Take military experience, a geology degree, add years as a financial analyst, and you get the wisdom of Byron King. His work from Outstanding Investments and his Military Tech Alert feature regularly in the pages of Markets and Money. But here he was in the flesh at World War D. His task was to answer this: how do you preserve wealth in times like these?
Well, how exactly ARE times right now? Byron gave us a tour of issues in the US economy, then the world. Software and robotics are taking jobs. There’s high unemployment. California is in a historic drought. The political leadership of the US is a farce. Byron quipped on Obama’s reputation: ‘if you want the President to know something, write it on the side of a golf ball’. Meanwhile, Russia is muscling into surrounding territory under Putin, and the Chinese are staking out their claims in the Pacific.
One of the many hats Byron wears is as a resource analyst. He flagged the rising trend of resource nationalism in countries like Argentina, South Africa and Brazil. You only had to look at the economies of Venezuela and Zimbabwe to see where that leads, he cautioned. Tread a little carefully outside countries with a solid rule of law seemed to be the hint.
It’s not all bad. Nobody saw it coming, but US oil production is booming. Abundant oil and low natural gas (and low labour cost) is ‘reshoring’ US manufacturing. And those barrels of shale oil will keep coming for the foreseeable future. This will keep a lid on oil prices for now — around US$100. It’s also helping out the US trade deficit. That’s bolstering the US dollar. That means weaker gold and silver prices.
North American oil is also changing the trade route as tankers that once headed from Venezuela, Angola and Nigeria to the US now set sail for China. Tip: keep your eye on the Strait of Malacca for signs of trouble. That’s a chokepoint now.
Maybe your eye is on the Pacific anyway. After all, it’s the stage for the US ‘Pivot’. That’s an interesting policy, said Byron, considering the US navy hasn’t been this small since 1916. It doesn’t have the muscle of yesterday, let alone yesteryear.
Byron gave us an interesting detour here. If you want the origin of the current financial system, with the US dollar at the heart, take a look at American navy power in the late 1940s. With Western Europe and Japan in ruins, is it any wonder they got their way at Bretton Woods? America was the new Rome.Then we fast forwarded to the Vietnam War years. US troops and military spending was showering US dollars all over the country. As a former French colony, the banks in Vietnam were either French or connected to them.
So those vast US dollars began to collect in the vaults of Paris based banks. It was mostly these deposits that French President Charles de Gaulle wanted converted to gold in 1971. That’s when US President Richard Nixon reneged on the deal to convert US dollars to a fixed weight in gold. And here we are today with trillions in US deficits and American power tied up at the pier.
The takeaway is if US power doesn’t truly dominate the world today, who does? The answer is nobody. Nations will be more inclined to act aggressively, suggested Byron. Frozen conflicts might start thawing out…and we might see more territorial expansions. Institutions like the UN will become increasingly redundant.
From here Byron left the geopolitics behind and zoomed in on how to create and keep your wealth. The outlook for retirees, he said, all over the west is grim in the sense that financial repression will lock down interest rates. Fixed interest income ain’t what it used to be. That means looking, in part at least, at the stock market. He told us where he was looking. Then a couple of stock ideas and how to go about finding the right company at the right time. You can hear all that, and much more, on the WWD conference video.
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