(Almost) Daily Musings

Evening all

Ski lift pass prices are outpacing inflation, courtesy of PE's love affair with the slopes. But I’m an optimist—I doubt Apollo’s hiking of Vail’s prices is about boosting top line. Clearly its a subtle nudge to prioritize the performance sport that really matters: après-ski.

While I am scouring the web for Mooserwirt’s cap table, I share today’s musings.

Cheers
Philip

Chart Art

Bengaluru Moonshots

As markets are roaring and vola has moderated since the election, one industry that is facing uncertainty and drastic shakeups is the business of import export. Not a shocker that Chinese exports to the US have drastically fallen since 2018. ~8% that is.

Indian exports to the US have shown slight increases, but let’s not throw confetti just yet—they’re still holding a smaller-than-expected share of Uncle Sam’s trade wallet. However, there’s reason to believe that the winds are shifting in India’s favor, and not just because of cheap labor or diplomatic charm. Here's the data worth chewing on:

• India’s 2023 Trade Balance with the US: Net positive at ~USD 28.3bn (Export/Import Ratio: 1.08x).

• Bilateral Trade Growth: Averaged 11.5% annual growth since 2000 — I do not dare benchmark my public market performance against this

• Key Exports:

  • Jewellery and Precious Metals: Think pearls, gold, and gems. All things that shine. And Marilyn Monroe’s best friends. At least by her account. USD 25bn in exports (FY 2023).

  • Electronics Engineering and Machinery

• Alas: History does not guarantee future results. So looking ahead I steer clear of shiny metals and focus on shining stars: SpaceTech:

  • The India-US Defence Industrial Cooperation Roadmap was signed in May 2023. Goal is to fast-track tech cooperation and co-production

  • The India-US Defence Acceleration Ecosystem (INDUS X) – a network of universities, incubators, corporates, think tanks, and private investment stakeholders was launched in June 2023 — focus is especially on advancing defence tech and bilateral collaboration. Example of this is also the tandem development of Air Launched Unmanned Aerial Vehicles (some may say this is continuation of Shia LeBeouf and the Transformers Saga. Others say ALUAV)

  • US DoD Space Force has signed the first International Cooperative Research and Development Agreement with two Indian start-ups. Specifically:

    • 114AI — dual use software for space domain awareness

    • 3rd Itech — imaging sensor supplier and developer of semi tech

    • Other players to keep tabs on: Pixxel, Dhruva Space, Digantara. All launched satellites for commercial and industrial application

• The global space economy was valued at USD 424bn in 2022 (USD 610bn by 2031)

  • Despite its ambitions, India currently holds just 2% of the global market share. Aims to increase this to 10%. If done in the same timeframe as the global market we have a double whammy. 8% market share capture + 4.1% global CAGR = 24.5% local market CAGR — in Private Equity there is an investment adage: Even great management cannot make a business work in a dying industry. Without being active in a thriving industry, long-term performance is hindered. Seems we have all but that in India’s SpaceTech

• For Indian SpaceTech and perhaps for a vacation destination if you are looking to escape winter’s gloomy temperatures: Bengaluru. 38% of SpaceTech companies in India sit here. Specifically the Bengaluru action seems to be in the Downstream segment of the Space value chain:

Downstream Applications: A Closer Look

India’s downstream sector is particularly thriving in these areas:

1. Earth Observation

   • Think agriculture optimization, disaster response, and even urban planning via satellite imagery.

   • Case in point: satellites are mapping droughts and irrigation patterns

     • Challenges: While the tech exists, adoption lags due to limited integration with decision-making systems at scale. Farmers need better apps, not just satellites.

2. Satellite Communication

   • SATCOM is helping bridge India’s digital divide by bringing the internet to rural villages. No Wi-Fi? Legacy. SATCOM is what's happening now.

3. Navigation and Timing

   • Beyond helping you find your nearest Starbucks, PNT services are critical for drone delivery systems, railways, and even asset tracking.

   • PNT and GNSS based drone tracking has been earmarked for an estimated market potential of USD 708m in the next five years

And to not leave you hanging for Space Trivia during the holiday season — the other value chain stops before and after downstream are:

• Upstream: Building, launching, and operating satellites.

• Auxiliary: Niche services like space insurance and tech training—yes, that’s a thing.

Investment in Indian SpaceTech has skyrocketed in the past three years, outpacing the previous decade’s funding combined. The big spenders fuelling these Moonshots:

• Speciale Invest

• AWS Startups

• Seraphim Space

• Anicut Capital

• Astir Ventures

Mo’ Tariffs, Mo’ Money?

On the matter of tariffs, many claim they are already priced in, yet JPY and MXN strength post-election suggests otherwise. Unlike in 2016, both currencies remain relatively stronger. Some potential causes come to mind:

• Sturdier, More Diversified Supply Chains? Doubtful

  • While plausible, recent data (e.g., high US-Mexico trade interdependency) argues against this explanation, as supply chains remain tightly linked.

• USD Weakness? Not plausible

  • Charts disprove this theory; the USD basket (e.g., DXY) has rallied since Nov 6, indicating overall strength.

• Market Complacency? Perhaps

  • There may be underpricing of local currency risks, despite tariffs reducing demand for goods from these economies (Think Mexican consumer goods and steel; Japanese electronics and auto components)

If I am to believe Fisher — and I have no reason not to — then theory suggests that currency weakness should follow lower demand. This is not observed. Interested to see how currencies will fare as potential tariffs become more tangible.

Tech Deflation

Deflation is the motto. For information hardware and software that is. Cathie Woods may have made some peculiar call outs but this one seems to stick: Innovation is deflationary.

Animal Spirits

Market valuations are at ATH. Fittingly so is consumer outlook for stocks Return potential in the next 12 months.