this cautionary tale this week.
Speaker 1: Essentially he says, but where the barrage of predictions for
Speaker 1: three flooding or inbox right now? And John joins us. Now, John,
Speaker 1: we come to the Roman calendar year end with a
Speaker 1: bunch of assumptions, including that there's often a so called
Speaker 1: Santa Claus rally and so on. So let's first ask
Speaker 1: what does actually happen in terms of things like position
Speaker 1: squaring or profit taking or loss harvesting that we should
Speaker 1: be aware of in the run up to December thirty one. Well,
Speaker 1: it's it's often known in Britain as bed and breakfasting,
Speaker 1: the idea of taking losses to give yourself an allowance
Speaker 1: to maximize your ability to offset capital games. There's a
Speaker 1: lot of people have taken a lot of losses this year.
Speaker 1: You might well find that there's some confusing activity when
Speaker 1: that happens, and there's window addressing when people want to
Speaker 1: end the year with portfolios that make it look like
Speaker 1: they've been smart buying into stocks that have done well,
Speaker 1: even though it's almost exactly what they shouldn't be doing.
Speaker 1: It's difficult to work through exactly what that's going to
Speaker 1: imply for this year, when frankly, there was almost nothing
Speaker 1: you could have been in that would make you look smart,
Speaker 1: and it would be a great idea to prove that
Speaker 1: you were in cash at the beginning of the year.
Speaker 1: You don't really want to be in that position now.
Speaker 1: So it is going to be a strange final months
Speaker 1: of the year. And next week we have the final
Speaker 1: inflation numbers, followed immediately after by the f O m C.
Speaker 1: I suspect that's still overshadows absolutely everything else and wild
Speaker 1: in the foreseeable future, I imagine that will trump any
Speaker 1: of the excitement that would come with the end of
Speaker 1: the candy right, and we're actually almost lucky that there
Speaker 1: are still catalyst or it will be quite the long December.
Speaker 1: But something else that happens from early December usually as
Speaker 1: we get analyst predictions, huge long research notes outlining cell
Speaker 1: side assumptions for your head and predictions. One of the
Speaker 1: wilder predictions that did catch by. I don't know how
Speaker 1: many I've been through, but yeah, this is the time
Speaker 1: of year when you get a lot of predictions that
Speaker 1: The good side of this is that it's a very
Speaker 1: good discipline to force yourself to sit down as a
Speaker 1: piece of paper within a spreadsheet and come up with
Speaker 1: a clear prediction. There's no question that that's a good discipline.
Speaker 1: Just like a college, it's a good idea to actually
Speaker 1: have to write an essay or whatever. Actually publishing what
Speaker 1: you're expecting and what your assumptions are is a good idea,
Speaker 1: and a lot of the research that people produce at
Speaker 1: this time of year is pretty interesting. It's worth finding
Speaker 1: a way that says there's almost no point taking any
Speaker 1: notice at all of what they say for their final numbers,
Speaker 1: particularly for the stock market, because the stock markets on
Speaker 1: a year year basis is incredibly difficult to predict, and
Speaker 1: it tends you know the stock market rises by an
Speaker 1: average of seven or eight percent a year over time.
Speaker 1: It's very rarely rises by seven or eight percent in
Speaker 1: any one year. Tends to be up in double figures
Speaker 1: or very occasionally take a big ball, but it's unusual
Speaker 1: to get a year when it just gains about seven
Speaker 1: or eight percent, even though on average over the very
Speaker 1: long term that's what you can expect to get. But
Speaker 1: there is some usefulness to your head prognostications though, right
Speaker 1: even if it's only to knock people out of habitual thinking.
