Editor's note: If it makes you feel uneasy when we write about China, you're not alone...

Most Americans simply don't want to hear anything about the amazing opportunities in Chinese stocks. Our colleague Steve Sjuggerud and his research team have a name for it...

China-phobia.

Today's Masters Series essay comes from the September 4 issue of Steve's free DailyWealth e-letter. In it, analyst Vic Lederman details the latest proof that China-phobia is alive and well today... discusses the outrageous threats... and explains how you should respond...

Your Alma Mater Is the Next Victim of 'China-Phobia'

By Vic Lederman, analyst, True Wealth Opportunities: China

Uncle Sam is at it again.

He just asked universities to change how they invest. Specifically, he asked them to stop investing in China.

Make no mistake, the goal is to hurt China... not to help U.S. universities.

This is a political maneuver. It's designed to put out the "tough on China" image. And universities just happen to be the bystanders getting hurt this time.

It's strange. But that's where we are.

Regular Digest readers have seen this before... In the Masters Series last November, I covered how politicians were lining up to force government 401(k)s into divesting from Chinese companies.

It was a boneheaded move then. And today's action is similarly boneheaded.

The simple fact is, "China-phobia" is still here. It's going strong. And this time, it's hurting your alma mater.

Don't let the government rhetoric fool you. If you get swept up in China-phobia, it will hurt you, too.

We'll get to the details of this latest incident in a minute. You'll see that letting China-phobia drive your investment decisions would be like taking a chainsaw to your returns.

But first, you must know why many Americans have China-phobia today...

It's a mix of fear and respect. My mentor and True Wealth Opportunities: China editor Dr. Steve Sjuggerud described it best through a conversation with one of his friends in DailyWealth back in November 2018...

"My American pride took a real hit on this trip," a friend told me on our most recent trip to China.

"What was it that got you?" I asked him. It was his first time visiting the country.

"It wasn't one thing. It was... everything," he said.

"We are in what is supposed to be a third-world, communist country," he explained. "So my expectations were low. But Beijing and Shanghai are like stepping into the future. And I just did not expect that, coming from America."

I think his sentiments get right to the heart of the matter...

Americans feel that China is the first real threat in decades to our belief in American dominance.

That sentiment is as clear as ever with this most recent incident of China-phobia...

On August 18, the State Department released an ominous letter. It's titled "Letter From Under Secretary Keith Krach to the Governing Boards of American Universities."

You can go read the original for yourself online. But the premise is simple... China is bad, so don't buy shares of Chinese companies.

Putting the politics aside – let's focus on the money. To make its point, the State Department makes two outrageous threats...

First, it threatens universities by implying that buying shares of Chinese companies, even through index funds, is a breach of fiduciary duty. In other words, the government is telling universities that buying emerging market stocks is irresponsible... and hinting that it might take action against them for doing so.

Second, the government threatens that the delisting of Chinese companies is imminent. This is such a big statement, it's hard to address the scope of it. But the bottom line is simple...

Threats like these are designed to make headlines. That's all. And acting on them would be a near-impossibility.

Remember, the Chinese companies we're talking about here are big – really big. E-commerce giant Alibaba (BABA) is the perfect example...

It's the fifth-largest company on U.S. stock exchanges by market cap. And its operations span across the world. Its stock is also up more than 300% since it went public in 2014... triple the return of the U.S. market over that span.

This is the kind of company that Uncle Sam is threatening to take away from U.S. investors. And it's starting by bullying universities... hoping they'll be scared enough to pull their money out.

Giving in to the pressure would be a big mistake. Over the last two years, Chinese A-shares have more than doubled the performance of the S&P 500.

The reality of this situation is simple... China and the U.S. are the world's two largest economies. And Uncle Sam is threatening to cut U.S. investors off from one of them.

It's a short-sighted and selfish move... one that's designed to hurt U.S. investors for a short-term political win. But as Steve said in his November 2018 DailyWealth on the topic...

Don't let China-phobia fog your vision.

The long-term opportunity in China is massive. It's a trend you need to own once the current bust turns into a boom.

Last fall, Uncle Sam targeted the 401(k) plans of its own employees. This year, it's targeting university endowments. And it's using the threat of delisting some of the world's largest companies from U.S. exchanges as its lever.

That kind of fear-based narrative might motivate some Americans to get out of emerging market stocks altogether. But the data shows us they'd be making a big mistake.

China-phobia isn't an investment thesis... It's a political one. And it's designed to hurt and intimidate U.S. investors to score political points.

Good investing,

Vic Lederman

Editor's note: Investing in China has been one of the smartest moves you could've made in recent years. And right now, my colleague Brian Tycangco sees a similar setup taking place in another part of the world... It's a group of markets he calls the "Next Chinas." He recently put together a presentation detailing exactly how to profit. Get started right here.