Go East, Young Man

A few months ago, the mere suggestion of allocating capital to China would elicit, from most institutional asset allocators, a look usually reserved for someone questioning the laws of thermodynamics. "Geopolitical risk," they'd intone, with the gravity of a priest reciting scripture. China was, after all, the bête noire of the West (aside from Russia, being literally uninvestible). Congressional bills clamoring for divestment, expansions of the CMIC list, and threats of sanctions were as regular as the tides.

Now? Well, geopolitical risk hasn't exactly vanished. It's just… diversified. It's less a US-China showdown and more a global free-for-all: US vs. Canada, US vs. Europe, US vs. Panama – a global trade war in full swing.

Suddenly, China's risks, while still substantial, appear almost… quaint in comparison. The leadership in Beijing, after all, has experience navigating the capricious currents of Trumponomics. Their targeted reciprocal sanctions haven't ignited the same… hysterical response from the combover-in-chief as Canada(!)'s. And Chinese equity markets, even after a recent rally, remain a pretty good fundamental value compared to their American counterparts.

Of course, China isn't without its baggage. A looming demographic cliff, a property market nursing a three advil hangover, and a bipolar relationship with private enterprise (current mood: Jack Ma is cool again… for now).

Then there's Taiwan. A shooting war? Unlikely. As a senior Taiwanese executive at a major chip manufacturer once confided (in a private forum) that a direct assault is unnecessary. Taiwan's cyber defenses, he lamented, were less than robust. He expressed confidence in China's ability to cripple Taiwan's power grid, at will, with a few well-placed keystrokes.

Failing that, there's the energy chokepoint. Taiwan relies on imported natural gas and coal for 85% of its power generation, with reserves measured in weeks. A blockade, even a brief one, would bring the island to its knees and then to the negotiating table.

But the most likely scenario? China leveraging its considerable AI prowess to subtly shape public opinion in Taiwan, employing a blend of social media manipulation, traditional news influence, and strategically placed "friends" to nudge a more… amenable government into power.

So, what's the takeaway? It’s time for a reappraisal of China. The competitive landscape has thinned due to the last couple of years of tough times - but tough times make tough men. The trendlines, I suspect, are poised for a lasting reversal.

"There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure."

Jesse Livermore