Speaker 1: I certainly agree that it's worth thinking through what you
Speaker 1: really believe. It would probably be more useful to try
Speaker 1: to come up with predictions five or ten years hence,
Speaker 1: which are impossible obviously so many unknowns. Once you've begin
Speaker 1: to go out further into the future, but you then
Speaker 1: have a much clearer scenario analysis, and you have much
Speaker 1: more of a grasp of what you see, both the
Speaker 1: risks and the opportunities. Being the long view move into
Speaker 1: the future. It's a cliche, but it is true that
Speaker 1: the more likely that the stock market is going to
Speaker 1: do well for you, but you still need to work
Speaker 1: out what criteria will determine exactly how well it does. Meanwhile,
Speaker 1: the fascinating thing wrote up with some research from Jannis
Speaker 1: Henderson is that analyst the pretty good at predicting how
Speaker 1: much of companies will earn, what their profits will be,
Speaker 1: and for one year that is almost useless. So this
Speaker 1: year was all about a fall in pe ratios, which
Speaker 1: almost nobody predicted, and earnings growth has been fine and
Speaker 1: almost exactly an a lot of people predicted. Doesn't help
Speaker 1: at all explain what's happened on the market this year
Speaker 1: or predict what was going to happen in the right
Speaker 1: And that's a real question. Has this year been an
Speaker 1: exception in terms of sharks or black swan events or
Speaker 1: our so called longer term trends still intact. My best
Speaker 1: guess is that it's probably a regime change year. I mean,
Speaker 1: the regime that started to change in It was obvious
Speaker 1: that something was going to give, and we've finally seen
Speaker 1: that this year because inflation really is back and the
Speaker 1: correlation between bonds and stocks is breaking down. So a
Speaker 1: lot of those assumptions finally got shaken this year, and
Speaker 1: that is one of the interesting things about looking at
Speaker 1: all the research. Incidentally, there is more dispersion than there
Speaker 1: usually is, meaning that you know, there's greater uncertainty and
Speaker 1: people are admitting to greater ansepty because a lot of
Speaker 1: reliable models for the last twenty years aren't working. On
Speaker 1: top of that, we had one very major bona fide shock,
Speaker 1: which of course the invasion of Krane, and frankly a
Speaker 1: shock that wasn't so much less in economic terms, which
Speaker 1: as zero COVID in China, that when everybody thought the
Speaker 1: pandemic was pretty much over, China suddenly started seeing it's
Speaker 1: ekond of be being far more affected by it than
Speaker 1: it had been before. So those are very major shocks
Speaker 1: at the point when the regime appears to be changing anyway.
Speaker 1: So this has been a very unusual year. We do
Speaker 1: seem to be having many of these unusual years and
Speaker 1: in the most recent decade. But John, even if you
Speaker 1: knew what was coming for sure, even if you're absolutely
Speaker 1: guaranteed that something was going to happen, would guarantee us
Speaker 1: a better return. It's not necessarily the case, isn't. No.
Speaker 1: I mean, if you've already discounted the good news ahead
Speaker 1: of time, then just as well that the good news
Speaker 1: finally materializes. But it doesn't particularly help you at that point.
Speaker 1: Even if you know what's coming, if the market is
Speaker 1: wildly overpriced is predicting what's coming, you could still come
Speaker 1: a cropper. You not only need to know what's coming,
Speaker 1: you also need to work out how well the market
Speaker 1: disposition for it, and if things are bad, you also
Speaker 1: need to understand what the systemic might be. So many
Speaker 1: of the other very interesting example this year, it's not
Speaker 1: a true Black Swan event because I don't think crypto
Speaker 1: big enough, but some of the horrors in crypto were
Speaker 1: very major, significant deals. And obviously because it's crypto, which
Speaker 1: has only been around a little bit more than a decade,
Speaker 1: there's a lack of precedents for it. Luckily, would appear
Speaker 1: that crypto isn't linked enough with trag fi as we
Speaker 1: have the traditional finance that it's going to cause a
Speaker 1: systemic events in itself. So John, given that the new
Speaker 1: Year that that we know and love or hate is
Speaker 1: not the new year in every geography or market, how
Speaker 1: do other markets do over US holidays? That's an interesting one.
Speaker 1: Thanksgipping can create some very weird dynamics in the rest
Speaker 1: of them because there's no real holiday at all, and
Speaker 1: it's complete shutdown here in the States Christmas. It's interesting
Speaker 1: almost the other way that Europe really does just go
Speaker 1: into complete hibernation for a whole week, and the US,
Speaker 1: despite being a more religious country in many ways, doesn't
Speaker 1: take Christmas so seriously. Yes, so you do get some
Speaker 1: very strange effects that way. In general, anything that's happened
Speaker 1: in the last two weeks of the year, though, is
Speaker 1: so likely to be driven by load liquidity that it
Speaker 1: can really alter perceptions in a way it shouldn't. And
Speaker 1: also the fact that you mentioned China earlier, we have
Speaker 1: another New Year coming up in a couple of months. Times, well,
Speaker 1: the Chinese New Year really messes things around. You have
Speaker 1: to any Chinese daity, you have to start applying moving
Speaker 1: averages to and stuff, or otherwise you just can't quite
Speaker 1: see what's happening because of the big shift caused by
Speaker 1: the moving lunar new year. Yes, you mentioned how Jannis
Speaker 1: Anderson had talked about the dispersion in predictions this year.
Speaker 1: One prediction you point out that seems to be almost
Speaker 1: a universal article of faith, and that's a quote from
Speaker 1: your column, is that the US will fall into a recession.
Speaker 1: But you point out the amount of vocabulary being used
Speaker 1: is hilarious, you know, playing villain a garden variety soft dish.
Speaker 1: But one phrase stood out to you, and that's rolling recession.
