Here's the memo I wrote on my preliminary thoughts on buying the dip on Chinese equities. I recommend reading it before reading this memo.

Dear CommonStock community,

Some have argued that we should avoid investing in Chinese equities due to the possibility of China invading Taiwan, which could lead to economic sanctions or instability that harms Chinese businesses. However, avoiding Chinese stocks while maintaining investments in $AAPL and other companies with major manufacturing operations in China is an inconsistent strategy.

If the rationale for avoiding Chinese equities is to limit exposure to Chinese political risk, then companies like Apple with large China manufacturing footprints have significant exposure as well. An invasion of Taiwan leading to economic sanctions on China would likely disrupt manufacturing operations located in China. This could harm Apple's ability to produce iPhones and other products, severely impacting its profits and share price.

Additionally, many of the components in Apple's products are sourced from Chinese suppliers. So even if Apple shifted manufacturing out of China, its supply chain would remain largely based in China. Avoiding direct investment in Chinese companies while retaining investments like Apple seems to offer a false sense of insulation from Chinese market risk.

Rather than selectively avoiding Chinese stocks, a more prudent strategy is to assess political risks in China and their potential impacts across our entire portfolio. Diversification and moderation, not blanket avoidance based on geography, tend to be wiser investment principles. With proper due diligence and risk management, some exposure to Chinese stocks along with companies like Apple that are dependent on China can be maintained as part of a thoughtful, balanced investing approach. Maybe it's better to resort to small and mid cap companies that don't rely on China for sales and raw materials.

In summary, singling out avoidance of Chinese stocks while retaining investments in Apple seems inconsistent with the underlying rationale of limiting exposure to China.

Sincerely,

Dissecting the Markets