Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Friday. Today is Friday, May 15th. It has been an eventful week.
We got inflationary consumer price numbers.
We got even more inflationary producer price numbers.
And we got something I want to spend today talking about — President Trump's meeting with Chinese President Xi Jinping.
Taiwan Must Be Defended
Those of you who follow this channel know I am a historian.
Classical history is my focus — Greek and Roman.
And I want to invoke Cato the Elder today.
Cato was a Roman senator who, at the end of every speech he gave — on any topic — would finish with the same line: "Carthago delenda est."
Carthage must be destroyed.
He said it over and over, relentlessly, because he believed Carthage was an existential threat to Rome and that Rome needed to stay focused on it no matter what else was happening.
I have become Cato the Elder on Taiwan.
Taiwan must be defended.
I have been saying it for years and I will say it until I am blue in the face.
Because if China takes Taiwan, they own the tech stack.
Every advanced semiconductor that makes our F-35 fly, that runs Nvidia's chips, that powers ChatGPT, Claude, all of it — comes from Taiwan.
If China took Taiwan, they would control the tap on a resource as critical to our national security as oil.
They would decide who gets chips and who doesn't.
Every country that agrees with their takeover gets chips.
Every country that doesn't gets cut off.
That is not a hypothetical.
That is the most likely outcome.
And it would destroy our tech industry.
It would be over.
What Xi Said — And Why It Matters
What was unusual about this meeting is that President Xi warned Trump directly — on the first day — that America's position on Taiwan would create friction and conflict.
The Chinese press published it immediately in their readout.
Leaders do not typically issue public warnings to each other on day one of a summit.
That is a ratcheting up.
That is Xi raising the temperature deliberately.
It reminds me of Admiral Sam Paparo — former Pacific Fleet commander — and what he and Admiral Davidson called the Davidson Window.
Their prediction: by next year, China could move on Taiwan.
I did not expect the warning to come this publicly or this quickly.
Wall Street still has a major blind spot on this.
They are not pricing in what a Taiwan conflict would actually mean.
What This Means for Your Portfolio
At the beginning of great power wars, markets typically drop 30%.
They tend to rally afterward — and they rally better for the victor.
But if we lost Taiwan, our tech industry would be destroyed.
The market would not come back the same way.
This week, two of the five biggest risks I laid out in Midnight in America moved closer.
The biggest risk of the five — China and Taiwan — got significantly more real.
I want to be honest with you.
This has left me in a thoughtful and reflective mood heading into the weekend.
On Monday I am going to talk specifically about what this means financially — how to think about hedging and positioning your portfolio if a Taiwan conflict were to happen.
Because it would have significant implications, and I want you prepared.
Have a wonderful weekend.
I will speak to you on Monday.
“The Buck Stops Here,”
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Written by Dylan Jovine