Speaker 1: It sounds very ominous. Explain what it is. I'm not
Speaker 1: I'm not sure that this is from ms and Saunders
Speaker 1: some ways almost moderately positive in the ideas that there's
Speaker 1: been a succession of different sectors that have felt the
Speaker 1: problems in turn and others that have done relatively wellness
Speaker 1: and results. That's in part because the initial pandemic had
Speaker 1: such differential effects, much bigger impact on some parts of
Speaker 1: the economy than those oil prices. The last pay checks
Speaker 1: are now actually down for the year, incredibly. It's possible
Speaker 1: that energy, which has been one of the factors that
Speaker 1: has kept everybody else the loft, is now going to
Speaker 1: be under performing and that that will help other factors.
Speaker 1: That's the notion of the Roding recession is that following
Speaker 1: the very unusual circumstances of pandemic, it will be an
Speaker 1: unusual recession which it's particular parts of the economy particularly
Speaker 1: badly at different times, but spares others at different times.
Speaker 1: So all we have to do is make sure we
Speaker 1: pick the right parts of the economy to exactly at
Speaker 1: any one time. Yes, Bloomberg Opinions, John Authors, stay tuned.
Speaker 1: Stephen mim next on the outlaw status of the Bahamas
Speaker 1: HQ two fd X in a long line of opaque enterprises.
Speaker 1: This is Bloomberg Opinion. You're listening to Bloomberg Opinion. I'm
Speaker 1: Vonnie Quinn the Bahamas. Who wouldn't want to be headquartered there?
Speaker 1: Work there, commute to and from that beautiful island nation.
Speaker 1: And yet well, let's pause for a moment and bring
Speaker 1: in Bloomberg Opinion columnist and the University of Georgia professor
Speaker 1: Stephen mim So. Stephen, Obviously, the reason we're talking about
Speaker 1: the Bahamas is it hosted the headquarters of Crypto Exchange
Speaker 1: f t X, which obviously imploded in recent weeks. We
Speaker 1: don't even know the extent of the damage caused by
Speaker 1: ft X and the associated Alameda. You say, though, that
Speaker 1: the first red flag came long before things like opaque
Speaker 1: balance sheets and oddline items. It was actually the fact
Speaker 1: that the HQ was the Bahamas. Why is that? Well,
Speaker 1: you know, the Bahamas have this longstanding reputation which is
Speaker 1: arguably quite deserved of being somewhat loose place legally, a
Speaker 1: place that really likes to tolerate. It has for decades
Speaker 1: tolerated so fairly shadowy banking operations and also very kind
Speaker 1: of fly by night financial operations. It has regulation, but
Speaker 1: they are not capably ministered at least haven't been. That's
Speaker 1: gotten a very bad reputation. Now is this something that
Speaker 1: a particular administration has guided the island towards or is
Speaker 1: this something that's been true of the Mohammas since the
Speaker 1: founding of the island nation. Well, you know, in a way,
Speaker 1: you could argue that geography is destiny on some level
Speaker 1: when it comes to the Bahamas, because it's incredibly close
Speaker 1: to the United States, so it's very convenient, but it's
Speaker 1: also operating completely outside of its legal shadow So um
Speaker 1: long ago, centuries ago, it was a center for piracy
Speaker 1: and people sort of operated there with community, even though
Speaker 1: it's a British colony basically kind of run by warlords
Speaker 1: Thomas Um. But later it became place to run guns
Speaker 1: during the Civil War and then during Prohibition. That's really
Speaker 1: when it's story really takes off. The white former kind
Speaker 1: of planter class got into rum bootlegging and shipping run
Speaker 1: and that seems to have created a kind of ethos
Speaker 1: on the island among the white ruling class that tolerated well,
Speaker 1: in that case, illegal operation. But that continued decade after decade.
Speaker 1: You know, in the nineteen thirties, as provision ended, it
Speaker 1: went into tax evasion. It became the go to place
Speaker 1: for evading high income taxes in the United States. And
Speaker 1: that's just kind of percolated. No, you say geography, but
Speaker 1: also I guess it's just out of the reach of
Speaker 1: other regulators. Can other kinds of authorities be involved when
Speaker 1: it comes to something like crime or shadowy behavior? I mean,
Speaker 1: could somebody be extradited from the Bahamas for example, Yes,
Speaker 1: there are tradition treaties. The bigger problem is the sharing
Speaker 1: of financial information and the Bahamas selective refusal to do
Speaker 1: so with other nations in a kind of reciprocal way.
Speaker 1: You know, it's gotten a lot of attention, negative attention,
Speaker 1: or being a place where you can have offshore bank
Speaker 1: accounts that are unregulated and untaxed, and you know, they've
Speaker 1: gotten a lot of pressure to comply with international regulation,
Speaker 1: especially after the year two thousand and because they were
Speaker 1: put on a blacklist. Basically that made it clear that
Speaker 1: you shouldn't do business with them. And so since that
Speaker 1: time they've sort of grudgingly cooperated, but they've done so
Speaker 1: through this rather clever way of saying, yes, we agree
Speaker 1: to share information. However we're only going to share information,
Speaker 1: say with the Cayman Islands, We're not going to share
Speaker 1: information with the EU or what have you. So it's like,
Speaker 1: basically they're cooperating with other tax havens, but not with
Speaker 1: core economic centers at the global financial system. Well that's fascinating.
