When it comes to investing or trading the most difficult thing to incorporate into your thought process is matters relating to politics. Why do I say that? For everything else, we can reduce the weightage to a specific number.
What do you do with politics? Will it play out as reported in the media? Or is this all being staged and there is a bigger play behind the curtain that we are not aware of? We have to suspect that there is something going, on the world stage that we don’t have clear answers but we can make some calculated inferences.
The Russian/Ukraine conflict opened up many policy decisions in the industrialized or developed countries that should have repercussions for all in the world. June was a significant month with many policy decisions. The US and their G7 allies decided to ban imports of gold from Russia. That was soon followed by a Russian default, forced by the asset freeze and banking sanctions.
Next came the announcement by NATO to increase their troops from 40,000 to 300,000 and put them on “high alert and readiness”. This was followed up by G7 in a communique that they would phase out Russian oil, and in the meantime threatened price caps on Russian oil imports which would only limit global supply and increase prices.
Things didn’t stop there. Very soon Finland and Sweden signed an agreement paving their way to join NATO. There was nothing more required to irk and irritate Putin. Putin clearly send a warning that he would respond to it in his own time if military and infrastructure will be deployed on the borders surrounding Finland and Sweden that were connected to Russia. The US immediately responded by opening up a permanent army base in Poland. A place of significant political importance and controlled by Russia during WW2.
So was this all to provoke deterring a possible WW3? Too early to tell. While all this is in the background, we have Nancy Pelosi, the Speaker of the House and the third most important politician from the US, visiting Taiwan in a highly publicized trip provoking the ire and displeasure of the People’s Republic of China. China has used some of the strongest words in condemning this trip by a high-ranking US lawmaker to Taiwan in 25 years.
Why was this trip so important for the US, China, and Taiwan? The mainstream media and the likes of CNN, CNBC, and Fox News are not highlighting this as much as they should. So what is all this fuzz about an 82-year-old woman visiting an island that China has to show so much muscle with 27 warplanes and aircraft carrier ships?
It has everything to do with the future of technological edge and sophisticated military power. This trip has come on the heels of the passage of the Chips Act (it was just passed by Congress last Thursday).
There is no one among the US lawmakers who is also so much invested in the Semiconductor industry as Nancy Pelosi. It is public knowledge that Nancy and her husband Paul Pelosi have invested almost 10% of their investments into one of the most sophisticated chip makers NVIDIA. So they should be knowing a lot about Chips.
Now, who is the most important chip producer in the world? It is TSMC (Taiwan Semiconductor). It has been already reported by Nikkie news that Pelosi met with both the founder and Chairman of TSMC. TSMC has become so critical to US economic and national security. Equally, it is critical to China’s economic and national security.
TSMC is so important that they make 90% of the world’s most sophisticated microchips, and power the cutting-edge technology, critical infrastructure, and weaponry of modern times. Most of the chip makers that we know by name have over the years become designers and have outsourced manufacturing to TSMC. This makes everyone vulnerable. This was the main reason for the chips act.US clearly understood the importance of protecting the global supply coming from Taiwan until manufacturing and technological leadership can be established on US shores.
TSMC is already building manufacturing in Arizona. Intel is making efforts to catch up with the sophistication level of TSMC. They want to make massive investments in the US in manufacturing and foundry business which all has a long gestation period. While most of the chip stocks are down more than 30% for the year this is an area for inter-generational wealth. There will be government money in it and institutional money tends to follow government money.
If you received value from this post, and you’d like to send some back, or if you’d like to signal to me to continue spending time on these types of explorations, feel free to buy me coffees (thank you!):
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate it if you could take a second and tell a friend. Honestly. It makes such a big difference.
Forward this email. Recommend the newsletter. Share on Twitter, WhatsApp, Telegram, LinkedIn, Slack, wherever!
Join Breezy Briefings’ Official Telegram Channel: https://t.me/BreezyBriefings
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.