• Clifford Bennett , Chief Economist | World’s most accurate currency forecaster at Clifford Bennett has over 36 years of market trading experience and was named the 'World's most accurate currency forecaster' by Bloomberg New York. He has advised some of the world's largest organisations, billionaire investors, and political leaders and


• 14.02.2022 04:30 pm
#stocks

WSJ Headline today.
Yes. War can happen.
Meanwhile, all the global realignment I have been speaking of for more than a decade, of their becoming three equal super-powers, USA, Europe/NATO, and China all continues to unfold.
We simply cannot ignore that the modernisation of the economy of over one fifth the world's population inescapably means a new global super-power. Many have been slow to accept this reality. It is normal in the history of the world for both technology and numbers to matter. And when any nation has both, they become a force to be reckoned with.
On the sidelines, is Russia. After I spoke at APEC in 2012, Putin referred remarks in his closing speech to what I had said in my talk on three equal reserve currencies. "That currency guy got it wrong?" A pause. Then, with a smile, because "he left Russia out". There will be four equal super-powers he proffered, therefore four reserve currencies. How telling, as this is exactly the strategic vision the President of Russia has always pursued. The return of a powerful Russia. Perhaps new style Soviet bloc.
This is why the West's rush to push NATO right up on to the very door step of Russia via Ukraine, is of such serious concern within Russia and to Putin's long term vision of Russia remaining the dominant power in her region. Throughout history every major power has always asserted itself within its own region. For example the Cuban missile crisis. This is why we should definitely take the current risk of war very seriously indeed.
The 'war trades' I spoke of some time ago are coming to pass and while some markets have had significant corrections, they now appear to be reverting to the previous war trade trends.
Personally, I have always had a problem with making money out of war or such, but you do need to protect yourself. An actual outbreak of war would not lead to a mere two weeks skirmish. Forces, as has already begun to take place, will become fluid all around the other Russian neighbours. NATO forces would be at hair trigger levels of activity. This should be contained militarily, but we cannot be 100% certain this will be the case.
We are certain that economic conflict will rage as we have never before experienced. Any threat to energy supply to Europe from Russia will lead to some level of panic in Europe and especially in markets. Interestingly, the UK market may be seen as some form of safe haven.
We can expect, as I spoke of several weeks ago, for Oil to go above $100, a leading headline in the WSJ today. We also forecast Gold could move as high as $2,500. $3,500 long term is a very real possibility. The US dollar will be bought, but so too will the Yuan. Selling equities would seem highly appropriate for the time being. Especially, as they are due a further major decline in any case and the whole world is leveraged/borrowed long.
For Australia, there is no change. Keep selling the equity market rally and the Australian dollar. A trade exposed nation, with a permanent reduction in migration, and having alienated our biggest trading partner, well, the stars are not aligning well.
History shows us that no one ever expects war, but the pressure can build slowly to actualisation. This is where we may be just now. I hope war is avoided, but the probabilities continue to tilt that way. If one considers the historical background, the nature of all super-powers to assert themselves particularly if feeling threatened by an opposing super power on their own border, then war is a real possibility.
Any conflict will see ever deepening ties between China and Russia. The world is shifting in very significant strategic ways right now.
Protection trades are buying Gold, Black Gold, US dollar, Yuan, and selling Stocks, Euro and Australian dollar.
Just for the time being.
US Consumer Confidence Collapsing
As I have been highlighting for months the US Consumer is in serious retrenchment mode making the entire US economy vulnerable to a long sustained period of near flat growth accompanied by on-going high inflation. The Federal Reserve has lost control and we are entering unchartered waters.

Clifford Bennett
ACY Securities Chief Economist.
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