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Short Taiwan?


NewbieD

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To me it seems likely that China will attack Taiwan in the next couple of years. 

What would be some ways to implement a trade on this? Unfortunately my broker has nothing on e.g. TSMC or any of their bigger stocks. 

Are there any US companies that would be badly hurt if this happens?

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I don't get the comps to Ukraine as far as projecting the american response.  When's the last time you got something manufactured in Ukraine?  I'm pretty sure my notebook and like half the chips in it were manufactured in Taiwan.  If I were speculating, I would speculate that the free people of Ukraine bloody putin's russian serfs pretty well and that is more likely dissuade the chinese when they see how much ass a free person fighting for their way of life can whoop versus a commie who is compelled to fight.  Taiwan has also been preparing for that fight for a lot longer.  Hopefully, this message also help get Xi dealt at this upcoming CCCP meeting and they tack back toward the prior trajectory. 

Edited by CorpRaider
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Lots of decent points here.

 

I know everyone has their own views on this, but if a situation like that happened, for me it wouldn't feel right to be contributing to their financial destruction.  In contrast to the current situation, it would feel better to buy dirt-cheap Taiwanese stock after or during the event.

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Just my 2c but these kind of ideas suck. No offense to the author. The reasons are simple though. Its too macro. Too complex. Too many things that can go wrong that dont allow you to make money even if your thesis is right. And at the moment, too many people are thinking its a good idea too because of what just happened with Russia. Its like the people saying you should buy puts after the markets gone down 10%.

 

You would have just just as well, if not better owning VIX calls or US index puts as you would have shorting Russian stocks before the Ukraine thing unfolded. Just keep it simple and stay in your own backyard.

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14 minutes ago, Gregmal said:

Just my 2c but these kind of ideas suck. No offense to the author. The reasons are simple though. Its too macro. Too complex. Too many things that can go wrong that dont allow you to make money even if your thesis is right. And at the moment, too many people are thinking its a good idea too because of what just happened with Russia. Its like the people saying you should buy puts after the markets gone down 10%.

 

You would have just just as well, if not better owning VIX calls or US index puts as you would have shorting Russian stocks before the Ukraine thing unfolded. Just keep it simple and stay in your own backyard.

 

Gregmal nails it here, I would add that I think 99% of the time, trying to do what this guy is suggesting ends up losing you money... it's fun conversation while holding a cigar, and a glass of whisky while playing armchair napoleon with your friends by the fireplace, but you will lose money... and if you don't lose money, its actually worse, since you will then have the illusion that you were a genius and you are then likely to lose even more money by trying to repeat what was likely just plain silly luck

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4 hours ago, scorpioncapital said:

why not invert and go long Intel?

 

This was exactly my thoughts. Go long Intel and if you want to hedge the immediate volatility than buy long term, way OTM puts on TSMC (at like $30-40) which is likely going to crater in the that scenario. 

 

Only spending a few pennies on protecting the downside and owning the alternative for the upside. 

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7 minutes ago, TwoCitiesCapital said:

 

This was exactly my thoughts. Go long Intel and if you want to hedge the immediate volatility than buy long term, way OTM puts on TSMC (at like $30-40) which is likely going to crater in the that scenario. 

 

Only spending a few pennies on protecting the downside and owning the alternative for the upside. 

100%. You can completely ignore lots of stupid and improbably tail risk if you throw pennies at a few windfall type hedge plays.

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7 hours ago, NewbieD said:

To me it seems likely that China will attack Taiwan in the next couple of years. 

What would be some ways to implement a trade on this? Unfortunately my broker has nothing on e.g. TSMC or any of their bigger stocks. 

Are there any US companies that would be badly hurt if this happens?

 

I don't think so. Russia's attack on Ukrain is like another WWII level of war, nothing close to the gulf war. Chinese army is not as good as Russia so it will be another WWII level. This kind of level is not going to hurt Taiwan.

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I don't really understand why Taiwan is put into context to Ukraine. I can't imagine the US would allow the Chinese to take Taiwan. You can allow yourself to ignore Ukraine (despite important commodities) but not the heart of chips. The whole future is in Taiwan. That seems to be beyond being unable to imagine Trump as president before he got it. 