Speaker 1: I mean, is there competition between tax havens? Then yes,
Speaker 1: there is. Actually it's kind of you know, it's like
Speaker 1: a race to the bottom. You know, remember the Panama papers.
Speaker 1: You know, Panamas is a place that Switzerland is obviously
Speaker 1: has a very different reputation. But then you have a
Speaker 1: lot of these other typically former colonial possessions now independent
Speaker 1: nations manual out to other South Pacific uh, small nations
Speaker 1: that have become places for this sort of offshore banking.
Speaker 1: What will change it? Because you know, we think of
Speaker 1: the Bahamas is this beautiful island nation. I'd love to
Speaker 1: work there, you know, you'd love to work from there.
Speaker 1: It'd be an easy commute. Would the Bahamas ever want
Speaker 1: to become sort of on the up and up as
Speaker 1: opposed to a place known for the fact that it
Speaker 1: has a little bit of an outlaw status. Well, you know,
Speaker 1: I think there's obviously a downside to the crypto implosion
Speaker 1: taking place within the Bombas and this doesn't give them
Speaker 1: a lot of credibility. And but it would be a
Speaker 1: very hard habit to shake, and historically has a lot
Speaker 1: to do with the relationship between a ruling class that
Speaker 1: has had a lot of involvement in very clandestine or
Speaker 1: shadowy things, and that's probably a very hard habit to break.
Speaker 1: It's changed a lot, obviously since independence in the nineteen seventies,
Speaker 1: but a lot of the original players they're known as
Speaker 1: the Bay Street Boys, which makes it sound like they're
Speaker 1: like a K pop band or something, but they're is
Speaker 1: the easy exactly. But these are like people of British
Speaker 1: descent who ran the islands for decades and cut all
Speaker 1: sorts of corrupt deals with organized crime and the like.
Speaker 1: And I think a lot of that still carries over
Speaker 1: and probably paved the way for when Crypto made its appearance.
Speaker 1: Like you know, here's a new kind of financial speculative
Speaker 1: entity that's unregulated. It's like, let's, you know, someone in
Speaker 1: the Bahamas, and they did. They really made a push
Speaker 1: for this, like let's bring crypto to the Bahamas, and
Speaker 1: they succeeded. Unfortunately, that's still very much in play of
Speaker 1: kind of like do you need a charter? You know,
Speaker 1: like and also conversely, interestingly enough, historically denying people charters
Speaker 1: people who come in and like someone else's Meyer Landsky
Speaker 1: mob figures like you're not letting them in and they
Speaker 1: can't build the I mean, the casino stuff is the
Speaker 1: whole awesome side of this. There was a great story
Speaker 1: this air to the Amp Fortune went in and tried
Speaker 1: to build a casino and keep built it on an
Speaker 1: island off of NASA, and then the Bay Street boys
Speaker 1: were like, now, like, you're not going to be allowed
Speaker 1: to take a boat out basically, I mean, it's bad
Speaker 1: for him. He got Bahamas blocked, Yes, Bahamas blocked exactly. Yeah.
Speaker 1: I mean, you have a column out that details some
Speaker 1: of these stories, and some of them are incredible and
Speaker 1: very fascinating, the type of thing that you know, we
Speaker 1: all love to read. But at the same time, often
Speaker 1: these things end very badly for a lot of people,
Speaker 1: as the ft X history is going to for a
Speaker 1: lot of people as well. What's the future for the Mohammas.
Speaker 1: I mean, the fact that a company is headquartered to
Speaker 1: the Mohammas. Is that enough to suggest that there should
Speaker 1: be a red flag or there plenty of companies that
Speaker 1: are completely transparent and operating completely in the open that
Speaker 1: are based there. There are legitimate companies that are based
Speaker 1: in the Bahamas, for sure, absolutely. What's troubling though is
Speaker 1: the number that are not so legitimate and have been
Speaker 1: you know historically this is I think less of a
Speaker 1: problem now, but in the nine seventies, for example, the
Speaker 1: late seventies, there were three hundred banks of the Bahamas.
Speaker 1: There were more banks than bars in the Bahamas, and
Speaker 1: the vast majority of them what are called like suitcase corporations.
Speaker 1: They were effectively a post office box and nothing more,
Speaker 1: but they were obtained a kind of bogus charter. So
Speaker 1: the problem is that while there are very legitimate businesses
Speaker 1: in the Bahamas, I have no doubt the damage that
Speaker 1: it does to those businesses to be in the same
Speaker 1: place as these other businesses is really unfortunate and I
Speaker 1: think then that goes to your question actually about like
Speaker 1: what is the future Bahamas, because it's like guilt by association,
Speaker 1: which may well be unfair, but that probably then has
Speaker 1: an unfortunate consequence on future development. I mean to some extent,
Speaker 1: I guess I or anybody wouldn't want to judge the
Speaker 1: island nation given that it needs tourism. Absolutely, I suppose
Speaker 1: the easy way to ask it, can we blame the Bahamas? No?
