Rise of Strategic Capitalism: Focal Point, Taiwan

“The West as a whole in the early 1990s became obsessed with a ‘peace dividend’ that would be spent over and over again on any number of soft-hearted and sometimes soft-headed causes. Politicians forget that the only real peace dividend is peace.”

— Margaret Thatcher

April 7, 2025 — “Trust me, you’ll miss the benefits of the empire when it’s gone.”

That’s one of our favorite historians of empire, Niall Ferguson, with a mic-drop eulogy for the American-led world order — Pax Americana.

Niall is Scottish, so you may want to forgive his sour disposition. The real-world experience of the United Kingdom’s century-long experiment with Empire gives him good reason to see the world thus.

For the United States turn, Niall is lamenting the end — with Thursday, April 2nd’s “Liberation Day” declaration — of the post-WWII system powered by aircraft carriers, cheap capital, and cheaper rhetoric.

If that era’s on its last legs, the fracture point is Taiwan.

A speck on the map.

But it’s home to TSMC — Taiwan Semiconductor Manufacturing Company — the beating heart of the digital economy. It cranks out the world’s most advanced microchips for Apple, Nvidia, AMD, and even the Pentagon.

Chips are the size of a fingernail but are worth more than barrels of oil. And the “picks, shovels and blue jeans” of the nascent AI world economy.

Unfortunately for free traders, the Taiwan chip industry is parked within the missile range of a country that considers Taiwan not a nation, but a wayward province.

One bad weekend in the Taiwan Strait, and we’re not just looking at a military crisis — we’re looking at a global blackout. iPhones, fighter jets, data centers, car factories, hospitals: frozen.

That’s why Washington now calls TSMC a “silicon shield.”

It’s not a poetic flourish — it’s a last-ditch firewall between civilization and the cliff.

Niall Ferguson continues his bender, calling Trump’s response “Project Minecraft.” It is a fantasy where America pickaxes its way back to 1955, armed with tariffs and nostalgia. “Trump stands as much chance of reindustrializing the U.S. as you do of getting your frozen laptop to work by smashing the motherboard with a Minecraft hammer,” Ferguson says.

Yet beneath the meme is a real shift. Call it imperial rollback. A controlled demolition. Tariffs. Trade walls. Tough love for NATO freeloaders. A plan — chaotic, maybe — but a plan to shrink the empire while trying to save the Republic. And let it flourish anew.

Another classically trained writer we respect, Victor Davis Hanson, doesn’t see a fantasy. He sees a reckoning. “Globalization didn’t just move jobs,” he writes. “It moved the soul of the country.”

In his telling, free trade became a euphemism for the long con. Wall Street got rich. Working-class America got fentanyl, Dollar Trees, and lectures about coding bootcamps.

All while running massive trade deficits since 1975.

Hanson’s verdict on tariffs and market chaos? Painful, sure. But just. “This is a 50-year injustice,” he says. Tariffs aren’t the problem — they’re the apology note.

And Taiwan? Taiwan is the leverage point.

Taiwan’s chip foundries hold the keys to the 21st century — the gadgets, the code, the weapons, and the learning machines. TSMC is more than a tech company. It’s an economic deterrent, as critical as nukes were in the Cold War.

Which brings us to Grey Swan regular John Robb.

He lays out the fork in the road: China’s model is command-and-control. Centralized innovation. State-owned companies building toward national goals.

The U.S.? It’s chaos by comparison. Decentralized, stock-driven, and addicted to quarterly earnings. Nvidia builds because Jensen Huang sees gold in the GPU hills — not because Uncle Sam told him to.

Chaos is “our” strength.

Trump’s team of realists see the game for what it is. Nobody (‘cept maybe Trump himself) likes tariffs. They’re another tax. An impediment to free trade. But today, the tariff tweaks aren’t about trade – they’re national firewalls. And the blueprint for a fractional world along ideological lines.

Forget what economic textbooks say. This isn’t about flat-screen TVs or comparative advantage. It’s about who gets to write the firmware for the world. And whether that code is geared for individual flourishing – or state control.

The WTO is an antique. Their version of free trade is in hospice. We’re in a new era now — Strategic Capitalism. Traders and individual investors need to sort out which side they’re on.

Economists say that free trade is helpful. So do the political scientists. To them, free trade is a tool that can prevent wars between countries.

Thomas Friedman, the New York Times columnist who has been a cheerleader for endless globalism, rose to fame with the observation that no two countries with a McDonald’s franchise got into a shooting war.

Of course, Russia’s invasion of Ukraine proved that idea wrong. As friendly as it was nice while it lasted.

The reverse, however, is also true. Ferguson sees a retreat, Hanson sees a just war, and Robb sees divergent systems locked in a winner-takes-all sprint.

Tariffs aren’t the first salvo in a trade war. They represent something much larger in scale: a war of ideas. Taiwan, for better or worse, is the DMZ resting precariously in between.

Chaos over control! Damn the torpedoes! Full speed ahead!

If that sounds dramatic, good. It is. That’s why our most recent research looked in detail at this emerging chip war.

Addison Wiggin
Grey Swan

P.S. If you’re a paid-up member of the Grey Swan Investment Fraternity, please join us for a live Zoom call on Thursday at 11 a.m. April, 10 EST.

This week, we’ll take a deeper dive into our model portfolio and how those positions have fared during the global sell-off. (Quick spoiler alert: 15 of 20 positions are up, including all five of our Aggressive Portfolio positions.)

Fraternity members will get the link and password Thursday morning. Seats are limited. Risk isn’t.

