{"text":[[{"start":4.85,"text":"A couple of weeks ago, a striking snippet of news emerged from Down Under: the New Zealand government signed a pact with Singapore which guarantees that the two countries will send each other food and fuel if global shortages erupt. "}],[{"start":18.9,"text":"“The past few months have shown we live in a volatile world — Kiwis are seeing that every time they fill up their car,” Chris Luxon, New Zealand’s prime minister, said. “That is why we are hustling in the world to protect [ourselves].” "}],[{"start":33.45,"text":"He is not alone. Australia recently signed a similar pact with Japan to maintain flows of rare earth minerals, fuel and agriculture to offset any crisis. The EU is considering regional stockpiles of fertiliser amid fears of a food crunch. And, as I have written, governments and companies around the world are now quietly stockpiling key items. Call this, if you like, a new fashion for hoarding and huddling as fears that we are entering the era of scarcity intensify."}],[{"start":62.35,"text":"This is ironic, in a cultural sense. Most western business and political leaders grew up in a world where scarcity seemed an old-fashioned problem. Seamless free trade and efficient supply chains that drive growth were the leitmotifs of the era of neoliberal globalisation. Moreover, the prevailing wisdom in Silicon Valley today is that technological innovation will remove future capacity constraints in many areas of our lives."}],[{"start":88.55,"text":"Indeed when the American writers Derek Thomson and Ezra Klein published a thoughtful book last year about rebooting America, they called it Abundance, in the hope of unlocking that future, and it quickly became a bestseller. "}],[{"start":101.89999999999999,"text":"Investors have absorbed this cultural vibe too. In the last couple of years there has been a stunning rally in the tech stocks that purport to use innovations, such as AI, to unleash that “abundance”. As a result, the so-called Magnificent Seven Big Tech companies now account for around 35 per cent of the S&P market, compared to 12 per cent a decade ago."}],[{"start":123.69999999999999,"text":"This is striking. But what is doubly noteworthy, as Jeff Currie of Carlyle wrote on X, is that while “information and technology services [are] 42 per cent of the S&P 500” today, “energy and materials [are] roughly 6 per cent” and “commodity hedge fund AUM [assets under management] is essentially nil.”"}],[{"start":142.54999999999998,"text":"Or to put it another way, investors have been so dazzled by services that they have long overlooked stocks linked to old-fashioned industrial and energy processes. Thus the “Heavy Asset, Low Obsolescence”, or Halo trades, have all “been starved of capital” in relative terms, Currie wrote. "}],[{"start":161.74999999999997,"text":"However, this approach jars with the current direction of world events and the threat of scarcity. The crisis around the Strait of Hormuz has already created shortages of energy and industrial inputs, and these are likely to worsen. "}],[{"start":175.99999999999997,"text":"The US war with Iran has also demonstrated the longer-term vulnerabilities around global trade, given that the strait is not the only transport chokepoint in the world and Iran is not the only country seeking to use such chokepoints for leverage."}],[{"start":189.19999999999996,"text":"And what investors sometimes overlook is that the eye-wateringly large capital investment plans being rolled out to support AI require not just hundreds of billions of dollars, but also molecules in the form of materials such as copper, water, gallium, lithium and concrete. "}],[{"start":206.44999999999996,"text":"The supply of these has been undermined in the US, among other countries, by the lack of capital investment in key industries or mines. And the more that politicians erect nationalist or protectionist barriers, the more that pressure to use capital to invest in local markets in order to ensure ready access to molecules will increase. "}],[{"start":225.99999999999997,"text":"“This is not an AI-disruption story. Halo is better read as Hard Assets, Local Operations,” wrote Currie, who forecasts a major repricing as investors shift from tech to Halo trades. As Craig Tindale, an Australian investor, noted on X: “The financial world and the physical world are pulling in opposite directions, causing the old economic rules to fail entirely.” "}],[{"start":248.14999999999998,"text":"Many observers in Silicon Valley might disagree. Indeed, on a recent visit to America’s West Coast I was struck by tech’s confidence that the stock market and AI boom can weather geopolitical turmoil. “Does anyone really care if the Strait of Hormuz is open?” one banker observed during the Milken conference, which was dominated by excitement about SpaceX’s upcoming initial public offering."}],[{"start":271.95,"text":"Maybe future historians will conclude that the techies were right. But investors today should nonetheless pay attention to how governments, in New Zealand and elsewhere, are already nervously adopting a scarcity mindset, and then ask if current weightings in the stock market index really reflect this."}],[{"start":290.5,"text":"After all, as Robert Rubin, former US Treasury secretary, wrote in the FT this week, “markets can be out of sync with reality for an extended period, and then react rapidly and harshly”. Once again, reality is likely to eventually exact its revenge."}],[{"start":311.79999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779503934_4748.mp3"}