Speaker 1: And this is really what I've written in Certainly the
Speaker 1: reporting on there's the Bahamas really should not be blamed
Speaker 1: so much as Sam Bankman freed his associates and f
Speaker 1: t X, which were clearly operating in ways. You know.
Speaker 1: The The interesting thing though is for outside investors, the
Speaker 1: decision will locate there. You know, it should have been
Speaker 1: something that might have might have indicated that there could
Speaker 1: have been something because they since there is this history
Speaker 1: of not really asking to question when someone sets up
Speaker 1: financial operations in the island nation, and as it turns out,
Speaker 1: those fears would have been entirely justified about f t X.
Speaker 1: If someone is coming too who says, you can't see
Speaker 1: our balance sheet. We're based at the pomise like it's like,
Speaker 1: good Lord, you know, maybe you want to look into that.
Speaker 1: Bloomberg Opinion columnist and University of Georgia professor Stephen Mim
Speaker 1: you're listening to Boomberg opinion. I'm Vonnie Quinn. Kazakhstan reelected
Speaker 1: its incumbent president last month for the next seven years.
Speaker 1: President Okayev will run the two hundred billion dollar economy
Speaker 1: and the world's largest uranium producer. Now. Kazakhstan chair is
Speaker 1: the second largest border in the world with Russia, after
Speaker 1: the U. S. Canada border, and this is where things
Speaker 1: get complicated. Relations have been a little strained, to say
Speaker 1: the least, since Russia's invasion of Ukraine, which TOKAIV does
Speaker 1: not support. Bloomberg Opinions. Savid Fickling has been examining how
Speaker 1: countries who need uranium on their way to zero carbon
Speaker 1: power need to start figuring out their supply chain now
Speaker 1: or uranium might be the next critical mineral crisis. He
Speaker 1: joined us for a conversation. When we talk about uranium,
Speaker 1: I guess most of us immediately think about nuclear power,
Speaker 1: particularly after the experience of war in Ukraine. Though atomic
Speaker 1: energy is now not destined for extinction, so explained to
Speaker 1: us who were depending on for uranium and also uranium oxide,
Speaker 1: the material that's needed for nuclear power. Yeah, so I
Speaker 1: mean uranium oxide is the hided material that is produced
Speaker 1: by mind and events have further refined and produced the
Speaker 1: nuclear field that's actually put into nuclear path plants. Let's
Speaker 1: bear about about three quarters of nuclear generation happens essentially
Speaker 1: in our E C D countries Europe, North American developed ASA.
Speaker 1: That will shift a little bit to as we see
Speaker 1: more nuclear plants switched on in places like China, India,
Speaker 1: But essentially three quarters of nuclear generation is in the
Speaker 1: rich countries. But those countries there are allies, only provide
Speaker 1: about of the uranium that's actually needed to fuel those
Speaker 1: reactors you need each year about seventy five thousand tons
Speaker 1: of uranium side roughly two thirds comes from China, the
Speaker 1: former Soviet Union, around and Pakistan, essentially countries that are
Speaker 1: not well aligned with those rich countries. And as we
Speaker 1: look at the problems in twenty two of being dependent
Speaker 1: for fuel on a country with which you're not aligned geopolitically,
Speaker 1: we need to think pretty hard about the fact that
Speaker 1: the same situation prevails with uranium, and particularly a huge
Speaker 1: proportion of the world's uranium comes from just one country, Kazakhstan,
Speaker 1: and Kazakhstan's diplomatic position is quite an interesting one. It's
Speaker 1: become more interesting in twenty two They seem to have
Speaker 1: been wanting to be rather more independent of Russia than
Speaker 1: they have been historically. But if you just look at
Speaker 1: the position of Kazakhstan on the map, it is very
Speaker 1: hard for them to carve out a policy that's truly
Speaker 1: independent of Russia and China together, because they are sand
Speaker 1: much in those countries. David, how far out is uranium
Speaker 1: traded and how is it even traded as a contract.
Speaker 1: It's not an established and liquid futures market, and even
Speaker 1: pricing for uranium tends to be from sort of private sources.
Speaker 1: There are no widespread futures contracts in uranium. Having said that,
Speaker 1: there is a very clear idea of long term costs,
Speaker 1: and this is actually one of the reasons that you
Speaker 1: see Kazakhstan has become so dominant as a producer of uranium.
Speaker 1: Thirty dollars a pound is a sort of benchmark price
Speaker 1: for viability outside of Kazakhstan. Most production costs considerably more
Speaker 1: than that, and of course, if you think Back in
Speaker 1: the history of this in the two thousands, it was
Speaker 1: not expected that wind and solar would take off the
Speaker 1: way they did, so uranium was seen as a future
Speaker 1: that a lot of investment went into places like Kazakhstan.
