Markets Held Hostage to Politics

In today’s Money Morning…markets focused on politics and international tension…is it possible for anyone to pick the top of a bubble?…investing to protect your wealth in a time of crisis…and more…

This week markets were at the mercy of global politics.

Investors worldwide breathed a sigh of relief as the first round of the French elections came to a close. Centrist moderate Macron will face off against extreme right wing candidate Marine Le Pen.

Both candidates are political outsiders. That’s a reflection of France’s reaction against mainstream politics. But polls indicate that most French are pro-EU. It’s widely assumed that the pro-EU centrist Macron will easily defeat the anti-EU Le Pen.

Except, it may not be as easy to predict as many would have you believe. There are plenty of experts feeding us pre-packaged analysis on why Le Pen is too extreme to ‘do a Trump’. But many similarly dismissed the Donald before his victory.

Meanwhile, North Korea’s unending tensions with the rest of the world also saw a spike this week. Including a specific threat aimed at Australia if we ‘blindly’ follow the US’ lead.

North Korea may be a failed nation state with a murderous spoiled brat for a leader. But that does nothing to reduce the threat of its large conventional army. Or the threat of its nuclear weapons.

And really, can the US administrations — past or present — afford to throw stones about nepotism and corruption? About family members being given positons of power they aren’t qualified for? I think not.

Arguably, North Korea’s sabre-rattling has always been primarily for their own domestic propaganda purposes. They have little real intent of achieving their stated goals on the international stage. But that can make responding to them an all the more delicate and dangerous a task.

It’s questionable whether Donald Trump has the deft touch needed. Or the attention span, for that matter, what with ever present distractions like Twitter.

In this week’s Money Morning, your editors tackled how these issues are affecting markets. They looked at how you can invest to protect and grow your wealth during times of tension and potential crisis. Read on for the details.

On Monday Greg returned to Australia’s unending debate about house prices. While many in the mainstream media claim (once again) to have picked the top in house prices, Greg admits that he has no idea. He goes on to argue that it’s impossible for anyone else to, either. What he does know is that attempting to predict the future is a fool’s game. And doing it with your investment money on the line is even worse. Greg argues you shouldn’t try to predict where markets are going and place bets on being right. Instead, let the market tell you what’s happening and invest accordingly. You can read why here.

On Anzac Day Greg took a step back from markets. He wrote about the horror of war, the lies that governments tell to convince the young to fight them, and why we should remember those young people’s sacrifices. You can read the article here.

As robotics disrupt and transform industry after industry, large institutional investors have benefited. But on Wednesday Greg made the argument that high flying fund managers may be the next species driven to extinction by robotic labour. Forms of artificial intelligence are already moving in. And it’s likely they’ll soon be doing a better job than humans ever could in that role. So it’s just a matter of time until ‘Hedge Fund Manager’ is just another defunct job title. What will that mean for the average retail investor? You can read more here.

In this week’s Financial Anarchists podcast, you can hear Kris and Woody’s takes on the various European elections and their potential effects on your investments. They try to discuss markets, but politics just keep getting in the way. Kris argues that we’re suffering from ‘too much democracy’. Click here to hear why.

Whether the risks of the EU fragmenting or North Korea pulling the trigger are genuine, markets are reacting to the headlines. Sam looked at both the risks of an EU breakup and an escalation towards war with North Korea in Thursday and Friday’s Money Morning articles. And he looked at ways you could protect your wealth as the world slides toward chaos.

To read about the kind of stocks that you should look at if global conflict heats up, including one example that’s already seeing significant gains, you can find Thursday’s Money Morning here. And for an alternative investment that Sam argues will perform well in a world at peace, and even better in a world in crisis, check out Friday’s Money Morning here.

Personally, I’m not spending this weekend digging a bunker in my back yard. I don’t believe that North Korea is the global threat it would like to portray itself as. And while a breakup of the European Union is certainly possible if the French elections put Marine Le Pen in the Presidential role, any fallout would be economic. Not literal radioactive fallout.

And, as we’re seeing with Britain’s exit in progress, the breakup of longstanding trade deals and international relations can create new opportunities for other nations. If the extreme scenario were to happen, and France left the EU, it could ultimately result in France’s markets becoming a friendlier place for Aussie exports. The short term shakeup would likely be rough, but long term it doesn’t have to be a bad thing for your investments.

One more week of furious campaigning in France, and we’ll begin to see.

Until then,

Tyler Jefferson,
Editor, Money Weekend

Publisher’s Pick: Special Report:Gigastocks’ The mainstream press is just starting to clock this phenomenon. But most of the resource-sector wonks haven’t grasped the FULL potential of what’s unfolding. Specifically, they don’t get the grand scale and potential of a development that occurred on 4 January, 2017. And what it could mean for three specific Australian stocks currently trading in obscurity…[More]

Numbers of Interest, as of Friday

Aussie Dollar to US Dollar: 74.68

Gold: US$1,267.70 (AU$1,697.45) per troy ounce

Silver: US$17.37 (AU$23.26) per troy ounce

Bitcoin: US$1,333.42 (AU$1,785.75)

West Texas Intermediate Crude Oil: US$49.48 per barrel

ASX 200: 5,924.10

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia