May was a nexus month: An unexpected electoral swing in Canberra, a tariff shock that froze China-to-U.S. sailings, and a fresh wave of AI-factory build-outs that will soon gulp more electricity than Japan\u2019s entire grid. <\/p>\n\n\n\n
\n\u201cFirst-order minds trade headlines; second-order minds trade consequences.\u201d<\/em>
\u2014 my scrawl in the margin of this month\u2019s notes<\/p>\n<\/blockquote>\n\n\n\nWhen tides, moons and storms align, it is the second-order currents\u2014not the surface chop\u2014that decide who makes harbour. The pages that follow track those deeper currents across the five horizons and four growth pillars (Land \u00b7 Labour \u00b7 Capital \u00b7 Technology), what I call my ‘Signal from the Noise<\/em>‘ strategy.<\/p>\n\n\n\n
Why May Felt Like a Punch-Up at History\u2019s Pub<\/h2>\n\n\n\n
Picture three burly patrons bursting through the tavern door at once:<\/p>\n\n\n\n
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- Election Cyclone<\/strong> \u2014 Canberra swings left, hard and fast.<\/li>\n\n\n\n
- Tariff Hammer<\/strong> \u2014 Washington slaps Tarrifs the size of steel anvils on China.<\/li>\n\n\n\n
- AI-Factory Fever<\/strong> \u2014 Every hyperscaler announces yet another gigawatt campus.<\/li>\n<\/ul>\n\n\n\n
Each brawler alone is noisy. Together they start a bar-fight that rearranges the furniture for a decade. This letter breaks up the scrum, drags out the underlying motives, and hands you the coat-check ticket labelled Opportunity<\/em>.<\/p>\n\n\n\n
1 \u00b7 Global-Horizon Macro Currents<\/h2>\n\n\n\n
1.1 The post-election macro reset<\/h4>\n\n\n\n
Labor converted 77 seats into 94<\/strong>, leaving the Coalition on 43 and the cross-bench enlarged. <\/p>\n\n\n\n
A bigger caucus means fewer internal veto points\u2014and a higher probability of regulatory activism (yet more red tape ahead). Expect quicker movement on industrial-relations amendments, energy-transition subsidies and housing tax reform. For CFOs, the discount rate on long-lived assets just ticked up (potentially: Alot).<\/p>\n\n\n\n
1.2 Industrial Policy 2.0 \u2013 tariffs or turbines?<\/h4>\n\n\n\n
Commentators call the April tariff package brinkmanship<\/strong>; we see industrial mobilisation<\/strong>. Executive Orders 14259 and 14266 hike reciprocal duties on Chinese inputs precisely when AI campuses need steel, concrete and megawatts The White House<\/a>. Flexport data show a 60 % collapse in China\u2192US ocean bookings<\/strong> within three weeks, the sharpest capacity withdrawal since COVID-19 Flexport<\/a>.<\/p>\n\n\n\n
\n\u201cLose the compute race once and you never catch up; the curve only steepens.\u201d<\/em> \u2014 Eric Schmidt, TED 2025<\/p>\n<\/blockquote>\n\n\n\n
Domestic steel makers have already reacted: Nucor shipments rose 10 % YoY<\/strong> in Q1 on stronger spot prices driven by tariff-fuelled demand Reuters<\/a>.<\/p>\n\n\n\n
As I contended with a notable Economist last week at a conference, the simple minded, consume the simple headline “Trump loves a deal, its just his ego running out of control”. I contended that it is the accumulation of many of the topics I have discussed before:<\/p>\n\n\n\n
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- Secretary Bessent <\/strong>pursuit of unequal non-trade barriers and manipulation of the WTO rules<\/li>\n\n\n\n
- Reagan Thatcher <\/strong>styled ‘New Order’ for reshaping the Global trading system and isolating China as offered by Stephen Moran at Hudson Bay Capital<\/a> <\/li>\n\n\n\n
- New World order<\/strong> in Re-Shoring and Friend-shoring as the Cold War re-ignights over idiology and protection of the dominance of the USD as the sole globally traded currency<\/li>\n\n\n\n
- Protecting USD treasuries<\/strong>, coutering the Triffen dilemma: ie. rebalancing terms of trade as Triffin warned that, over time, ever-larger external liabilities would erode confidence in the dollar and eventually force a painful adjustment.<\/li>\n\n\n\n
- Rule of Law<\/strong>: China’ and much of the rest of the world who align with China are abusers international law and in a Technology race, the US want to stand firm on ‘Rule of Law’<\/li>\n\n\n\n
