World Peace, Economies and Markets are Dependent on Geopolitics

By Victor Sperandeo with the Curmudgeon


Flash Update:

The assassination attempt on Donald Trump on Saturday is a disgrace for the U.S. Amazingly, the Secret Service failed to prevent it, despite numerous shooters killing innocent people in the last few years, the assassinations of two Kennedy’s, and an attempt to kill Ronald Reagan on March 30, 1981. Victor and the Curmudgeon strongly assert that no one anywhere in the world should promote violence to attain political power! No more on this topic (for now) which is being extensively covered by the mainstream media.

Introduction:

The lack of widespread concern and serious discussion of geopolitics is surprising. Regional conflicts can escalate and produce economic shocks, while disagreements between major powers can escalate into military conflicts resulting in a world war.

In last week’s column, we discussed the landslide victory for the center-left Labour party in the UK elections — its first victory in 19 years.  We also forecast gridlock in France after their elections with President Emmanuel Macron facing a deeply divided Parliament, including two blocs firmly opposed to him. 

This week we dig deeper into ongoing geopolitical conflicts and NATO summit outcomes that could be very dangerous for world peace.

Proof Points:

1. The regional conflict between Israel and Hamas in Gaza has resulted in mass destruction, killing of thousands of civilians, famine conditions and water shortages in Gaza. It poses additional dangers of global economic disruption, growing military vulnerabilities, deeper political polarization, new strategic challenges, and the shifting nature of warfare due to belligerent non-state actors, like Hamas.

2. Iran's support for militant terrorist groups (e.g. Hezbollah in Lebanon, Houthi’s in Yemen, Hamas in Gaza, Islamic Jihad in the West Bank, etc.) and its own military actions against Israel raise tensions in the Middle East that could easily escalate into a world war. If Iran were to close the Strait of Hormuz, oil prices could soar to $150 a barrel. That would mirror the “Arab Oil Embargo,” when Arab members of OPEC, led by Saudi Arabia, imposed an embargo on oil sales to the U.S. in retaliation for Washington’s decision to re-supply the Israeli military in the 1973 Yom Kippur war.

3. In April, Iran threatened “an obliterating war’ on Israel if Lebanon (Iran-backed Hezbollah’s home) is hit by a full-scale attack. Ouch, we’re getting close to that now!

 In June, Israel’s military said plans for a Lebanon offensive have been ‘‘approved and validated,” as Israeli forces and the Hezbollah movement engaged in cross-border exchanges of fire.

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Israeli soldiers firing artillery towards southern Lebanon. Photo credit: Jalaa Marey/AFP

The Israeli military said on Wednesday, July 10th that it hit a Hezbollah site deep inside Lebanese territory, the latest in a volley of strikes between the two sides amid Israel’s war on Gaza.  The IDF said the attack on Tuesday night targeted one of the Lebanese armed group’s air defense systems near the central village of Janta, which is located about 79km (49 miles) from Beirut, Lebanon’s capital. In parallel overnight strikes, Israel’s air force attacked a Hezbollah air defense site in the southern town of Baraachit and a weapons depot in the Kfar Kila area, it said. Reporting from the southern Lebanese town of Marjayoun, Al Jazeera’s Assed Baig said Israeli artillery, drone and missile attacks also hit the areas of Yaroun, Haddatha, Hula, Toulin and al-Nabi Shayth in the Bekaa Valley.

4.  In northern Israel, Hezbollah rocket attacks has forced approximately 96,000 Israelis to leave their homes.  Those displaced Israeli’s are now living in hotels or shelters with their children, most of which can’t go to school.  Many IDF soldiers are stationed in the North to protect the few remaining residents living there. That’s in addition to a significant IDF presence in the Golan Heights to protect against potential threats from Syria and to secure the region.

5. Russia’s ongoing war in Ukraine is a stark example of potential super-power conflicts, especially since NATO has granted Ukraine an “irreversible path” for membership, which Russia says it will not tolerate. “Ukraine’s future is in NATO,” the allies said in their joint communique Wednesday. Furthermore, the war in Ukraine disrupts global food and energy supplies, impacting economies worldwide.

Saudi Arabia privately hinted earlier this year it might sell some European debt holdings if the Group of Seven decided to seize almost $300 billion of Russia’s frozen assets. People familiar with the matter said it was a “veiled threat.” The Saudis specifically mentioned debt issued by the French treasury, two of the people said.

Russia and U.S. Headed for Nuclear War?

The bottom line is that the world seems to be heading towards a potential nuclear war, which it will never recover from.  There are no winners in such a devastating war.  Yet U.S. President Joe Biden seems to be oblivious to this existentialist threat. At his NATO solo press conference on Thursday, he said, “I have no good reason to talk to (Russia President) Putin right now. There's not much that he is prepared to do in terms of accommodating any change in his behavior, but there isn't any world leader I'm not prepared to deal with.”