Speaker 1: And then eleven you have the for Kushima disaster. Atomic
Speaker 1: generation plummets and prospects of atomic generation plummet even more
Speaker 1: so a lot of that investment was basically burnt, and
Speaker 1: what was left behind was Kazakhstan is the cheapest producer
Speaker 1: in the market. There are a lot of other projects
Speaker 1: out there that have been mapped over the last thirty
Speaker 1: fifty years. People know the uranium resources that are there,
Speaker 1: but it is not economic to mind that uranium. I
Speaker 1: was speaking to a produced a rare earth in Australia
Speaker 1: here and they have a project called Nolans in Australia
Speaker 1: which is a rare earth project. Rare Us often occur
Speaker 1: in combination with uranium. Back in the two thousands, they said, well,
Speaker 1: we can produce rare us and we can produce uranium.
Speaker 1: We can make money from each thing. Now that uranium
Speaker 1: is seen as a waste material, and in terms of
Speaker 1: when they're making their pictures to investors, The questions are
Speaker 1: not how much money can you make from this uranium?
Speaker 1: It's how do you deal with the cost of this
Speaker 1: worthless uranium. It's essentially there because there is so much
Speaker 1: low cost production coming out of Kazakhstan that more marginal
Speaker 1: projects elsewhere in the world are just not viable. But
Speaker 1: let's just have a think about this in combination with
Speaker 1: what's happening in twenty two. Of course, we're now all saying, gosh,
Speaker 1: Europe made a big mistake in the eighties and in
Speaker 1: the nineties two thousands by becoming so dependent on Russian
Speaker 1: gas just because Russian gas the cheapest source of energy.
Speaker 1: Were really seem to be making the same mistake here
Speaker 1: with uranium. There's an unreliable supply chain there for uranium.
Speaker 1: If we actually want to unlock a more reliable supply chain,
Speaker 1: we need to have higher incentive prices, and that's going
Speaker 1: to mean we need more development of nuclear power plants
Speaker 1: to increase demand in the market. Tell me a little
Speaker 1: bit about storage. Can you store uranium for the long term? Well,
Speaker 1: I mean, obviously, an overarching issue we've had since the
Speaker 1: start of atomic energy is how do you deal with
Speaker 1: nuclear waste? Of course, but in terms of nuclear fuel storage,
Speaker 1: you can store it a bit and most nuclear plants,
Speaker 1: well all nuclear plants will have a storage facility on
Speaker 1: site for nuclear fuel that's not yet being loaded into
Speaker 1: the reactor. You reload the fuel like a cold plant,
Speaker 1: where you're putting it in all the time with newclear fuel.
Speaker 1: Every eighteen months or so, you replace about a quarter
Speaker 1: of the fuel that's in the reactor. And the fuel
Speaker 1: comes in the forms of these fuel assemblies, which are
Speaker 1: a series of rods which are kept in a very
Speaker 1: secure facility on site. They're moved from that fatility into
Speaker 1: the reactor and that's a process that goes on continually.
Speaker 1: It's a a very slow refueling process, but it is
Speaker 1: essentially a reviewing process. The organing credits to the Simpsons. Yeah,
Speaker 1: exactly exactly. But obviously you can't keep unlimited quantities of
Speaker 1: that fuel on site. You have only sort of limited capacity.
Speaker 1: There are a lot of things that need to be
Speaker 1: done at a nuclear power plant, so there's a limited
Speaker 1: space for that. And of course anywhere we are handling
Speaker 1: nuclear material there is a perforation risk. So it's not
Speaker 1: like nuclear plants can stock up for the next three decades.
Speaker 1: With all of the uranium they're going to need, there's
Speaker 1: always going to need to be a supply chain going
Speaker 1: from minds to nuclear power plants to waste facilities. Yeah,
Speaker 1: this is a bit of a conondrum. I mean, on
Speaker 1: the one hand, you have political factions in many developed
Speaker 1: countries fighting against atomic power, for example the Green Party
Speaker 1: in Germany which didn't want an extension to Germany's nuclear
Speaker 1: operating licenses. On the other hand, you've countries such as
Speaker 1: frans and raising nuclear completely and even Japan after for Kushima.
Speaker 1: I mean, I think the expectations should be particularly in Asia,
Speaker 1: a lot of these plants have been set up with
Speaker 1: in the last ten years, so they will operate for
Speaker 1: likely fIF the years without problems. In developed countries where
Speaker 1: the fleet and nuclear plants is a lot older, I
Speaker 1: think that question is still up for debate. You know,
Speaker 1: the real factor that's actually dealt a blow to atomic
Speaker 1: energy over the past fifteen years. Certainly a green politics
Speaker 1: in Europe plays a part in this, but I think
Speaker 1: the biggest factor is the extreme difficulty of building nuclear plants.
