What must the US do to prevent losing to China in D.C. and Silicon Valley’s manufactured “AI race”? + Darius’s book recommendations

Happy Monday at 1342. It's your skipper here, Darius Dell, to present our Macro Minute for Monday, September 21st, 2026. Hope everyone had a great weekend. So as always, we'll start with the executive summary from today's lit off morning note. So let's dive right in. Today's key macro question is, what must the US do to prevent losing to China in DC and Silicon Valley's manufactured AI race? The short answer is cooperate. The key supporting evidence is US and Chinese officials gave upbeat readouts on AI trade and investment talks, signaling intent to stabilize ties before this week's summit between President Donald Trump and President Xi Jinping. Both sides agreed to a US-China AI dialogue and will consider a notification mechanism for AI incidents carrying national security implications. China's official news agency, Tsinghua, called the preliminary talks candid, in-depth, and constructive. Treasury Secretary Scott Besson deemed them very successful. He told Axios that we are open to discussions on avoiding shared risks and avoiding biosecurity issues. This marks a tone pivot by Besson, who recently warned there is no day after tomorrow if China wins the, quote, AI race. The moderated tone signals both governments want to cap the rivalry, despite gaps in on technology controls, Taiwan, and national security. Recall that AI has become a flashpoint since the May-Trump-Xi summit with US officials and Chinese technology companies alleging Chinese distillation of American models, an accusation that Beijing categorically denies. Chinese officials have said that officials have threatened to retaliate in response to any kind of measures by the US government. All told, investors should be aware that neither side is ready to agree on concrete de-escalatory measures at the current juncture. Progress may, however, be possible at the Asia-Pacific Economic Cooperation Summit in Shenzhen in November and or the US-hosted G20 summit in Florida in December. So what does this mean for your portfolio? Recall that China's AI development has a structural advantage relative to US AI development when analyzed through the dual lens of the cost of capital and the cost of tokens. For example, Chinese tech firms are currently paying 300 basis points less for debt capital than their US rivals, which allows them to price tokens at one to two orders of magnitude below similar quality tokens from leading US LLM providers. This is a competitive vote that allows China to finance and market marginal token supply at uneconomic prices. China's AI development has a structural advantage relative to US AI development when analyzed through the lens of energy as well. For example, the US' 4,520 terawatt-hours of electricity generation capacity is less than half of China's 10,583 terawatt-hours. The US' trailing five-year CAGR of 2.3% in electricity generation is roughly a third of China's trailing five-year CAGR of 6.4%, so the gap is widening. And finally, China's AI development has a structural advantage relative to US AI development when analyzed through the dual lens of politics. Young people and women, both of them who overwhelmingly vote Democrat, at 60 to 65% and 50 to 55% respectively, represent the lion's share of the public backlash against AI in the US. The 2028 general election could usher in a blue wave if the Trump administration continues to summarily dismiss mounting domestic concerns regarding AI's safety and AI's impact on the labor market. Lastly, recall that China dominates critical mineral supply at roughly 60% of mine production and 90% of refined production. This is a Trump card that China could use to affect U.S. economic development. In fact, the U.S. government has effectively shut down a U.S. military whose arsenal has been depleted via nearly seven months of war in Iran. Moreover, China is currently ahead of the U.S. in 66 of 74 critical technologies, according to the latest ASPE critical technology tracker update. In our view, it is far more likely that China wins the so-called AI race than not. Investors should continue to view a secular bear market that likely commences in 2028 as their modal outcome scenario, and look for evidence that this should be your base case scenario is that this market cycle ends in a secular bear market. And you need to disprove that, in my opinion. I think you have to start with that as the base case scenario. If you don't believe that's the base case scenario, in my opinion, I think the burden of proof is going to be on you, not the market. So we'll wrap it up, as always, with a question from our community. This one's titled Book Recommendations. Said, saw a post that included a list of podcast recommendations that was extremely helpful. Was wondering if anybody has any book recommendations. So as always, in terms of book recommendations, I'll start with the best and most important book of all time, it's the Holy Bible. Definitely check that out when you get a chance. It'll change your life. I'm a big believer that we create the world that we want to live in with our thoughts, our actions, our inactions, and our words. And there's never been a better book in human history that can help people formulate the proper thoughts, actions, inactions, and words to create positive outcomes, not just for themselves, but the community around them. So at the bare minimum, even if you don't believe in this Jesus guy or anything like that, I still highly recommend learning from all the wisdom in those several thousand pages that I try to read at least five times a week, preferably seven. But obviously, life happens. So just putting on the screen, this is my personal book recommendation. This is from page 55 of my upcoming book. I'm going to write a book. I have written a book. We're in the marketing process and the publishing process of The Current Jock Show, so it's currently expected to be out, I want to say, in early to mid-February of next year. So the book's done. It's basically the book is a summary of what I think are the most important things that investors need to know to maximize upside capture in bull markets and minimize downside capture in bear markets. It's essentially a summary of all the books that I've read across nearly two decades of being on Global Wall Street, plus the, I would say, upwards of maybe not 10,000, but maybe certainly over 7,500, 8,000 meetings with institutional investors over the past couple of decades and just kind of summarizing everything that I think is best practices. It's a summary of what I've learned from academics, best practices from practitioners, and ultimately best practices from some of the best investors in the world that have influenced my career on Global Wall