Dear Readers, Its Thinking Time! Buckle up for a quick recap of global events. This week we cover European plane maker Airbus’ struggles to gain ground on Boeing, the Middle East’s increasing demand for strategic partnerships as Western funds vie for their business, Starbucks’ third CEO in two and a half years, and China’s challenge to Nvidia. TBL Thinks is our way to summarize the most important paywalled, longer reads relevant to global macroeconomics, helping you cut through the noise. With that in mind, please enjoy.
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Gulf Wealth Makes Its Presence Felt
Middle East Trillions Force New Concessions from Wall Street (BBG) With nearly $4 trillion in their vaults, and acute awareness of their importance to Western capital markets, the Middle East’s biggest state-controlled funds are increasingly asking asset managers what they’ll do in return for an investment. Investment firms are being urged, even required, to have more gatherings in the Gulf, bring in more people to live and work in the area, and set up local offices.
A group of sovereign wealth funds in countries including Saudi Arabia, the United Arab Emirates, and Qatar are flexing their financial might in a previously unseen way. The largest sovereign funds are also closing in on their circle of trusted asset managers, especially when decisions involve members of royal families and their top advisors. Western firms face a tough challenge as they try to keep expanding their business in the Middle East.
The Gulf puts money in US funds to diversify from its reliance on oil profits, but in doing so, it is not hesitating to flex its fiscal muscles. The Public Investment Fund (PIF), which manages $925 billion, is viewed as particularly aggressive in seeking a more prominent position on the world stage, and as it tries to develop Riyadh into one of the world’s premier destinations, it is mounting pressure on the world’s largest asset managers to set up offices in the region. The Qatari Investment Authority (QIA) is also making more aggressive demands in its transactions as it tries to bring more events to Doha, and favoring investments with domestic connections.
Moves from the Middle East have our attention, especially as such favorable attitudes have emerged toward bitcoin.
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A New CEO For Starbucks
Inside Starbucks’ Surprising CEO Firing and Hiring (WSJ) Turbulent times are brewing stronger than coffee for Starbucks this year, with the company dealing with two high-profile activist investors, public criticism from former CEO Howard Schultz, and slowing sales. This week it announced its third CEO in two and a half years—current Chipotle chief Brian Niccol is set to take helm of the global coffee chain.
The world’s largest coffee chain by sales, Starbucks cut its financial outlook for a second time this year as traffic in its cafes slowed, cutting into sales and profit. Starbucks also suffered a blow in China, a major growth market, as local rival Luckin surpassed it in sales and units. Former CEO Schultz also added to the company’s troubles when he took to LinkedIn to publicly criticize Starbucks and urge it to renew its focus and own its shortcomings.
Activist investors Elliot Investment Management and Starboard Value, and Schultz, are looking at Niccol’s appointment’s to turn things around for the company. At Chipotle, Niccol led the company with strong sales and profit even as other restaurant chains struggled, and despite a series of price increases, showed growth in sales in recent quarters, outpacing other chains including Starbucks. Is Starbucks a victim of inflation, unable to raise prices without shunning customers? Maybe the White House can ban $7 lattes.
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China Surmounts US Sanctions
Huawei Readies New Chip to Challenge Nvidia, Surmounting US Sanctions (WSJ) China’s Huawei Technologies is set to introduce a new chip for artificial intelligence use, challenging Nvidia. The company told potential clients the new chip called Ascend 910C can be compared to Nvidia’s H100, which was introduced last year and is not directly available in China. The communist country has been able to power on ahead and overcome sanctions imposed by the US, and develop alternatives to products made by the US and its allies.
Huawei is aided by billions of dollars in state support, and has become a national champion in areas like AI, and an integral part in Beijing’s efforts to “delete” American technologies. The technology Cold War rages on.
Nvidia creates less powerful variants of its chips to export to China to comply with export rules which prevented the company from offering its most advanced chips to China beginning of 2022—China has, however, found creative means to obtain the more powerful Nvidia chips. The Huawei Ascend 910C aims to fulfill the need for more advanced chips in the country. US trade policies are clearly having some effects opposite of what would be desired, an outright advance in Chinese technological capabilities.
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Until next time,
TBL Thinks
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Unchained empowers you to fully control your Bitcoin with a collaborative multisig vault, where you hold two of three keys and benefit from a dedicated Bitcoin security partner. Purchase bitcoin directly into your cold storage vault and eliminate exchange risks with Unchained's Trading Desk.
Unchained also offers the best IRA product in the industry, allowing you to easily roll over old 401(k)s or IRAs into Bitcoin while keeping control of your keys.
Don’t pay more taxes than you need to. Use code TBL for $100 off when you create an account.
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