2020 Half Year Performance & Thucydides's Trap analysis

Solid result so far

LEL delivered solid results for its clients with 33% YTD compared with SP 500 down 5%.

Theta and Delta Netrual

We are further revolutionized our long short strategy currently in Theta and Delta Netrual portfolio. Starting from April 2020, 95% of our portfolio are cash from outside point of view but actually perfectly comprised of Long/Short Stock and Options.

LEL holds balance portfolio concentrated in China and US and holds view that China will become the largest market in the world and US will continue to dominate outside of China .

There is no Thucydides's Trap scenarios!

Most economist and politician concerns about the conflict between China and US should lead to serious conflict or even 3rd world war in the future, so called Thucydides' Trap.

However, we don't see the escalating conflict coming, instead, peace will come earlier than most people think for the following reasons.

1. Sea Civilization vs Land Civilization

First of all, China, given its bountiful land resources, naturalizes its land civilization in the past 5000 years. Thus, China governors has no incentive and also has never showed its willingness to occupy or invade other nations beyond its border.

Second, compared to Sea civilization, through history, China governors have hard time to make active impact or influence on other ethic or nations. As of today, China governors still can't regulate Uyghur in its Xinjiang area nor Mongolian are great examples of its conservatism in natural. Thus, we think United States will continue to dominate outside China for a long time.

2. Growing domestic market

The COVID event accelerates China's growing domestic demand. Given uncertainty of export trade, China government are devoting to boost domestic economy by building more infrastructure for such as EV industry and many others.

According to Apple's App Store stats, China led the category of physical goods and services in 2019 ($225 billion, or 54% of the total for the category), while the US accounted for most of the in-app ad sales in 2019 ($23 billion, or 51% of the total for the category).

Given iPhone has lower market share in China compared to US, the stats show significant purchasing power of middle class in China. We think US companies and politician will soon change its attitude to cooperate with China rather than picking fight. In fact, Apple is a great example of successfully company dancing between two elephants. Apple operated under different philosophies when dealing with China and US laws respectively. Its not really hard to achieve win-win situation!

Thank you for reading and we will share more of our views in the future.