Street. So without further delay, let me just read this. The first five books in this book list are books that I think help you become a better investor. Think about managing risk. Think about approaching the concept of figuring out where you are and testing your hypothesis. Those are all core competency skills that you need to be a good investor, whether you're in financial markets. And so number one, The Finance Bible, in my opinion, is Thinking Fast and Slow by Danny Kahneman and Emil Stavursky. If you are new to investing, make sure that is the first book you read. Everything else you read will make more sense, and you'll be able to spot-- your BS meter, your bull crap meter will be much better once you read this book. And everything you start to consume, whether it be marketing materials from a fund manager or somebody talking about something on TV, if you start to think about it through the lens that they provide-- and thinking fast and slow, you're going to be a much better investor and just a much smarter person. So at the bare minimum, hopefully, you're reading to make yourself smarter. Number two, The Misbehavior of Markets, A Fractal View of Financial Turbulence by Benoit Manelbrot and Richard Hudson. That's a great book that helps you understand the importance of understanding volatility as it relates to having a forward data-driven view on financial markets. Number three, Inside the House of Money, Top Hedge Fund Traders on Profiting from Global Markets by Stephen Drobny and various authors. He's essentially interviewing hedge fund practitioners across Global Wall Street. What's their best trade, worst trade? What's their process? It's a real good book on how different investors who are really skilled, really successful investors skin the cat, so to speak. And so I think that's a great book for beginners to understand the breadth of process that you're going to see across Global Wall Street. We're all trying to skin a cat a little bit differently. But at the end of the day, your goal should be to maximize upside capture in bull markets and minimize downside capture in bear markets. And so that's a great book on thinking about how a bunch of different really successful investors do that in different ways. Super Forecasting, The Art and Science of Prediction by Phil Tetlock and Dan Gardner. This is the Bible of forecast. If you're going to be forecasting anything and you have not read this book, trust me, your forecasts are going to suck. So I highly recommend you read this book. It's going to tell you basically everything that you haven't been taught in school about why your forecasts tend to be wrong and accurate. And so basically, you can obviously use that to correct the holes in your forecasting process. Hedge Fund Risk Fundamentals, Solving the Risk Management and Transparency Challenge. Richard Horowitz, really, really thoughtful book in terms of what do hedge funds and more importantly, what do institutional investors, the LPs of hedge funds care about from a risk management standpoint? If you can figure out what they care about and you can build a process that ultimately allows you to essentially create the solutions that they're looking for from an investment process standpoint. And so that was instrumental early in my career in terms of trying to develop and design risk management systems that eventually wound up being employed across the global buy side, something I'm very proud of. And so I'm going to talk a little bit more about this in just a few minutes. But first, I want to talk a little bit about some of the things that I've learned in the last five books in this list are really just departing from the day-to-day, how do I do this? How do I think about growth? How do I think about inflation? How do I think about managing risk in markets? What leads market risk? What lags market risk? Those are the kinds of questions that get answered in books one through five. Books number six through 10, and I would say six through 12 because I would add Ages of Discord and End Times by Peter Turchin in these books. These books think about regime change. People-- 99.9% of human beings and investors suck at regime change. They're terrible at it because people are not-- our brains are hardwired, as you will learn in Thinking Fast and Slow, our brains are hardwired to not recognize regime change well. And so these books help you understand that the world is big, it's different, and it's cyclical. Things that aren't normal happen way more frequently than we allow ourselves to believe over time. So Principles for Life and Work. work by Ray Dalio, Principles for Navigating Big Tech Crisis, Big Debt Crises by Ray Dalio, Principles for Dealing with the Changing World Order, Why Nations Succeed and Fail by Ray Dalio, The Fourth Turning, a book written by my former colleague and one of my mentors, Neil Howe. The Fourth Turning is here, also a Neil Howe book as well. And then, again, Ages of Discord and End Times by Peter Turchin. Again, you need to understand that the world changes. The world is always changing, but we go through these paradigm shifts and these big regime changes far more frequently than most investors are aware of, and that is where you get the biggest amount of tracking error as it relates to any legacy investment strategy or investment portfolio, by failing to recognize regime change. How many people failed to recognize the transition from fiscal dominance and monetary dominance and all the associated risk that that brought to the bond market, that brought to the bullion market, that that brought to ultimately the stock market, and all the policy choices and actions that we've seen in the context of the geopolitically driven society. That's just one example of significant regime change that we've seen in financial markets in recent years. And so you need to have a framework and a deep understanding of economic history that doesn't just span back to the late 1940s when most of the U.S. data time series start to really become meaningful enough to do statistical analysis with. You've got to understand how the world has worked across millennia, across hundreds of centuries, because at the end of the day, there is a constant across all that, and it's human beings, and it's how we're going to interact with each other that ultimately creates the outcomes that we see in the economy and financial markets. So hopefully that was helpful. We'll wrap it up there. Jerry Stowe here presenting our macro minute for Monday, September 21st, 2026. Best of luck out there today. We'll catch you back here tomorrow. Cheers. If you enjoyed this content, please remember to like and subscribe. Thank you. This content is for informational purposes only and does not constitute an offer or a solicitation. 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