by Byron King, Daily Reckoning:
Today, we’ll discuss war in the Middle East, metals, energy, Big Tech, and how to protect wealth in turbulent times. Maybe it’s ambitious to think we’ll simultaneously make sense of so many different items, but let’s give it a try…
Begin with the Super Bowl, the other night. To me, the most interesting thing was that Air Force F-22s didn’t zoom over Levi’s Stadium in the opening ceremony. Originally, the gray birds were scheduled for an overflight, but were yanked due to “operational commitments,” per an official press release.
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Sorry, no F-22s. They’re busy. Screen shot from You Tube.
The flyby included two B-1 bombers, although just one is pictured. Plus, two F-15s, two F/A-18s, and two F-35s. The Air Force and Navy have plenty of those, but no spare F-22s, alas…
And no B-2 bombers either, which is worth noting. Because perhaps the super-stealthy birds also had “operational commitments,” maybe something similar to what occurred last June in the skies over Iran. On that point we’ll have to wait and see because, from the outside, we can only ponder the possibilities of what may be in store for those airborne platforms.
Meanwhile, I’m mostly holding metal miners, related hard assets, and energy. And there’s no way I’d sell even an ounce of physical precious metal just now. Hang onto gold and silver. (That’s just me; this isn’t personal financial advice.)
Are You Hedged Against Risk?
There’s much to dissect here. But first I want to say hello and welcome new subscribers. Recent moves in gold, silver, other metals and energy have expanded our reader lists at Paradigm Press… and yes, you’re in the right place. Thank you for being here.
And to answer a commonly asked question: When you signed up for a paid newsletter, the package included complementary e-letters like this one.
Now, let’s return to the missing F-22s and B-2s at the Super Bowl. Evidently, they’re tasked with… umm… other things. Add in a large number of recent military transport flights to the Middle East, plus Navy assets in the North Arabian Sea. And it’s fair to say that “something” could happen sooner or later, and don’t be surprised if it’s sooner (see below). Which prompts me to wonder about stock markets, and more specifically energy and metals.
That is, big geopolitical events – like, say, dropping bombs on Iran – move markets. Globally, when missiles ignite and ordnance falls, people flee to safety which has traditionally been in dollars, but in recent years includes significant buys into precious metals, certainly gold.
Oil prices also serve as a predictor, definitely when the problem is in or around the Middle East. So, note that oil is moving up, currently in the mid-$60s per barrel. Oil services are strong, too: look at last three months for Schlumberger/SLB (SLB) or Halliburton (HAL).
Which raises the question: Are your investments positioned for the possibility of conflict? Are you hedged against war risk? For example, consider an oil company that works far from any potential battle front, like Petrobras (PBR). Nice chart over the past month, eh?
Petrobras (PBR), three-month chart. Courtesy YahooFinance.com.
Do Markets Get It?
In an internal message over the weekend, my colleague Dan Amoss (with whom I work on the Jim Rickards letters under the Strategic Intelligence banner) pointed out how it seems that markets have lost sensitivity to the probability of an earthquake-level geopolitical event like a real, all-out war with Iran.
Here’s how Dan phrased it: “Investors assume the S&P and the VIX complex is a hyper-efficient Bayesian barometer of risk, but it could sleepwalk into a multi-day market closure event, and #REF! out, quantitatively speaking, in a paradigm shift historical event.”
In other words, in his inimitable way Dan critiqued the widespread belief in so-celled “efficient markets.” In particular, considering what’s obviously going on in the Middle East, Dan posed the question of why markets seem so upbeat, for example how the DOW touched 50,000 last week. Because really, when a war starts and if something bad happens – fog of war, and all that – then more than a few investment avenues could rapidly become locked-out to mere mortals.
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