A year after Russia invaded Ukraine, China proposed a plan for peaceAt least that’s what China calls it.
This plan has little chance of resolving conflicts. But it effectively points the way to the possibility of China invading Taiwan and igniting World War III.
Before I consider myself euthanized, there are a few things to consider.
I am a veteran lieutenant colonel in the US Air Force. I worked at the Pentagon. Coded missile paths for US nuclear weapons. And I did all this during the Cold War.
War is not something I take lightly. It’s not something I want or encourage.
But as Ian King pointed out on Tuesday, China’s interest in Taiwan is out of our control. China will very likely move to secure these interests in the not too distant future.
As investors, we must soberly look at the potential trajectory going forward and the impact it will have on us.
We will do that today.
We are going to tear apart China’s peace offer for Ukraine. We share some leading thoughts from current servicemen. And I’ll give you my assessment of how a war with China could break out, the weapons each side is most likely to use, and which companies will manufacture them.
But most importantly, we’re highlighting actions you can take now to protect yourself, your family, and your property in the potentially turbulent year ahead.
Doublespeak of China’s ‘Peace Plan’
China’s peace plan To tell The sovereignty of all nations should be protected.
Sounds good. Almost mediocre. Hard to argue.
That’s the point. China is not talking about Ukraine here. I’m talking about Taiwan.
In China’s view, Taiwan is part of its sovereign territory. This belief has been held for her 80 years, despite not having direct control over the island.
1975, Mao Zedong Said Then-Secretary of State Henry Kissinger said Taiwan was a minor problem and could wait 100 years to resolve it. After addressing China’s more pressing needs, Taiwan’s minor issue still needs to be revisited.
Many of these needs are being met today. The country is the second largest economy in the world. Life expectancy has increased from about 60 years for him in 1975 to 78 years for him today.
Taiwan is also a completely different country than it was 50 years ago. Transformed from being “ridden with counter-revolutionaries,” as Mao Zedong put it in his 1975, to a modern tech powerhouse producing his 92% of the world’s computer chips.
If the international community were to accept China’s “peace plan” and wish that all nations respect each other’s sovereignty, China would seem justified in quickly assimilating Taiwan into its political structure.
Another innocent passage of the peace plan states, “Regional security should not be achieved by strengthening or expanding military blocs.” This comes with a demand that the world change its “Cold War mindset”.
For Ukraine, this means NATO should stop defending Ukraine. But for China, it means that US alliances with South Korea and Japan should be undermined. A reduced US presence in Asia would make it easier for China to wage a war for Taiwan.
China’s motives and intentions have long been clear. What has been unclear to this day is when and how this conflict can be initiated.
Current military official statements give us a good idea…
Preparing for conflict in 2025
February 1, Air Force General Mike Minihan I have written An internal memo reads, “I had a hunch that I would be fighting in 2025.”
Taiwan’s presidential election is in 2024. [Chinese President] Xi is the reason. The US presidential election is in his 2024, and President Xi Jinping will be America in turmoil.
Xi’s team, reason, and opportunity are all aligned for 2025.
Whenever China attacks, I expect the first clash between China and the United States will occur at sea, between American carriers and Chinese anti-aircraft weapons.
This includes China’s DF-26 missile, aka the “carrier killer.” The missile has a range of at least 2,500 miles. It uses satellites for targeting. Its launcher is mobile. As such, the DF-26 is more likely to be used in warfare.
However, large missiles generate a lot of heat when launched. Because of the heat, the US will know when it will launch. The satellite will find the launch immediately, no matter where the launch took place. Trajectories are calculated in seconds and updated continuously.
On board, the crew will know they are under attack. They quickly prepare weapons like the SM-6 — missiles that can intercept aircraft and missiles as they approach the ship.
Aircraft carriers may also use electronic warfare systems. These disrupt the aiming system of incoming missiles. The Surface Electronic Warfare Improvement Program (SEWIP) system provides this capability.
These are just some of the tools at our disposal, and the most used ones.
Why is this important to understand?
Because this is the first step in understanding how we can protect our wealth in what could be the biggest conflict in 21 countries.st century.
Two defense stocks that can help protect America
The battle between Chinese missiles and US defenses is irrational. But war is always irrational. And you need to prepare for the unreasonable.
