Investing in Trump’s Tweets

A Trump-led military strike against North Korea is all the mainstream media has talked about for weeks.

For the past few months, there’s been regular media coverage of President Trump tweeting about what North Korea might be up to.

Whenever North Korea releases a new photo of a missile launch, Trump weighs in via Twitter.

Naturally, an imminent war would be a very important subject for investors…

I didn’t touch on the topic for one reason. I am suspect of any subject getting blanket media coverage. When the media chews up and spits out the same old story for days or weeks on end, I find myself far more interested in the stories they aren’t telling.

However, there’s another reason.

Hunkered down on this island continent, it’s easy to forget that Northern Hemisphere political threats and taunts may have long-term implications for us. Aussies have a firm habit of ignoring US politics unless it makes us feel good.

Is a conflict between the US and North Korea a real threat? It’s possible.

Nonetheless, I find it hard to believe the country which created the National Security Agency (NSA) didn’t notice North Korea becoming a nuclear power. The very same NSA that turned any mobile device connected to the internet into a spying tool.

North Korea becoming a genuine warmongering threat under the watchful eye of NSA is the exact same as a teenager trying to climb out of the bedroom window in a house equipped with movement, floor and window sensors. It just ain’t gonna happen.

Yet the media is dragging your attention to this ad nauseum.

Trump tweets his fury, and millions of web pages spring up to mock or support him. Kim Jong-un kindly sends the world sketchy looking pictures of a backyard missile, and newspaper headlines pose rhetorical questions about when the ‘next war’ will start.

None of this is useful information to you.

Media hype glorifying or threatening war doesn’t make you feel good. In fact, it’s this fear that governments tend to capitalise on. After all, they can’t enshrine drastic liberty-smothering laws without making you scared.

Now, as a gold bug, I’d be tempted to say this sort of geopolitical conflict is the perfect time to bump up your gold and silver holdings.

After some digging around, I believe there is another way that escalating political tensions can benefit you.

I’m not talking about your consumer staples stocks like Woolworths Ltd [ASX:WOW] or Wesfarmers Ltd [ASX:WES]. Bank stocks aren’t the answer either.

But one atomic element might be…

No. 28

When you think of investing in stocks that benefit from military conflict, defence stocks rank highly. There is a very strong connection between war and well-performing defence stocks.

Specifically, our interest lies with the materials used to make armaments.

Or, to be exact, the element with the atomic number 28 on the periodic table, which humans have used for over 5,000 years — possibly longer than gold!

Atomic number 28, as you may know, is the base metal nickel. It’s one of the most abundant elements on Earth, behind only iron, oxygen, silicon and magnesium. An important difference, however, is that only half of the planet’s nickel can be economically mined.

The base metal finds itself in over 300,000 consumer-end products. Roughly 65% of all nickel produced is used for stainless steel purposes, making this metal incredibly important to China’s continued growth.

But few people realise that 20% of all nickel ends up in non-ferrous alloys for highly-specialised purposes, like the aerospace industry and military. A nickel alloy is in virtually every piece of weaponry and machinery across all military disciplines. And in all countries.

The versatile and endless use of nickel across all global military departments makes this base metal the one true ‘war metal’. Put simply, no weapons or machinery can operate without nickel.

The nickel price — perhaps reflecting geopolitical tensions — is starting to come out of its slump.

Nickel one-month chart (US dollars)

Nickel historical price graph

Source: London Metals Exchange
[Click to enlarge]

The nickel price has rallied 17.14% per tonne in the past month alone. After falling to a year-to-date low of US$8,750, nickel prices have finally moved past the US$10,000-per-metric-tonne point once again.

Granted, today’s nickel price is one fifth of the all-time high of US$53,750 it reached a decade ago.

What’s important to remember is that if Trump is hell-bent on marching the US into war, the US has no active nickel mines. In fact, the US is reliant on sourcing its nickel as a by-product from copper or palladium-platinum mines.

Which means, if the US suddenly decides to enter a war with another country, they’re going to increase their military spending.

Of course, those weapons will need to get the nickel alloy from somewhere. Some of the largest nickel mines in the world comes from Russia and China. Australia rounds out the top 10 nickel producers.

Tomorrow, I’ll show you how nickel stocks have performed alongside the base metal price rise. Otherwise, if you wish to discover resource analyst Jason Stevenson’s favourite nickel stock on the ASX right now, go here.


Shae Russell,
Editor, Markets & Money

Shae Russell started out in financial markets more than a decade ago. Working with a derivative brokering firm, she helped clients understand derivative markets, as well as teaching them the basics of technical analysis. Since joining Port Phillip Publishing eight years ago, Shae has worked across a number of publications. She holds the record for the highest-returning stock recommendation, in which a microcap stock returned over 1,200% in six months. Ask her about it, and she won’t stop yapping on. For the past two years, Shae has worked alongside Jim Rickards as his Australian analyst, translating global macro trends for Aussie investors, and how they can take advantage of these trends. Drawing on her extensive experience, Shae is the lead editor of Markets & Money. Each day, Shae looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

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