 

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While i think it is highly likely that China will bring Taiwan back into the family i think the word ‘attack’ is too strong. How will they do it? No idea. When? Not sure; just sooner than people think. It will likely happen in stages over time; think years - just like Hong Kong, except longer. Xi, just like Putin, has stated in writing what is coming. We need to become better listeners when people like Putin and Xi speak. I think we would be foolish to not take Xi at his word when it comes to Taiwans future. When ready, China will start to apply the screws… Look at how easy and relatively quick it has been for China to remake Hong Kong in its image (a couple of years is nothing in China's long 2,000 year history). Why do you think so much chip production is frantically trying to move back to the US? Following the money can also be instructive. 
 

Do i think my macro view on Taiwan is actionable? No, of course not (on its own). At least not for me and how i invest. Too many moving pieces. Timing uncertain. Now if i held a big position in a Taiwan based equity would my macro view be an input? Yup. Doesn’t mean i wouldn’t own it… i would just have my eyes wide open to what is coming.

—————
China-Taiwan tensions: Xi Jinping says 'reunification' must be fulfilled

https://www.bbc.com/news/world-asia-china-58854081

—————

i invested in oil back in December for a whole bunch of reasons. The impending invasion of the Ukraine just became another tailwind to an already strong thesis (that oil prices were headed higher).

Edited by Viking
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China has 2.8m troops (double the US), warships cyber capability, missiles, modern infantry equipment etc. Plus they have public sentiment (at least seems that way). 

 

Taiwan has 88,000 active troops….sorry but idc what type of missile defense system you have or what geographic system you have. You’re not going to outlast China. Amphibious landing is not the only way into Taiwan. 


If China wanted to push in Taiwan they absolutely could. Why would the US get involved? It has a lot to lose by standing up to China. Frankly we’ve done it to ourselves by exporting manufacturing for almost every industry. US has zero leverage.
 

I agree though, there is no way to play this. Intel seems like the obvious answer. 
 

 

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29 minutes ago, Castanza said:

China has 2.8m troops (double the US), warships cyber capability, missiles, modern infantry equipment etc. Plus they have public sentiment (at least seems that way). 

 

Taiwan has 88,000 active troops….sorry but idc what type of missile defense system you have or what geographic system you have. You’re not going to outlast China. Amphibious landing is not the only way into Taiwan. 


If China wanted to push in Taiwan they absolutely could. Why would the US get involved? It has a lot to lose by standing up to China. Frankly we’ve done it to ourselves by exporting manufacturing for almost every industry. US has zero leverage.
 

I agree though, there is no way to play this. Intel seems like the obvious answer. 

 

China also has pretty much a monopoly on iPhone production... if someone can explain to me what companies like Apple are thinking I am all ears... clearly i am an idiot 🙂 

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To allude to what Greg said earlier I think the best hedges are good undervalued  companies that would be a decent investment on their own, AND also would benefit from whatever situation you are trying to bet against. So you give yourself multiple ways to potentially win under various scenarios.

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I would say the US response depends the expected consequences: will AMD and Nvidia still be able to get the amount of chips they want without loosing too much margin? Or do they get deprioritised or have to "partner" with some chinese entity? 

Maybe the deal is constructed in a way that the Chinese grant TSMC a kind of independency, at least in the beginning. With a (wide) transition period. This could appease the US and get the Chinese a foot in the door.

I can purely speculate on this. But since the neuralgic infrastructure of the next decade is at play and with it world domination, I guess the US would put up more effort to oppose those Chinese efforts than the NATO puts up against Russia right now. 

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Quote

He asked Mr Biden if he could "vow to protect Taiwan", and what he would do to keep up with China's military development.

Mr Biden responded: "Yes and yes."

...

He was then queried a second time by CNN anchor Anderson Cooper if the US would come to Taiwan's defence in the event of an attack by China. Mr Biden replied: "Yes, we have a commitment to do that."

