In today’s mailbag issue of The daily cutLet’s look at the Bitcoin (BTC) bull case.
We’ll also look at three blue-chip tech stocks selling at the bargain counter.
But judging by the feedback in the mailbag, one of the most pressing questions is the fate of Taiwan and the future of the semiconductor industry.
Taiwan Semiconductor Manufacturing Company (TSM) is responsible for about 90% of advanced semiconductor manufacturing.
And as the name suggests, it is based in Taiwan.
If Chinese leader Xi Jinping delivers on his promise to take the island nation by force, it could disrupt supplies to the rest of the world.
It’s a powder keg.
And it’s having profound implications not just for Taiwan and China… but for the US as well
Our macro expert Nomi Prins has been closely monitoring developments.
As she wrote…
I don’t think China will attack Taiwan unilaterally. She doesn’t want to deal with the same kind of sanctions that were imposed on Russia for attacking Ukraine.
However, should this happen, it would cause serious supply chain disruptions, especially in the semiconductor industry.
A Nomi reader wants to know more about what will happen if China carries out its threat – and captures the chip industry in the process…
Reader question: You can agree or disagree with Nancy Pelosi’s trip to Taiwan. But it had the benefit of showing China’s true colors.
I predict that China will establish a naval blockade against Taiwan in the very near future and will maintain it until Taiwan surrenders. In this scenario, everything coming from Taiwan has to be flown out.
How will the semiconductor industry survive? US stock markets will crash. Any suggestions on how we can protect ourselves? Thank you for your insight.
– Paul B
Nomi’s answer: Hello Paul. Thanks for your email. You make some interesting observations.
The “military drills” China conducted around Taiwan after Pelosi’s visit closed the entire Taiwan Strait to merchant shipping and barred the skies over the island to all air traffic.
So there is no doubt that it was some kind of deadlock. But it was temporary…
It is questionable whether China could pull off a prolonged blockade without collapsing its own economy. It would almost certainly isolate itself from its main trading partners.
And this is now particularly problematic for Xi Jinping. Economic growth in China is already slowing thanks to ongoing Covid-related closures and a housing market explosion.
But if it does something stupid, it would trigger serious supply chain disruptions.
Taiwan accounts for 65% of the world’s total chip production. And it makes 92% of the world’s specialty chips.
Apple and other US companies rely on TSMC for the chips that go into electronics, cars and trucks, farm machinery and home appliances. The US military also relies on these chips.
If China invades Taiwan…or encircles it with a naval blockade…Taiwanese exports of semiconductors would dry up. That would deal a hammer blow to the US economy…financial markets…and the defense sector.
But here’s the thing…
This would result in a major setback for China. It also relies on TSMC chips. Despite investing the equivalent of billions of dollars in developing its industry, it still controls less than 10% of the chip market.
That’s the most likely reason why China’s recent attempts at economic coercion have left Taiwan’s semiconductor industry untouched.
One way to play this off in your portfolio is to invest in US chipmaker Intel (INTC).
The company will spend nearly $60 billion on new state-of-the-art semiconductor facilities in the US and Germany. It won’t get those assets up and running overnight. But securing semiconductor supplies domestically… or from our allies… will be a top priority over the next decade and beyond.
That’s why Congress passed the CHIPS and Science Act last summer. The bill will provide chipmakers like Intel with more than $52 billion to research, develop and build semiconductors and factories in the United States
Intel has already announced a new $20 billion plant in Ohio. Thanks to the CHIPS law, it expects to increase its margins and expand its operations. That means it can compete with major foreign chipmakers like Nvidia, Samsung, and TSMC.
Crypto investors shifting gears continue to face a brutal bear market.
Bitcoin is down 71% from its all-time high last November. And the world’s second most valuable crypto by market value, Ethereum (ETH), is trading 72% below its November peak.
So, the hopeful message shared this week by fellow crypto investing expert Teeka Tiwari may surprise you.