NO GOOD REASON?  With its advanced nuclear arsenal, Russia’s military is the strongest and most dangerous armed force in the history of mankind.  Vladimir Putin is the one man who can end the world as we know it.  Yet Biden talks like his dislike of Putin is the same as the “Hatfields and McCoys” feud from 1863-1891, between two Appalachian mountaineer families.

Takeaways from the NATO Summit:

The inexorable march to war and chaos at the end of the recent NATO summit were demonstrated by several points of order:

-->Victor fears that Frankfurt/Berlin, Paris, London, Washington DC and NYC, could be targeted with nuclear missiles when those weapons are deployed in Germany.

Indeed, worldwide tensions are escalating:

“Increasingly, partners in Europe see challenges halfway around the world in Asia as being relevant to them, just as partners in Asia see challenges halfway around the world in Europe as being relevant to them,” U.S. Secretary of State Antony Blinken said last week at the Brookings Institution.

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Victor’s Opinions:

1. The only world leader who is talking PEACE is Victor Orbán, Prime Minister of Hungary since 2010 and rotating EU President. Orbán met with Donald Trump at the latter’s Mar-a-Lago home in Florida this past week "as the next stop of his peace mission," Orban's spokesperson said. "The discussion was about the possibilities of peace."  

-->Yet the EU has ostracized Orban as a saboteur to the EU cause?

An EU diplomat said that Orbán’s “actions are not serving the EU or peace. They play into the hands of Putin and his war project. The Hungarian slogan to ‘make Europe great again’ is more about making Russia great again at this stage.”

2. U.S. comments on China are absurd: Deputy U.S. Treasury Secretary Wally Adeyemo said on Friday that Washington and the European Union (EU) must deliver a message to China that its firms face a choice between doing business with U.S. and EU economies or equipping Russia with dual-use goods.  It had to be made clear that "Chinese firms can either do business in our economies or they can equip Russia's war machinery with dual-use goods. They can't continue to do both," he said in a speech on a visit to Berlin.

This type of suggestion shows how little U.S. government officials understand about the U.S. economy, as consumer prices would surge if imports from China were significantly reduced.  America is especially dependent on China for all types of electronics and computers.

Most people know that Apple makes all their iPhones, iPads, and Mac’s in China, but few are aware that the major U.S. hyper-scale cloud companies (Amazon, Google, Microsoft, Facebook) outsource manufacturing of their IT equipment to Original Development Manufacturers (ODMs) in China.

In May, the U.S. hiked tariffs on an array of Chinese imports, including quadrupling duties on Chinese electric vehicles to 100%.  Yet in June, China's exports grew at their fastest in fifteen months and increased 8.6% year-on-year. China's trade surplus stood at $99.05 billion in June, the highest in records going back to 1981, compared with a forecast of $85 billion and $82.62 billion in May.

3.  The U.S. Constitutional Republic is a complete failure, as previously stated.  Our so-called Representatives in the House and Senate, plus the Judiciary, are not even close to representing “the people” or enforcing the laws (as stated in the U.S. Constitution). Instead, they serve “Corporate Money Masters” and their personal interests of maintaining power by receiving donations.

-->Sadly, swearing an oath to maintain the law, as per the U.S. Constitution, has become a fraud and a joke.

Victor’s Conclusions:

One may ask, is America now the world’s bully?  As the leadership of our two political parties won’t call for peace talks, and the West blames Russia and China for the Ukraine war, what do you think will be the end result?   New sanctions on Russia?  Threats by the U.S. against China with more tariffs?  World tensions will only heighten. The instability of a superpower, like the U.S., Russia or China, could trigger a domino effect across the world, creating unparalleled chaos and destruction.

In blunt terms, it appears the U.S. and the EU are not seeking peace – only perpetual war.  Until it ends with nuclear missiles. That’s very scary!

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End Quotes:

1. A reminder for people across the world, who currently act like non-thinking Zombies, is to bear in mind these words:

“Alexander, Caesar, Charlemagne, and I have founded empires. But on what did we rest the creations of our genius? Upon force. Jesus Christ founded his empire upon love; and at this hour millions of men would die for him.” Attributed to Napoleon, but some doubt its authenticity.

2. And this from someone known as the “Father of the Republic”:

“The closer the collapse of the Empire, the crazier its laws are.” Marcus Tullius Cicero (106 BC to 43 BC) was a prominent statesman and orator in the tumultuous period of the late Roman republic.


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His extensive writings include treatises on rhetoric, philosophy and politics. Cicero is considered to be one of Rome's greatest orators and prose stylists and the innovator of what became known as "Ciceronian rhetoric" He was proscribed as an enemy of the state by the Second Triumvirate and consequently executed by soldiers operating on their behalf in 43BC.
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Stay calm, healthy, success, good luck and till next time….

 

The Curmudgeon
ajwdct@gmail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional.  He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996.  He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies, and government policies.  Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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