 

october 2021

 

https://www.bbc.com/news/world-asia-59005300

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5 hours ago, Climacus said:

I would say the US response depends the expected consequences: will AMD and Nvidia still be able to get the amount of chips they want without loosing too much margin? Or do they get deprioritised or have to "partner" with some chinese entity? 

Maybe the deal is constructed in a way that the Chinese grant TSMC a kind of independency, at least in the beginning. With a (wide) transition period. This could appease the US and get the Chinese a foot in the door.

I can purely speculate on this. But since the neuralgic infrastructure of the next decade is at play and with it world domination, I guess the US would put up more effort to oppose those Chinese efforts than the NATO puts up against Russia right now. 

You really think anyone gives a damn about AMD’s and NVDIA margins when Taiwan is attracted? Both actually would be seriously impaired if not close to zeros in this case. So there you have your hedging advice (long dated low strike puts on both )The Chinese would continue to be able to run TSM fabs and supply US companies as if nothing has happened?

 

I do think the HS could protect Taiwan much better than Ukraine simply with air and missile cover, using the navy as well as from bases in Japan.

Edited by Spekulatius
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The result of an attack on Taiwan could easily be the destruction of productive resources, (human and otherwise), that the Chicom government wants to control. What would they benefit? As it stands now, they can saber rattle for bargaining chips in world negotiations, (today is mixed metaphor day). Their actions can and will have an effect on the shaping of Taiwanese society and if they're smart, they'll study this.

 

Which gets me to wondering, just how much of mainland Chinese society is being influenced by their institutions and how much will these institutions will be changed by conflict between socioeconomic layers. They are a quasi communist society so conflict theory can't be dismissed, right?

 

Being a western individualist, I have difficulty extrapolating the effects of eastern collectivism, but I see possibilities beyond the kumbaya meme.

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I think the war in Ukraine has unraveled the myth for the world to see with its own eyes that Russian (and Chinese militaries) relying mostly on conscripts with poor equipment and poor morale are somehow able to match US military capabilities and thus must be feared.  

 

If China tries to invade or even blockade Taiwan, assuming the Taiwanese people wish to remain independent - I don't believe the PLA air force and navy could subdue the Taiwanese & US military (and Japanese Self Defense Force).

 

Bill

 

 

Edited by wabuffo
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26 minutes ago, wabuffo said:

I think the war in Ukraine has unraveled the myth for the world to see with its own eyes that Russian (and Chinese militaries) relying mostly on conscripts with poor equipment and poor morale are somehow able to match US military capabilities and thus must be feared.  

 

If China tries to invade or even blockade Taiwan, assuming the Taiwanese people wish to remain independent - I don't believe the PLA air force and navy could subdue the Taiwanese & US military (and Japanese Self Defense Force).

 

Bill

 

 

There is no doubt that US has the most powerful military force. I think the question is will US be able to afford/win a sustained war with China over Taiwan? We haven't been able to do that with Vietnam or Afghanistan. 

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1 hour ago, Spekulatius said:

You really think anyone gives a damn about AMD’s and NVDIA margins when Taiwan is attracted? Both actually would be seriously impaired if not close to zeros in this case. So there you have your hedging advice (long dated low strike puts on both )The Chinese would continue to be able to run TSM fabs and supply US companies as if nothing has happened?

 

 

I was trying to find a diplomatic compromise how the Chinese could incorporate Taiwan without stepping on US interest. Since it sounds just as convincing that the Chinese will get Taiwan someday as the Americans would not let them. A pure attack would be a different matter of course. 

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I think the question is will US be able to afford/win a sustained war with China over Taiwan?

 

I wouldn't frame it that way.  The US would be able to successfully defend Taiwan until the PLA gave up or its navy and air force was devastated.   This is defense of an island, not a land war of invasion/occupation like Vietnam or Korea or Afghanistan.  It would be a high-tech war fought with nuclear submarines and advanced fifth-generation stealth fighter/bombers.  US military superiority in this type of combat is unrivaled and the PLA can't ever catch up any time soon.

 

Just my 2-cents.

 

Bill

Edited by wabuffo
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