We’re also asking for your best trading ideas. You read that right: we’re throwing the gates wide open and “crowd-sourcing” new trades with you! Bring ‘em on… no ideas are too small.

If you have any suggestions on new trades or macro ideas we’re missing, please share them here: addison@greyswanfraternity.com

— Margaret Thatcher

April 7, 2025 — “Trust me, you’ll miss the benefits of the empire when it’s gone.”

That’s one of our favorite historians of empire, Niall Ferguson, with a mic-drop eulogy for the American-led world order — Pax Americana.

If that era’s on its last legs, the fracture point is Taiwan.

A speck on the map.

Chips are the size of a fingernail but are worth more than barrels of oil. And the “picks, shovels and blue jeans” of the nascent AI world economy.

Unfortunately for free traders, the Taiwan chip industry is parked within the missile range of a country that considers Taiwan not a nation, but a wayward province.

That’s why Washington now calls TSMC a “silicon shield.”

It’s not a poetic flourish — it’s a last-ditch firewall between civilization and the cliff.

In his telling, free trade became a euphemism for the long con. Wall Street got rich. Working-class America got fentanyl, Dollar Trees, and lectures about coding bootcamps.

All while running massive trade deficits since 1975.

Hanson’s verdict on tariffs and market chaos? Painful, sure. But just. “This is a 50-year injustice,” he says. Tariffs aren’t the problem — they’re the apology note.

And Taiwan? Taiwan is the leverage point.

Which brings us to Grey Swan regular John Robb.

He lays out the fork in the road: China’s model is command-and-control. Centralized innovation. State-owned companies building toward national goals.

Chaos is “our” strength.

The WTO is an antique. Their version of free trade is in hospice. We’re in a new era now — Strategic Capitalism. Traders and individual investors need to sort out which side they’re on.

Economists say that free trade is helpful. So do the political scientists. To them, free trade is a tool that can prevent wars between countries.

Of course, Russia’s invasion of Ukraine proved that idea wrong. As friendly as it was nice while it lasted.

The reverse, however, is also true. Ferguson sees a retreat, Hanson sees a just war, and Robb sees divergent systems locked in a winner-takes-all sprint.

Tariffs aren’t the first salvo in a trade war. They represent something much larger in scale: a war of ideas. Taiwan, for better or worse, is the DMZ resting precariously in between.

Chaos over control! Damn the torpedoes! Full speed ahead!

If that sounds dramatic, good. It is. That’s why our most recent research looked in detail at this emerging chip war.

Addison Wiggin
Grey Swan

P.S. If you’re a paid-up member of the Grey Swan Investment Fraternity, please join us for a live Zoom call on Thursday at 11 a.m. April, 10 EST.

Fraternity members will get the link and password Thursday morning. Seats are limited. Risk isn’t.

We’re also asking for your best trading ideas. You read that right: we’re throwing the gates wide open and “crowd-sourcing” new trades with you! Bring ‘em on… no ideas are too small.

If you have any suggestions on new trades or macro ideas we’re missing, please share them here: addison@greyswanfraternity.com

Just a couple of days ago, everyone was celebrating gold’s move above the critical $4,000 psychological resistance level. But with today’s pullback, it slipped back below that level in both COMEX futures and spot, which makes me pause and think, as it indicates a rejection of that key level.

This increases the likelihood of a modest pullback or a period of sideways consolidation, as gold may have temporarily run out of momentum to push higher in the short term. That is perfectly normal, healthy, and not at all surprising. It is much like a sprinter who has just run hard and needs a moment to catch their breath.

Gold. Stocks. Bitcoin. Prediction markets. Each a different surface on the same wave — money searching for a story it can still believe in.

The Schelling Point of this moment isn’t one price or policy; it’s the shared intuition that something historic is shifting… even though we haven’t named it.

It’s Friday. It’s a good time to “remobilize our axioms,” as my favorite William F. Buckley quote goes.

We need to stick to our guns and remember that the goal of understanding Grey Swan events as they unfold is to plan, preserve our capital, and earn a good return for the long run. Let’s not get distracted by the market highs or headlines of a terrifying bull!

Only during the ‘08 financial crisis and its aftermath have the majority of money managers seen stocks as undervalued.

This data point is another in a list of historic highs – stock indexes, gold, silver, bitcoin, retail investment, retail margin borrowing – we’re seeing in the market right now.

Markets are out of whack to the upside.

History’s cautionary tale? When markets are out of whack… it takes an unsettling event (crisis) to get them back into whack.

As AI clusters demand more light at every layer — from rack to package — Coherent’s share of that energy pathway increases. The startups illustrate what’s possible; Coherent ensures it happens.

As light enters the data center — step by step, layer by layer — Coherent is the most experienced and scaled name in the field. It carries the light forward.

Gold. Stocks. Bitcoin. Prediction markets. Each a different surface on the same wave — money searching for a story it can still believe in.

The Schelling Point of this moment isn’t one price or policy; it’s the shared intuition that something historic is shifting… even though we haven’t named it.

It’s Friday. It’s a good time to “remobilize our axioms,” as my favorite William F. Buckley quote goes.

Only during the ‘08 financial crisis and its aftermath have the majority of money managers seen stocks as undervalued.

This data point is another in a list of historic highs – stock indexes, gold, silver, bitcoin, retail investment, retail margin borrowing – we’re seeing in the market right now.

Markets are out of whack to the upside.

History’s cautionary tale? When markets are out of whack… it takes an unsettling event (crisis) to get them back into whack.

As light enters the data center — step by step, layer by layer — Coherent is the most experienced and scaled name in the field. It carries the light forward.