- MOST FOUNDATIONAL and IMPORTANT<\/strong>: this is the era of the 21st Century Manhattan Project <\/strong>equivelant.\n
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- Truly Transformative Tech in Agentic Ai (hyperscaling at a hyperscaled rate) <\/li>\n\n\n\n
- Large Scale Robotic manufacturing of all high value goods and of Humanoid Robots themselves<\/li>\n\n\n\n
- Agentic Ai and aggregated problem solving from embeded systems of known knowledge<\/li>\n\n\n\n
- Agentic Ai and new discoveries from supercomputers and quantum computing creating new knowledge areas and new knowledge within<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n\n\n\n
1.3 Demography & demand cliffs<\/h4>\n\n\n\n
Independent demographers now estimate China over-counted<\/strong> its population by ~130 million; the working-age cohort is falling outright Financial Times<\/a>. Russia\u2019s own statistics office forecasts a drop from 146 m to 139 m by 2046<\/strong> TASS<\/a>. Commodity demand anchored to those consumers will peak sooner and lower than most models assume.<\/p>\n\n\n\n
Pillar touchpoints: Land (commodities), Labour (demographics), Capital flows.<\/em><\/p>\n\n\n\n
Not only is this a problem for the Chinese, rather is a problem for the rest of the world. <\/p>\n\n\n\n
As the Chinese population Supply\/Demand shift becomes clearer, the work demands more, goods cost more, and the Triffen dilemma exacerbates as the costs of Chinese goods ratchets upwards (America would then be in the position of importing inflation y-on-y from their single largest supplier)<\/p>\n\n\n\n
Second order impact, as the Chinese factories have been built for sweatshop like conditions with thousands of employees, re-tooling what is $35T of installed manufacturing ‘sheds’ is going to take a significant amount of capital, resources, capability and energy, displacing their factory workers. <\/p>\n\n\n\n
Socially this is a disasterous situation if the Chinese decide to lay off workers (it is a communist country), and replace them with robots, and as mentioned above, the capital required to do so, of which the world are only prepared to loan them at higher rates than the ‘risk free rate’ of the USA.<\/p>\n\n\n\n
Enter the only othe real options to provide scale at speed, with lower capital costs, leveraging existing labour supply: India, Mexico (integrated with USA), Canada, Vietnam, Korea. <\/p>\n\n\n\n
India<\/h3>\n\n\n\n
India is a great geo-political option as well as a tactical and capital option as India is demographically ~20 years behind China, have a large population of highly educated realists, who have culturally bridged the east and the west for over a century. There is strategically a lot to like for American Corporates, to scale in India – if only for India’ convoluted National Union styled quasi-federal or asymmetric federal state (its complicated, and the states\/regions relationship with the Central Government is inconsistent across the country. <\/p>\n\n\n\n
Mexico <\/h3>\n\n\n\n
Mexico is a great geo-political option as well as a tactical and capital option as Mexical is demographically ~30 years behind China, have a very large working age population of highly educated realists, who have (in the north of the country) been culturally aligned to the west for over a 50 years. There is strategically a lot to like for American Corporates, to scale in Mexicao, least of which is the shared boarder, however there are risks with the south, the limited industrialised land to the North and Population is in the center, cut off by the range.<\/p>\n\n\n\n
Canada<\/h3>\n\n\n\n
Canada is a great geo-political option as well as a tactical and capital option as Canda is basically a state of America, as Trump puts it. It has been culturally aligned to the west for over a 100 years. There is strategically a lot to like for American Corporates, to scale in Canada, least of which is the shared boarder, however they tend to be more leftist that the leftists in America, which from America’ point of view is concerning.<\/p>\n\n\n\n
America themselves<\/h3>\n\n\n\n
