That ’70s Show
In a post back in May (That ’70s Show),
I mentioned Bank of America’s chief investment strategist Michael Hartnett’s 1970s analogue and I added that in some ways our current time was worse than the 1970s, because the geopolitical situation was worse:
An Important Way Today Is Worse Than The 1970s
Reading Michael Hartnett’s parallels between today’s market environment and the 1970s, I am struck by a jarring difference between then and today. The early ’70s were a period of Détente, a relaxing of tensions between the United States and its largest geopolitical rivals, the Soviet Union and China. In 1972, President Nixon visited both Beijing and Moscow. History.com recounts the results of Nixon’s diplomacy with Moscow:
He and Brezhnev signed seven agreements covering the prevention of accidental military clashes; arms control, as recommended by the recent Strategic Arms Limitation Talks (salt); cooperative research in a variety of areas, including space exploration; and expanded commerce. The salt treaty was approved by Congress later that summer, as was a three-year agreement on the sale of grain to the Soviets. In June 1973, Brezhnev visited the United States for Summit II; this meeting added few new agreements, but did symbolize the two countries’ continuing commitment to peace.
The contrast between then and now is striking. Today, the United States is in a proxy war with Russia in Ukraine, while unnamed U.S. officials are leaking to the New York Times that U.S. intelligence helped kill Russian generals and leaking to NBC News that U.S. intelligence helped sink Russia’s flagship in the Black Sea.
At the same time, the United States State Department is poking the Chinese dragon over Taiwan.
I often close posts suggesting readers consider using the Portfolio Armor website or iPhone app to hedge, in the event that our predictions end up being wrong, or the market goes against us. This goes especially for leveraged names like BOIL and TECS, but the geopolitical situation today adds an extra layer of risk. Essentially, we have the World War III risk of the early 1960s (Cuban Missile Crisis) with the stagflation of the 1970s. Let’s hope cooler heads prevail.
Niall Ferguson Echoes My Views
In an interview with CNBC International published on YouTube a few days ago, historian Niall Ferguson made similar points. It’s worth a watch.
In Case You Missed It
On the Portfolio Armor blog, I wrote about the apparent suicide of Bed Bath & Beyond‘s (BBBY) CFO.
BBBY shares are now down about 10% in Frankfurt trading as I type this.
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