Cold War II is already having a far reaching impact on investing
Cold War II is already having a far reaching impact on investing from defense to the Agriculture sector.
Cast your mind back to the early 90s, the Cold War has come to an end (1991), the Soviet Union has broken up and there is a euphoric feeling, albeit in the West that “freedom” and “democracy” has triumphed over its ideological opposite, communism without an apocalypse of a nuclear showdown.
The Soviet Union (now Russia) would taste “freedom”, embrace free market enterprise, consumerism and economies would boom. There was indeed a brief Washington-Moscow honeymoon period. But that has most definitely come to an end. East West relations are frosting over again.
Russia’s annexation of Crimea in 2014 has been the catalyst for a freezing up of Russian, US foreign relations under the previous Obama administration. There was hope that the new Trump administration would restore relations and remove trade sanctions on Russia.
How many times did Trump appear on stage to say, “Wouldn’t it be nice to get along with Russia?”
Trump: “Wouldn’t it be nice to get along with Russia?”
So electioneering is not much more than political theatrics. When the President is in “power” it is the puppet-masters who pull the strings. Perhaps former US President Jimmy Carter nailed it when he said that America is no longer a democracy and called the nation an “oligarchy.”
In keeping with Obama’s tough stance, Trump then signs the Russian sanctions bill. Russian Prime Minister Dmitry Medvedev called the sanctions a “full-scale trade war,” and added that the Trump administration had demonstrated “utter powerlessness.”
In short, getting along with Russia makes sense to everyone but the US oligarchs.
The“military-industrial complex (MIC)” that the former US President Eisenhower warned about in his Farewell Address to the Nation on January 17, 1961, gives us the best clue.
Eisenhower Farewell Address (Best Quality) – ‘Military Industrial Complex’ WARNING
So the most likely big winner from Cold War II is MIC.
Perhaps the oligarchs have deduced that maintaining frosty relations with Russia and China is more valuable to them than having good East West relations. The multi billion dollar defense industry needs an enemy (or a perceived enemy) to keep their cash registers ringing with fresh orders.
Moreover, NATO was beginning to look obsolete during the end of the last cold war and the so called “War on Terror” just didn’t justify expensive weapon systems upgrades. You don’t need a sled hammer to crush an ant.
But in this new era of Cold War II, we have seen the industrialization and rapid militarization of China in Asia. Modern China is today more confident and lamenting its Imperial past wants more political influence in the region which matches its economic mite. There is Sino Russian plans to conduct global trade in the economic vibrant “new silk road” outside the dollar race track, thereby challenging USD hegemony. Russian is befriending and trading with a natural trading partner- the EU. So perhaps the US feels its global influence and power slipping away.
But an Empire in retreat has itchy trigger fingers. Fear is a powerful emotion and businesses are already cashing in on it. Luxury “doomsday” bunkers are back in vogue. Americans building doomsday bunkers in ‘record numbers’ since Donald Trump’s election. It sounds like something straight out of a dystopian sci-fi flick, but like many peculiarities emerging with the Trump administration, it’s not; people across …
But I am not prophesying doom and gloom (for if I am wrong I have nothing to lose).
Let’s just say that the western puppet masters prefer East West relations to be near freezing point. Then the EU will be more willing to pay 6% of its GDP towards NATO defense spending. Defense stocks are likely to do well in Cold War II.
Energy security for the EU will also become more of an issue. Europe is human capital rich but energy poor and if relations with Russia go cold again then Europe will probably need to rekindle supplies from the US.
Russia controls approximately 25% of Europe’s natural gas imports, giving it a veritable monopoly there for decades. Greece (76%), Turkey (64%), Hungary (60%), Slovenia (52%), Austria (49%), Poland (48%), and Germany (36%) are all heavily dependent on Russian gas.
Already Washington is helping set up new natural gas pipelines and terminals in the region that are heavily dependant on Russia for its energy needs. Put another way, it is pushing American companies’ bids and in so doing closing Russia out of business.
Cold War II is likely to give American energy sector stocks a boost. Could liquefied natural gas (LNG) exports could be about to take off? Now is the time to learn how to invest in the stock market!
The Agriculture sector is also likely to be impacted from Cold War II. In a tit for tat, the Russian government has banned the importation of agricultural and food products, including fruits, vegetables, meat, fish, and dairy products, from the Western countries that had imposed economic sanctions. That is hitting hard EU exports of agriculture produce to Russia. For example, EU Agri-food Exports to Russia in 2013 was 12,150 (million €) and in 2016 it fell to 5,707 (million €).
European Union, Trade in goods with Russia.
European Commission Directorate-General for Trade 03-05-2017 1 Units A4 / G2 European Union, Trade in goods with Russia Table of Contents pg European Union, Trade …
So where is Russia buying its agriculture from, (in other words which countries are the winner)?
Pakistan, Serbia, and Egypt, as well as countries in Latin American, such as Chile, Argentina, and Brazil, have all grown dramatically since the sanctions.
The airline sector is another part of your investment portfolio that might need evaluating in this new Cold War II era. Russia could close its Siberian airspace to western airlines. If so, that would add to fuel costs adversely impacting the profitability of western commercial airlines flying to and from Asia.
Cold War II is now in play (whats more there is no force stopping this momentum) so it might be prudent for investors to evaluate the winners and losers of this new Cold War era in East West relations.