Speaker 1: Billions have been spent on plants that have never been developed,
Speaker 1: and particularly we saw sort of further blow dealt to
Speaker 1: that by for Kushima. Now the thing that gets talked
Speaker 1: about on in this space is small modular reactors. This
Speaker 1: is the idea that you could build much smaller plants,
Speaker 1: much more of them, the sort of factory building production
Speaker 1: line type benefits. So what happens to geopolitical alignment? As
Speaker 1: you say, I mean, how should countries think about this
Speaker 1: going forward? Yeah, Well, I said earlier that the diplomatic
Speaker 1: existion of Kavakstani is a very interesting one, and I
Speaker 1: think you know, we're seeing everywhere in the former Soviet
Speaker 1: Union and outside of Russia. There are some interesting developments
Speaker 1: happening in that periphery in terms of governments being much
Speaker 1: less willing to do Moscow's bidding. But I think if
Speaker 1: you think of really long term geopolitics, you think of geography,
Speaker 1: and Kazakhstan, as I say, is landlocked. It's landlocked on
Speaker 1: most sides by China and Russia. On the other side
Speaker 1: by Iran and by Afghanistan, and there's a small order
Speaker 1: through Turkmenistan and aster by jan In terms of getting
Speaker 1: nuclear material out of Kazakhstan, if you do it by
Speaker 1: road or by rail, it has to go through one
Speaker 1: of those countries. Even if you do it by air,
Speaker 1: generally it's not flown by air because of course there's
Speaker 1: greater risk around. Carrying things like that by air technically
Speaker 1: would be possible, but of course even as air space
Speaker 1: is circumscribed by those countries, so in less the geopolitics changes,
Speaker 1: then the reliability of Kazakhstan as a source for most
Speaker 1: of the world's uranium is going to be contestal. And
Speaker 1: that's why, you know, I think if you go back
Speaker 1: to the era of the Cold War, if you go
Speaker 1: back to the seventies and eighties, something like the US,
Speaker 1: it was actually self sufficient in uranium. A vast amount
Speaker 1: of effort was put into ways of producing uranium from
Speaker 1: domestic fosse fate reserves and things like that. Really there
Speaker 1: is no domestic US production of uranium. Now there's a
Speaker 1: little bit of sort of reprocessing and things, but of
Speaker 1: fresh mind uranium, there is none of it. That is
Speaker 1: the sort of thing that if you were talking about
Speaker 1: a future of real geopolitical cultural style grade power attention,
Speaker 1: which is, you know, if you're a military planner, that
Speaker 1: is the sort of thing that you are thinking about.
Speaker 1: After the events of two then you really have to
Speaker 1: be thinking about, well, how do we have resources Australia,
Speaker 1: Canada in those nations more reliable allies, Yeah and so
Speaker 1: on that then, David, what price would uranium need to
Speaker 1: go to in order for there to be more production?
Speaker 1: I mean, if there was a doubling advice, would that
Speaker 1: cause problems worldwide? Or it wouldn't really cause a problem
Speaker 1: for nuclear power plants the atomic energy sector as a whole,
Speaker 1: because essentially all the cost of running a nuclip plant
Speaker 1: is actually building the plant. Prices above fifty dollars a pound,
Speaker 1: and especially long term prices about fifty dollars a plan,
Speaker 1: they would start to change this picture quite significantly. Plenty
Speaker 1: of miners are sitting on uranium resources which they regard
Speaker 1: as waste because they can't get a good enough market
Speaker 1: price for it. Prices significantly above fifty dollars a pound
Speaker 1: would really start to have people going back to their
Speaker 1: spreadsheets and their mining essays and working out what they
Speaker 1: could do with that. But it has to be not
Speaker 1: what we'veing At the moment. We see a clear sign
Speaker 1: of short term prices spiking well above flat level. The
Speaker 1: thing that's going to make a minor sit up and
Speaker 1: take notice. Is long term pricing, which is different and
Speaker 1: frankly is hard to calculate with a fairly i liquid
Speaker 1: commodity like uranium. And it would really come down to
Speaker 1: if you're an offered a nuclear power plants, do you
Speaker 1: actually go a little bit like we see Hesler going
Speaker 1: to someone who operates a cobalt resource and saying, I
Speaker 1: want to buy your cobalt. It would similarly, I think
Speaker 1: require atomic energy utilities going to uranium minders and saying
Speaker 1: I want to buy uranium and I'll unlock it at
Speaker 1: this price. It's such a small or any liquid market
Speaker 1: that it really needs that producer to consumer contact. Were
Speaker 1: unlikely to have a sort of liquid futures market that
Speaker 1: would actually represent that numeral opinions. David Fickling to China
Speaker 1: now and its fiscal position, COVID zero was obviously drained
Speaker 1: public confers. The deficit in the budgets for all levels
Speaker 1: of government in fact is nearly triple what it was
Speaker 1: this time last year. Incomes her down due to tax
Speaker 1: breaks for business and land sales have slumped to spending,
Speaker 1: of course, has also spiked to pay for lockdowns and
Speaker 1: COVID testing policy. Banks, apport and bond issues. Will they
Speaker 1: haven't filled the funding gap. I spoke with Boomberg Opinions
Speaker 1: Shuli ran about how China approaches taxation. Surely, how do
Speaker 1: you see China developing its system of taxation over the
Speaker 1: next year or so? Will new taxes be created in
Speaker 1: order to deal with the fiscal problem? Actually, just explain
Speaker 1: how taxes are designed and collected now in China. I
Speaker 1: would say China's physical system is very cool. The government
Speaker 1: is not good at collecting taxes, unlike the U, S, I,
Speaker 1: R S. So like, for instance, China don't having Rican text,
Speaker 1: hardly has any property tax. There is definitely no wealth tax,
Speaker 1: even like a corporate tax. Companies are quite good as
Speaker 1: using accounting gimmicks to avoid corporate tax. Yes, there has
Speaker 1: been a lot of speculation of Chinese government implementing inheritance
Speaker 1: or wealth tax, but I think that actual implementation would
Speaker 1: be very difficult because they have to somehow find people
Speaker 1: who know how to calculate They then near wealth, right.
