Here is an integrated view we developed, based on our analysis of the views and perspective of 16 gurus in the geopolitical investment risk space who we follow through a number of public-domain sources:
Most Recent View of one of our Most Admired Advisors (MAA)
One of our Most Admired Advisors (MAA) Dr. Marc Faber shares his thoughts on the current economic, financial and investment environment, especially with the beginning of likely long-term escalating war in the Middle East:
Summary of our Investment Ideas and Focus currently:
energy - we like oil and gas equities with these characteristics: positive free cash-flowing businesses, with limited or manageable debt and paying good dividends, doing business in relatively safer geo-political jurisdictions of the world
utilities - we like utilities with these characteristics: especially those with similar characteristics as the above for energy equities; especially utilities able to produce their own energy inputs; and especially utilities doing business in high-growth emerging markets and AI
emerging market equities - we like emerging market equities with great value, especially in areas like Brazil, Argentina, Colombia, Chile, Indonesia, Singapore, Malaysia, Thailand, Kazakhstan, South Africa and Hong Kong/China
in general negative on financial assets - especially government currencies and bonds, overvalued equities
some cash for everyday necessities in case of electricity outages, bank runs, capital controls, Internet outages
Middle East War Effects Estimates
Great chart from Sean Foo’s podcast - link here; Bloomberg Economics source.
Observations from shipping expert and analyst Calvin Froedge:
“The ground war is happening
The plan is the Kurds and the Azeris will push from the northwest. Azerbaijan has already brought military assets to the front.
Balochs will push from the southeast along with the gulf states to try to create a buffer zone along the gulf and stop the drone attacks. The United States and Israel will support from the air and with special forces.
The Israelis see this as a chance to slaughter the Persians once and for all. It's no coincidence the war started on a Jewish holiday commemorating a Persian slaughter. The Persians have an existential fight for their survival.
Iran will attempt to use its geographic advantage to make the ground war extremely costly. Mountains and deserts. Iran can mobilize a very large army - the coalition plan depends on air superiority being able to suppress the Iranian defense and allow coalition ground forces to advance.
Now where could this plan go awry? If the Iranians are completely alone with no allies, then things look grim for them in the long term. They can, however, inflict catastrophic damage on the infrastructure of the Middle East and potentially keep Hormuz effectively closed for months or more. But that doesn't change the long-term outcome.
What could change the long-term outcome? Involvement from Turkey, Russia, or Pakistan, as well as instability in Iraq and Syria. As mentioned before, there were also some large Shia populations the Middle East. The Turks have been in conflicts with the Kurds for quite a while. They may take advantage of movements by the Kurds for their own purposes. Likewise, Azerbaijan has been a thorn in the side for the Russians recently, and violence has escalated between the two. If the Azeris go into Iran with their army, it could present an opportunity for Russia. The Russians would love to have an open land corridor directly to Iran. Despite the Baloch animosity with Iran, Pakistan as a whole has shown some willingness to support the Iranians. Historically, Iran and Pakistan have both worked together to suppress the Baloch minority.
In summary, the coalition plan depends on Iran being isolated, which may not be the case once the ground war starts and opportunities for other regional powers open up on the map.
The plan is also highly dependent on US-Israeli air supremacy and the ability of the US and Israel to replace anti-air defenses as well as offensive stockpiles. With both the US and Israel already running low on key offensive weapons such as tomahawks and defensive weapons, the ability of the US and Israel to establish or sustain air superiority over the entire Middle Eastern theater is questionable. Remember, it's not enough to simply maintain control over Iran, which they have not been able to do yet. They need to watch out as well for threats in Iraq, Syria, Lebanon, the West Bank, and Gaza.
In summary, this is a complex war. It's much more complex than the war against Saddam, which the US arguably never won (Iraq is full of factions to this day, including powerful Iranian militias). What's clear is that expectations of business as normal any time soon are delusional optimistic, which is why energy majors and industrial concerns are shutting off production all together. Qatar LNG is 20% of the world's LNG supply - they've shut down completely. Restart is a month long process. A number of internationals have evacuated their staff. Force majeures have been declared across a number of industries. One of the biggest oil refineries on earth has shut down.
Don't plan on this resolving quickly! There will be significant impacts especially in energy, aluminum, and chemicals. Inflation globally could drive higher and entire industries in some countries will be demolished.” - source link here
Venn Diagram
Given the above focus, we strive to find equities which intersect in all of these focus areas. Here below we have a pictorial showing the intersection of these areas in a Venn diagram. The Energy equities circle includes energy producers, electricity/energy utilities and even agricultural fertilizers (input requiring natural gas to make some fertilizers). Our “sweet spot” focus is the intersection of all circle spaces:
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Specific Holdings in Our Portfolios
Let’s delve in to view our portfolios and especially in particular the 4 equities in the intersection of the spaces in the above Venn diagram …
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