The Department of Defense (DoD) is always ready for war. General Minihan’s words were widely criticized, but to me, they show that senior leaders see China as a potential enemy and are preparing for that reality. It should reassure you.
The best defense against war is a strong offensive capability. Billions of dollars flow to defense contractors as the Department of Defense buys new weapons and upgrades existing systems.
As investors, we should consider opportunities in this area.
One way to invest is to buy companies that: Raytheon (NYSE: RTN) make an SM-6, or Northrop Grumman (NYSE: NOC) Manage SEWIP.
But the deal on this idea isn’t just in the defense sector.
Recall that Taiwan currently produces 92% of the world’s semiconductors.
Semiconductors are the spark plugs of the world. Without them, all computers would stop working. All modern vehicles freeze. The house is a big box with no appliances or his HVAC system.
it’s just at home. Modern military hardware also relies entirely on semiconductors.
The world’s GDP of over $80 trillion goes hand in hand with the state of semiconductors. The dispute over Taiwan will put the brakes on many, if not all of these things.
Unless you have a backup plan.
U.S. manufacturers are looking to reduce their reliance on potential adversaries like China. This will boost the stock prices of many US companies as chip manufacturing becomes a national imperative.
A friend of mine, Ian King, has been researching these developments and has other ideas for the deal.
He found semiconductors to be the root of the biggest win of all time, with 32 stocks up more than 1,000% in less than five years.
As I said earlier, our defense and the lives of our military personnel depend on semiconductors.
Ian has a list of 32 stocks that have gone up over 1,000% in less than five years, but he also has insight as to which stocks are likely to go up 1,000% next. You can find out about his top picks in this presentation.
nice to meet you,
Michael Carr Editor, one trade
PS We will continue to monitor the situation in China in the coming months and years. I think it has the potential to become the No. 1 investment theme in the 2020s.
In the meantime, what do you think of China’s position on the world stage? Do you think they will invade Taiwan? What are you doing now to prepare?
Please email BanyanEdge@BanyanHill.com.
If you think inflation is bad right now…
I sincerely hope Mike is wrong about the war with China. He hoped to enter old age without seeing the outbreak of World War III.
But as Mike says, we must be prepared for any unreasonable outcome.
Let’s say there is some kind of conflict between the United States and China. Even a small, limited war would be a disaster.
If you thought supply chain disruptions in the age of COVID were sketchy, imagine how serious conflicts would be in the open. If the US he two navies fired at each other, how many shipments from Chinese factories would arrive at the port of Los Angeles?
We got a sample of what deglobalization looked like during the supply chain crisis. But while that confusion has all but cleared up, in Ian’s words, this long-term theme of “shooting China” is really just beginning.
That means that inflation and its ugly sister-in-law, stagflation, will be the bane on our part for the time being. And it shows in the data.
Last month’s surge in consumer spending inflation seemed to have taken the Federal Reserve by surprise. Fed Chairman Jerome Powell has spent much of 2023 in a decidedly dovish tone, with investors coming to the conclusion that the Fed’s tightening cycle is coming to an end.
Well…that’s not the message we’re getting today.
On Wednesday, Minneapolis Fed President Neil Kashkari frowned, suggesting the Fed was “open-minded” about whether the Fed should raise rates by 0.25% or 0.5% at its next meeting later this month. More importantly, he said, “we are not moving as fast as we would like” on lower inflation.
Atlanta Fed President Bostic agreed, saying, “We need to raise the federal funds rate from 5% to 5.25% and leave it there until 2024.”
Now, in the end, it doesn’t really matter whether the Fed hikes rates by 0.25% or 0.5% at its next meeting. Yelling out is a quarter percent difference.
But the change in tone speaks for itself. The Federal Reserve seems justifiably concerned about its inability to control inflation. The job market is still overheated, and Americans are still using credit cards a little more aggressively.
we have been saying this The Banyan Edge For months, of course. Setting the price of credit is the only move the Fed can make. Far from being the sole driver of inflation.
But the news isn’t all bad. The market volatility caused by the Federal Reserve should provide a good entry point for the kind of growth opportunities Ian is looking for.
It’s hard to believe that this bear market has just ended. But what we can expect is that smart investments today will pay off in the years to come.
US semiconductor companies appear to be one of those smart investments. Their expert Ian King talks about how to find the best here.
nice to meet you,
Charles Sizemore Editor-in-chief, The Banyan Edge