My wife is off this week, so we did a little weekend trip away to visit some family. I flew back Sunday night with an eye towards working Monday (she’s staying for a few extra days)…. and Monday morning I discovered it was a federal holiday and markets were closed!
Here's an idea. I don't see this ever happening, but I guess that's why it's a "tail" risk. If China was to invade Taiwan, then TSMC would go offline and the only way to manufacture high end logic chips will be via Intel since they are the only Western based manufacturer of any real scale.
I personally have a pair trade on where Intel and TSMC are equal weighted in my portfolio (I view them as a tax/royalty on technology growth and the digital transition). If TSMC goes to zero then Intel will >2X (probably a lot more than that) because they will be the only game in town (Samsung still exists, but they aren't a pure play like Intel and TSMC).
I have a lot of china exposure and have been thinking of using INTC as a hedge. There are two scenarios that I am considering: deglobalization and an invasion of Taiwan. De-globalization I see as a long term trend and not something that requires an immediately hedge. Invasion of Taiwan could be a black swan event but I think we learned a lot from the Ukraine war. It would take a massive buildup of military force that couldn’t be hidden from satellites so there would be a considerable amount to time to exit a position. The more near term threat would be a ban by the U.S. or CAN on foreign ownership of Chinese securities. That is harder to hedge. Not sure how that would affect FXI and other etfs.
Did you see the tweet from RepMGT over the weekend about national divorce? That is another tail risk for sure. Pretty shocking to be coming from a sitting member of Congress.
Thanks Andrew. The deep thinking on "big" questions about the future -- like obesity or rule of law or AI -- makes this game loads of fun. Right now I'm pondering the tail risks associated with the impact of demographics (particularly declining child births in China -- see Peter Zeihan's stuff) versus the end of the American empire and the rise of China (see Ray Dalio's stuff). Zeihan is predicting the collapse of China and the continued strength of America as globalism is replaced by nationalism. Dalio is predicting the end of American strength as our time as an empire follows typical historical patterns, and the rise of China. Two really smart guys -- differing outcomes. Macro tail risks are really hard. The more interesting question may be whether you/I/we can come up with a macro tail risk that drives an investible thesis because it is relatively likely to happen and under-appreciated by the rest of the market? Something like the collapse of the housing market in 2008-09. Kuppy thinks oil spiking to $300 is one such tail risk. Will have to give it some thought on others.
Weight loss drugs working (the Eli Lily one looks promising) Would tank Hershey's volumes. They'd still eat Hersheys, but a lot less. I don't think people would pay up cigarette like prices either for their Hersheys vs off brands. I'm short on valuation a tiny amount of HSY.
Another great post!
Here's an idea. I don't see this ever happening, but I guess that's why it's a "tail" risk. If China was to invade Taiwan, then TSMC would go offline and the only way to manufacture high end logic chips will be via Intel since they are the only Western based manufacturer of any real scale.
I personally have a pair trade on where Intel and TSMC are equal weighted in my portfolio (I view them as a tax/royalty on technology growth and the digital transition). If TSMC goes to zero then Intel will >2X (probably a lot more than that) because they will be the only game in town (Samsung still exists, but they aren't a pure play like Intel and TSMC).
I have a lot of china exposure and have been thinking of using INTC as a hedge. There are two scenarios that I am considering: deglobalization and an invasion of Taiwan. De-globalization I see as a long term trend and not something that requires an immediately hedge. Invasion of Taiwan could be a black swan event but I think we learned a lot from the Ukraine war. It would take a massive buildup of military force that couldn’t be hidden from satellites so there would be a considerable amount to time to exit a position. The more near term threat would be a ban by the U.S. or CAN on foreign ownership of Chinese securities. That is harder to hedge. Not sure how that would affect FXI and other etfs.
Did you see the tweet from RepMGT over the weekend about national divorce? That is another tail risk for sure. Pretty shocking to be coming from a sitting member of Congress.
Thanks Andrew. The deep thinking on "big" questions about the future -- like obesity or rule of law or AI -- makes this game loads of fun. Right now I'm pondering the tail risks associated with the impact of demographics (particularly declining child births in China -- see Peter Zeihan's stuff) versus the end of the American empire and the rise of China (see Ray Dalio's stuff). Zeihan is predicting the collapse of China and the continued strength of America as globalism is replaced by nationalism. Dalio is predicting the end of American strength as our time as an empire follows typical historical patterns, and the rise of China. Two really smart guys -- differing outcomes. Macro tail risks are really hard. The more interesting question may be whether you/I/we can come up with a macro tail risk that drives an investible thesis because it is relatively likely to happen and under-appreciated by the rest of the market? Something like the collapse of the housing market in 2008-09. Kuppy thinks oil spiking to $300 is one such tail risk. Will have to give it some thought on others.
Weight loss drugs working (the Eli Lily one looks promising) Would tank Hershey's volumes. They'd still eat Hersheys, but a lot less. I don't think people would pay up cigarette like prices either for their Hersheys vs off brands. I'm short on valuation a tiny amount of HSY.