Friday, October 28, 2022

The U.S. Treasury's Poor Excuse for a Website... and the Taiwan Risk Beyond Chips

By Herb Greenberg (View Archive)

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GM's next big release has no engine and no wheels

In a shocking move, auto giant General Motors is venturing into a whole new space (hint: NOT electric vehicles). While industry analysts see this as a way of catching up with Tesla, the bigger reason could be because this new space is getting the full backing of the current administration and could mean huge tax credits in the future. Or it could just be that this fledgling industry has more scope than the declining auto industry. Whatever it may be, this move could put GM into the same bracket as Apple, Google, Microsoft, and Amazon. Get the details of this massive trend here.

I laughed out loud when I saw that the government's TreasuryDirect site had been crashing under the weight of a last-minute rush by investors to buy I bonds...

Today is the last day for investors to sign up to get 9.62%, before rates fall to an expected 6.47% for the next six months – still a good rate, but not the bonanza (relatively speaking) they had been.

But to get those high rates, there's a catch...

No, not the $10,000 per person per year cap, or the amount of interest you lose if you cash them in during the first five years...

The catch is you have to use the TreasuryDirect website, which, as one financial planner told the Wall Street Journal, "isn't known for its user friendliness."

Give that man the Understatement of the Year Award.

My wife and I signed up a few weeks ago. And we found that for signing up and signing in, the website is like a throwback to the days of dialup.

It's exactly what you might expect from a clunky, bureaucratic government website... only worse.

The system for inputting your username and password is as if it was designed by and for software engineers back when the Internet was still referred to as the World Wide Web.

It's so bad that it's almost like the U.S. government is trying to do everything possible to convince you not to lend it your money.

The good news is that it's so obtuse that nobody would ever hack your account, because it's simply not worth the time... It would be like trying to break into a house with 15 different combination-style padlocks.

Even better news: As bad as it is, it works... and we got our bonds. (Earlier this year, my colleague Whitney Tilson was also able to navigate the site successfully – he shared the details of how to buy I bonds in his June 17 daily e-mail.)

That doesn't excuse the government of the most technologically advanced country in the world, which invented the Internet, to have such a joke of a website.

Or maybe it's that rates were so low for so long that nobody ever went to the website, so there was no reason to update it.

Whatever the reason, here's a memo to the Treasury Department: Time for more than a reboot, and welcome to the 21st century.

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Billions Pouring into the Next Big Industry

Major investors are taking note - and the legend who bought Amazon at $2.41 and Apple at $0.35 is pounding the table on one $4 stock.

Moving on, in Empire Financial Research's predictions for this year, I had predicted that the markets would get walloped by a surprise out of left field...

I was right but wrong. I thought it would be a clash between China and Taiwan, not Russia and Ukraine.

Still, due to post-pandemic supply-chain issues and the impact on Taiwan-made semiconductor chips, especially on cars, we already have a sneak peek into what a broader disruption might look like.

But it's not just chips...

One of the holdings in my Investment Opportunities portfolio is LKQ (LKQ), which in the U.S. supplies junk and aftermarket parts for cars that have been in crashes...

All of the company's aftermarket parts are made in Taiwan, which is why I cited Taiwan and geopolitical uncertainties as a risk to the idea. (If you're a subscriber, you can read the full writeup on LKQ right here... If not, find out how to gain instant access to it – and the full Investment Opportunities portfolio of open recommendations – by clicking here.)

It's one thing to know the risk... but it's another to fully understand just how dire the true risk is far beyond just LKQ – especially the way CEO Nick Zarcone put it on LKQ's third-quarter earnings call yesterday, when he said (emphasis added)...

As you know, and as everyone knows, the entire aftermarket collision parts industry moved to Taiwan decades ago. There [is] no material production capacity outside of Taiwan. It just doesn't exist. There are no plants sitting in Mexico or Vietnam or India sitting idle waiting for the Taiwanese machine to get shut down, right? It doesn't exist...

And the reality is if they were to shut down the economy and shut down [those] kind of shipments out of Taiwan, auto parts is the least of everyone's concern. Sixty-five percent of all semiconductor production and 90% of all advanced chip production comes out of Taiwan. So if China were to embargo export shipments, you would not be able to buy iPhones or new cars or medical equipment or anything that has a chip in it.

And we think that the Chinese leadership is – they're very smart. They certainly don't want to cook the golden goose that Taiwan represents in the form of a really strong economy. Our sense, and in talking with outside advisers, is it'd be more likely that China would move kind of to a Hong Kong model first, where they would seek to have significant influence over the territory, but not just shut – totally just shut down their economy.

I hope he's right. Then again, people never thought Russia would do what it did to Ukraine, including the Ukrainians, just before the invasion.

Re-shoring, anyone?

As always, feel free to reach out via e-mail by clicking here. I look forward to hearing from you.


Herb Greenberg
October 28, 2022

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Herb Greenberg

Herb Greenberg is a senior editor at Empire Financial Research. Previously, he was the co-founder of Pacific Square Research and Greenberg Meritz Research & Analytics – both independent, short-biased investment research firms. Greenberg spent more than 40 years as a financial journalist at some of the country's leading newspapers, websites, and broadcast media, where he covered almost every industry. He served as senior stocks commentator at CNBC and was financial correspondent at the Chicago Tribune. He also spent 10 years as the daily business columnist for the San Francisco Chronicle, during which time he started his five-year run as Fortune's monthly Against the Grain columnist and was the morning business reporter for San Francisco's KRON-TV. When the Internet and online media were still emerging, Greenberg was one of the first mainstream journalists to make the shift online, when he became senior columnist at TheStreet. He later shifted to the same role at MarketWatch. When Dow Jones bought out MarketWatch, he added a weekend investor column for the Wall Street Journal to the mix. Earlier in his career, Greenberg was a reporter at Crain's Chicago Business and a business reporter for the St. Paul Pioneer Press. He also spent a year as an analyst at a risk arbitrage firm. Greenberg holds a bachelor's degree in journalism from the University of Miami and completed the Herbert J. Davenport Fellowship at the University of Missouri.

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