Speaker 1: I think they're better off just lasting onto those big
Speaker 1: tech companies JD dot Com, n or Ali Baba and
Speaker 1: say you provide employment, you provide social benefits for your
Speaker 1: employees for the local governments where you do business, because
Speaker 1: that's just easier than like tracking down individuals and high
Speaker 1: network families. How scared are the ultra rich in China?
Speaker 1: You mentioned in your column that after the Party Congress
Speaker 1: and President Chies and things speech, the rich got a
Speaker 1: little nervous. And China does have a system where you
Speaker 1: can renounce your citizenship. Obviously, if you can get citizenship elsewhere,
Speaker 1: would they have to pay an ex attack so to speak. Yeah,
Speaker 1: there is this speculation right now. The speculation is that
Speaker 1: China is going to follow the US system in that
Speaker 1: Chinese citizens at taxed worldwide. Right, so even in Hong Kong,
Speaker 1: I know it's business. They Hong Kong's global investment banks,
Speaker 1: they have been asking their employees of Chinese origin if
Speaker 1: they have the Chinese possible because they have to do
Speaker 1: the tax it holding, So they are quite nervous. And
Speaker 1: then the idea is that maybe when they China will
Speaker 1: also install an exces tax. And that explains why Singapore
Speaker 1: is so hot these days. If you go to Singapore,
Speaker 1: there will be a lot of which Chinese because Singapore
Speaker 1: doesn't have any inheritance tax, didn't have any wealth tax,
Speaker 1: and then it's been kind of culturally close to the
Speaker 1: Chinese society and a lot of very wealthy Chinese have
Speaker 1: moved there. Do you have any numbers on how many
Speaker 1: billionaires are in China and what kind of percentage in
Speaker 1: tax they do pay to their local municipalities and elsewhere.
Speaker 1: I think the bilitaires don't pay very much tax, just
Speaker 1: like the U S tax billionaires. They don't pay much tax, right,
Speaker 1: They don't pay themselves any salaries. They basically use their
Speaker 1: shares as collaterals to take her margin loans and I
Speaker 1: think it's a very similar system in China. So in
Speaker 1: that sense, they don't really pay tax because they don't
Speaker 1: really have income shuty. You mentioned that she pivots fast
Speaker 1: from week to week. We saw presidentcy make a huge
Speaker 1: pivot in terms of the COVID controls. Does that mean
Speaker 1: the president she is watching the markets as closely as
Speaker 1: we all are. I don't think he watches market, but
Speaker 1: he says watched his own fiscal conference. He watches his
Speaker 1: own wallet. And then what we have seen with the
Speaker 1: UK and what happened to the guilt market is that
Speaker 1: globally all governments start to have to worry about their
Speaker 1: fiscal responsibility and discipline. Right, and then like, because of
Speaker 1: this COVID control and the very stringent developer and tech crackdown,
Speaker 1: China is running its biggest ciscal deficits in decades and
Speaker 1: it has used up all its physical power. So going
Speaker 1: into three, he will have to reopen the economy and
Speaker 1: have to get along with big tech because otherwise that
Speaker 1: means that the China will have to raise his best feeling.
Speaker 1: And who is going to buy Chinese government bout or
Speaker 1: like you know, investment grade popery board because a lot
Speaker 1: of the issuers are government affiliates Bloomberg Opinions Shu Ran
Speaker 1: that doesn't for this week's Bloomberg Opinion. Do get in
Speaker 1: touch with us that we love to hear yoursels in opinions.
Speaker 1: I'm at Vequinn at Bloomberg dot Net. Don't forget. We're
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