America on the other hand, has a highly skilled workforce, however to few workers. As they outsourced their manufacturing for the last 50 years to China (particularly low to medium tech) America has realised that this is the ‘tipping point<\/a>‘ in which they must re-industrialise for the rest of the 21st Centry and that whilst capital is relatively cheap (note Kondratiev and Dalio<\/a>) through investment over the next credit cycle. <\/p>\n\n\n\n
\n\n\n\n2 \u00b7 Geopolitical Manoeuvres<\/h2>\n\n\n\n
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- AUS-US drift risk<\/strong> \u2013 A super-majority Labor government may cool alignment with Washington just as AUKUS Pillar II<\/strong> tech-transfer funds are readied. Boards relying on U.S. export-control licences should scenario-plan for diplomatic whiplash.<\/li>\n\n\n\n
- The re-ignited Cold War<\/strong> \u2013 The Hoover Institute argues the current contest is not \u201cCold War 2.0\u201d but the same zero-sum dynamics rekindled. Today\u2019s choke-points are chip fabs and undersea cables, not Fulda Gaps.<\/li>\n\n\n\n
- Indo-Pacific winners<\/strong> \u2013 India, Vietnam, Taiwan and Malaysia rise as the logical processors of Australian ore as Chinese demand tapers.<\/li>\n<\/ul>\n\n\n\n
Pillars: Capital flows, Technology.<\/em><\/p>\n\n\n\n
AUS-US Drift Risk<\/h3>\n\n\n\n
(Why Canberra\u2019s new arithmetic could give boards whiplash)<\/em><\/p>\n\n\n\n
The ALP\u2019s 94-seat<\/strong> romp gifts the government something no recent counterpart has enjoyed: the votes to legislate at speed and (mostly) without horse-trading. One unintended side-effect: the diplomatic thermostat with Washington can now be dialled to \u201clukewarm\u201d without fear of domestic blow-back.<\/p>\n\n\n\n
That matters precisely when AUKUS Pillar II<\/strong>\u2014the bit that funds joint work on under-sea robots, AI\/ML and quantum sensing\u2014is edging from concept deck to cheque book National Defense Magazine<\/a>. If Canberra\u2019s rhetoric tilts a few degrees toward \u201cstrategic autonomy\u201d just as U.S. export-control lawyers are finalising the fine print, licences that looked bullet-proof in March can suddenly sprout conditional clauses.<\/p>\n\n\n\n
Board takeaway:<\/strong> any project that relies on EAR99 carve-outs, ITAR Technical-Assistance Agreements or fast-track DSP-5s needs a Plan B<\/em>. Run the scenario where a three-week licence renewal stretches to 90 days\u2014then ask who floats the working capital while engineers wait for the stamp.<\/p>\n\n\n\n
The Re-Ignited Cold War<\/h3>\n\n\n\n
(Same code-base, fresh patch notes)<\/em><\/p>\n\n\n\n
The Hoover \u201cGoodFellows\u201d like to joke that we\u2019re not in Cold War 2.0<\/strong> so much as Cold War 1.1<\/em>\u2014a software update on the original zero-sum game. The geography has shifted: today\u2019s Fulda Gaps are called TSMC, ASML and Samsung<\/strong>; the new Checkpoints Charlie live at the landing stations of under-sea fibre.<\/p>\n\n\n\n
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- Chip fabs<\/strong>: TSMC manufactures ~60 %<\/strong> of the world\u2019s logic chips; ASML owns 100 % of extreme-ultraviolet lithography. De-risking means designing supply chains that survive a three-month Taiwan Strait closure, not a three-day Suez blockage.<\/li>\n\n\n\n
- Cables<\/strong>: 97 % of global data still rides glass on the ocean floor. Beijing\u2019s \u201cDigital Silk Road\u201d aims to control 60 %<\/strong> of that capacity by 2030 Industrial Cyber<\/a>. Cut the cable, sink the cloud.\n
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- Hence StarLink, Kuiper, RocketLabs etc are all working to build an incontrovertible constellation of internet satellites to mitigate China and Russian aggression in communications totalitarianism. <\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
Board takeaway:<\/strong> map your single-points-of-failure. If the answer is \u201cTaiwan wafer starts\u201d or \u201cone subsea route out of Sydney,\u201d you\u2019re running hotter than you think.<\/p>\n\n\n\n
Indo-Pacific Winners<\/h3>\n\n\n\n
(The ore goes east\u2014but no longer to China)<\/em><\/p>\n\n\n\n
With Chinese demand plateauing, Australia\u2019s bulk cargoes are hunting new furnaces. Three stand-outs:<\/p>\n\n\n\n