As Teeka revealed during his special briefing Wednesday, the smartest investors in his network don’t sell. You buy.
They are taking advantage of the lower prices created by the bear market to invest in the world’s best blockchain networks at deep discounts.
And he urges his readers to do the same.
He’s targeting a niche within the crypto market he calls “tech royalties.” These allow you to take an amount as low as $1,250 and earn a five-figure monthly income.
Catch that up here. Below, a Teeka reader would like to learn more about the forefather of crypto – Bitcoin.
Reader question: Can Teeka give us another fireside chat about Bitcoin and what he suspects is about to happen?
– William R.
Teeka’s answer: I first recommended bitcoin to my readers in April 2016 when it was trading at around $428. Since then, we’ve seen peak-to-trough declines of 41%…55%…and 84%.
And even after more than six years of bone-crushing volatility, these price declines are still extremely difficult to stomach psychologically.
But every time Bitcoin has crashed like this, it has hit new all-time highs.
And my research still points to more upside.
A major source of adoption is the millennial generation. More than 44% of them own bitcoin or some other crypto. And Millennials are the largest demographic in the country…bigger even than Boomers.
And no Washington politician will disenfranchise 44% of the nation’s main voting bloc.
The second major source of adoption is Wall Street. It now accepts bitcoin as a tradable asset.
That’s why BlackRock, one of the world’s largest wealth managers, has just partnered with Coinbase, the world’s largest cryptocurrency exchange.
Blackrock has over $10 trillion under management. Its institutional clients want access to this space so badly that it has partnered with Coinbase to offer them an access point to crypto assets.
But we should still expect Bitcoin to be very volatile as it makes its way towards mainstream adoption. When disruptive new technologies are in the early stages of adoption, volatility can be wild.
The internet took a similar path in the 1990s. Those who bought in early…and weathered all the volatility…made fortunes.
I wish it was different. But there are no free lunches. Because of this, I constantly remind my readers that volatility is the price we pay for the chance to make life-changing gains in crypto.
Finally, a question for former Silicon Valley insider Jeff Brown on wiping out tech stocks.
The tech-heavy Nasdaq peaked alongside crypto last November. Since then, it’s down almost 33%.
But that masks even steeper losses in once-high-flying tech stocks.
Good day Jeff. I understand your stance on position sizing for our investments. However, their thesis on the future of the technology remains the same. So it makes sense to me to add stocks at today’s cheaper prices. Why isn’t this an effective strategy?
I’ve been a subscriber since early 2020. Thank you so much for sharing your wisdom, knowledge, expertise and guidance!
– Karl M
Jeff’s answer: Hello Karl. Thanks for subscribing. And thanks for your question. I’m sure many readers are wondering the same thing.
As a publisher, I cannot give individual investment advice. However, this usually depends on the circumstances of the respective investor. Most importantly, it depends on how long you plan to invest in these stocks… how much you want to invest… and how risk-tolerant you are.
Experienced investors with extra cash to invest…and the right time horizon and risk tolerance…are well placed to take advantage of today’s cheap prices.
Standing against the crowd is never easy. But now is the best time to buy. The lower the price you pay to own stocks in the world’s top technology companies, the greater your profits when you sell.
But like I said, it’s hard. So new or more risk-averse investors can simply focus on holding the stocks they already own…and making sure they’re not selling at or near the bottom.
For people who like to bargain, here is the shopping list I would start with. These are all blue-chip tech stocks that will come back strong when sentiment turns back.
Advanced Micro Devices (AMD) – AMD is a chip manufacturer specializing in computer and graphics chips. It’s down 58% from its November high.
Corning (GLW) – This glass company specializes in making fiber optic cables… and screens for TVs, cars and smartphones. It’s down 30% from its January high.
Block (SQ) – Block, formerly known as Square, is an online payment processing company. It’s down 79% from its November high.
That’s all for this week’s mailbag.
If you have a question for anyone on the Legacy team, please send it to [email protected].
Have a nice weekend.
Editor, The daily cut