Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

New Cold War Investment Profit Opportunities

Stock-Markets / New Cold War Aug 15, 2008 - 03:42 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleMartin Hutchinson writes: Like it or not, with the invasion of Georgia, we have a new Cold War – as well as the profit opportunities that accompany such a conflict. International investors were able to make a lot of money during the “first” Cold War, so if any more politicians or TV commentators tell me they don't want a return to those halcyon days, I shall scream.

And since the situation in Georgia has effectively created a new Cold War status, it's worth reviewing where the profit opportunities will be this time, and which countries the sensible, geo-strategically conscious investor will avoid – especially since Vladimir Putin looks a lot more dangerous than the sluggardly Leonid Brezhnev .

Danger on the Inside

You probably didn't have much money in Georgia , Ukraine, or Kazakhstan, the three countries most immediately affected by this.

That's good. And here's why:

  • Georgia, which had been well run economically, but was too small to be on most investors' radar screens, has become a very dangerous investment location, indeed.
  • Kazakhstan is likely to turn much more hostile to Western investors as it reorients itself towards a newly aggressive Russia. Companies like Italy's Eni S.p.A. (ADR: E ) that had appeared to do well out of their ability to invest in difficult environments like Kazakhstan will watch as that “difficult” mutates to “impossible,” perhaps even losing their proverbial shirts there.
  • Only the Ukraine seems to be trying its best to remain pro-Western, with its president, Viktor Yushchenko , flying in to Tbilisi to express solidarity with Georgia. However Ukraine has a presidential election next year – and no prize for guessing who will be trying to influence that election in favor of a pro-Russian anti-Western candidate, by violent means if necessary.

Then there's Russia itself. Investing in Russia has always been a bit like visiting Las Vegas – but now it's like wagering large amounts of money in a casino you know to be controlled by the Mafia . You might win, but the downside potential is much greater than the upside.

What's more, Russia's tendency to take aggressive action without worrying about Western reactions is likely to cause sharp stock market crashes when it happens, as Wall Street panics and rushes for the exits. And it's not as if Russia is economically well run; they have done very well since 2000, but entirely because of rising oil prices. At some stage, oil prices will reverse – at which point Russia, with its thuggish approach and expensive military machine, is likely to run out of money quite quickly. As with Venezuela , foreign investors will then be the most obvious people to loot .

Watching and Waiting to Feel the Pain

There are also implications for investors outside these most-deeply affected countries – but those implications are much-less extreme.

Most of the Eurozone is vulnerable to energy blackmail by Putin's Russia , which has effectively put out of action the oil and gas pipelines that pumped non-Russian energy through Georgia. Moreover, if Russia's belligerence continues, this new Cold War reality will force EU countries to reverse their current plans calling for minimal defense spending – they will want to protect both themselves and the particularly vulnerable EU members of Eastern Europe (notably Estonia, Latvia and Lithuania, which were part of the Soviet Union in 1940-1991) from sudden Russian assaults.

On one hand, that will put an immense strain on government finances and slow economic growth. On the other hand, such defense-oriented stocks as BAE Systems PLC (Pink Sheets ADR: BAESY ) and EADS (Pink Sheets ADR: EADSY ) can be expected to benefit.

The United States will also need to boost its defense spending – no matter which candidate wins November's presidential election , putting a major strain on an already sagging U.S. federal budget, probably leading to higher interest rates and lower economic growth.

Defense industry favorites, especially those oriented towards high-tech conventional war such as The Boeing Co. ( BA ), B-2 Stealth Bomber maker Northrop Grumman Corp. ( NOC ) and Lockheed Martin Corp. ( LMT ) can be expected to benefit accordingly, as these firms did during the 1980s, in the last major military buildup of the Cold War.

Looking Inside From the Outside

The other beneficiaries will be those countries that are uninvolved. India did well in the 1950s and 1960s through its posture of neutrality between the West and the Soviet bloc; this time it will be firmly in the Western camp, but relatively uninvolved so its rapid growth can be expected to continue.

China shares a border with Russia, but its military forces are already so huge that Putin is unlikely to want to mess with them. Last time around, China was a Russian ally until 1972; this time Putin may find he made a major mistake in timing his invasion of Georgia to coincide with China's Summer Olympic showcase . Matters of “face” are very important to the Chinese government, so China is more likely to be drawn into siding with the West, in any case an infinitely more important business partner than Russia and its rag-tag allies.

Finally, Brazil is so remote from the action that its growth is also likely to be unaffected, with any attempts by Russia and its friends, Venezuela and Cuba, to sow subversion in the region being easily resisted by the much larger Brazil.

A Different Kind of Cold War

It's not entirely a re-run of the “first” Cold War, to be sure. One enormous advantage is that Russia alone is much smaller than the former Soviet Union, both in terms of population and its weight in the world economy.

And this time around, oil will be a major focus.

If oil prices stay high, Russia's strength might grow, but lower oil prices are now so obviously in the interest of the United States and Eurozone that they will surely pursue every avenue to get them down, including the hitherto forbidden policies of higher interest rates and offshore drilling.

The “ World is Flat ” was – in many ways – a lovely dream, as in Thomas L. Friedman 's 2005 book.

It was never entirely realistic, and certainly isn't now. But there are many profit opportunities available for the shrewd investor in this newly lumpy world – especially one afflicted by a new Cold War.

News and Related Story Links :

By Martin Hutchinson
Contributing Editor

Money Morning/The Money Map Report

©2008 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


A. Magnus
15 Aug 08, 22:28
Wanted Economics, Not Propaganda!

Well wasn't this a nice little piece of propaganda - NOT! It's seems the ghost writer for this article was Zbiegniew Brezhinsky, the fellow responsible for arming and funding Al Qaeda against the Soviets in Afghanistan, the author of 'the Grand Chessboard,' or more properly 'Empire Building for Western Socialists.'

There can be no other rational explanation for the blatant lies and distortions of the historical record regarding the Georgian conflict. Saakashvilli ordered the invasion of Ossetia on August 7; Russian troops did not counterattack until the next day. This is documented thoroughly in the world media.

It's obvious this article is intended to sell the public, which has grown weary of the quasi-communist state practices of the 'war on terror' on a bad Hollywood sequel of the first Cold War. Well considering that the White House is acting like the second coming of Trotsky's world revolutionaries, it certainly calls into question if the Evil Empire truly fell at all.

In other words, keep your politics to yourselves and stick to fundamental economic analysis, please.

02 Sep 08, 21:19
Anti Russian propaganda

I disagree with this article as not being a reliable source of data. Investing based on this "analysis" would be suicidal.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in