WILL GEOPOLITICAL SENTIMENTS CHANGE?

Equities rose, the result of earnings and stronger than expected economic data. Trade tensions still remained at the forefront albeit was not weighing upon market sentiment. Oil also rose on rising Persian Gulf tensions, tensions that some believe are at the brink of war.

As noted yesterday a geopolitical premium is all but absent in oil prices but this could radically change if supplies are disrupted.

Commenting further about radical changes in sentiment, September 10, 2001 all naively believed the US was safe from attack even though there was ample evidence suggesting that such was not the case.

For the next 3-4 years all were incessantly on guard and many of the policies and procedures enacted then are now part of everyday life. It was the beginning of stringent AML polices (Patriot Act) and the TSA (Department of Homeland Defense).

Many Democratic presidential nominees have stated climate change is the biggest risk facing mankind. To me this statement is absolutely ludicrous. To me it is nuclear war. Climate change cannot instantly wipeout a country or civilization.

For those who slept through their college civics classes, from approximately 1948-1996, the basic tenant of American foreign policy was MAD and MADII. MAD stands for Mutual Assured Destruction.

MAD was replaced with MAD II around 1974 to ensure the basic doctrine of peace through overwhelming strength and mutually assured destruction would be the result if hostilities did indeed break out. It was the ultimate deterrence.

Many would adamantly write President Trump is the ultimate nuclear cowboy. Few have acknowledged that Candidate Trump is the only candidate and now President that has publically denounced the first use of nuclear weapons, a cornerstone of American foreign policy since 1945.

I am not suggesting a nuclear war is about to commence. I am only suggesting sentiments can radically change based upon some externality and the preposterous statements of leading politicians that have no real basis other than to garner headlines.

The “Nuclear Club” today has doubled since the days when MAD II was the basic tenant of foreign policy, many of its newer members do not espouse western society’s value of life.

With the above written Sting’s 1985 lyric of “I hope the Russians love their children too” is echoing in my head.

Will oil’s geopolitical premium return? Only history can answer that question but I do agree anarchy in the Persian Gulf is perhaps at the highest level since the 1914 dissolution of the Ottoman Empire that created today’s borders.

Last night the foreign markets were down. London was down 0.34%, Paris down 0.53% and Frankfurt down 0.94%. China was down 2.48%, Japan up 0.89% and Hang Sang down 1.16%.

The Dow should open moderately lower on trade fears. Oil is up another 1.25% on Middle East tensions.

kent
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