Rough Waters for 2021 Investors

Mike Dunn | Mutualfunddirectory.org | Thought Leader| January 11th, 2021

Here are 5 Concerns that investors need to include in their calculus to invest successfully in 2021.

2020 was a rough year for many, a tragic year for some, and a banner year for others. For investors, change is opportunity. On the bright side, it appears 2021 will have many opportunities if you can navigate the minefields of hyper-change.

Most investors and business people can come up with solutions if the problem is defined well enough. The goal of this article is to help you determine the looming issues so you can adjust accordingly.

Since 2011, the focus of this channel and website is macro-economic issues for investors to consider. The term macroeconomics encompasses influence from taxes, geopolitical realities, inflation, GDP growth, governmental relations, market trends, and other outside influences on the whole economy and economic niches. There are other websites that do a better job focusing on the political debate of the day. We stay in our lane.

1 – The South China Sea and Your Investment Strategy

In 2020, will the US allow the PRC (Peoples Republic of China) and PLAN (Peoples Liberation Army Navy) to create a blockade in the entire South China Sea?

If so, the PRC will further control 30% of the world’s commerce. Once they control the shipping lanes in the whole region, the PRC will have de facto control over the commerce to and from Vietnam, South Korea, The Philippines, and part of Australia.
Or will there be a shooting war with the world vs. China and North Korea? The PRC has burned many geopolitical bridges with the COVID-19 virus that has killed millions of people, their Belt and Road (some have called it “Debt Trap Diplomacy” and others have called it “Loan-shark lending to smaller countries”), and politically bulling.
However, the PRC has “invested” heavily in PR and influence over the years around the globe.
Currently, the US Navy sends one or two of its top-line warships through the South China Sea each month on “Freedom of Navigation Missions.” The ships are either one or two of the 68 deadly Arleigh Burke DDG Class Destroyers or one of 22 Ticonderoga Class Guided Missle Cursers. Travel through international waters is explicitly allowed per an international ruling in the Haag. The PRC has chosen not to recognize this ruling. The PRC has yet to actually shoot at a US warship, but for how long if they perceive any US weakness?
Now the PRC is again trying to woo investment and multi-national companies back to China. Even the ones that have just left.

The PRC and Maritime Shipping Industry

If the PRC takes over the shipping lanes of the South China Sea, they can further leverage their monopoly on their new dominance in shipping and shipbuilding. Many of the Greek shipbuilding empires are now moving to China. Japan is still the leader in shipbuilding.

The end game for the PRC is to control the world’s commerce and the world. If the PRC controls the shipping industry and the South China Sea, The only thing standing in the way of the PRC controlling the world’s commerce end to end is:

Jeff Bezos at Amazon
Walmart
the US trucking industry
the US rail system
UPS
and the USPS.

Strait of Malacca and Why it is Important to Your Portfolio

If the PLAN seizes the South China Sea, the next step will be the 1.7-mile-wide maritime navigation chokepoint of the Strait of Malacca. This water is controlled by one of China’s main strategic and military rivals – India. Most of China’s Oil and exports to Europe have to traverse these narrow passages.

Over 100,000 ships pass through this waterway each year. If a shooting war is somehow avoided in the South China sea, there is little chance of circumventing a major military conflict near this highly valuable waterway.

Investors need to be aware and have contingencies in mind on ways to profit if supply chains are stopped or experience delays if there is conflict in the South China Sea, or higher tolls are imposed.

2 – The Price of Oil in 2021 and the Impact on the Economy

Currently, the USA is now the biggest oil producer and exporter in the world and no longer dependent on countries that hate us for our oil needs. If you believe the rhetoric of the DNC, fracking will be stopped. Thus, your investments need to consider this situation and possible reality.

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3 – Inflation and World Debt Ratios

The world debt ratios were bad before the pandemic and will be last for decades as of 2021. Too much debt usually results in inflation. The countries with the worst debt to GDP ratios are:

Worst Debt to GDP ratios

1. Canada (by far the worst of the reported numbers)
2. Japan
3. USA
4. United Kingdom
5. China (FYI – has a history of under-reporting bad news)

You will need to speculate on the debt ramifications for 2021 and how it will impact your investing decisions. Dust off your inflation investing tactics from the Jimmy Carter era. Go to YouTube and Google to learn what to do, if that was before your time.

4 – Taiwan and Australia

Will Taiwan fall like Hong Kong in 2021? It has been said that the primary reason for the PLAN build-up was for the invasion of Taiwan. How will this affect your investments? How can you profit from this change? The new problematic development in China’s invasion plans is the US’s new anti-ship missile system. It is unclear is the PLA (Peoples Liberation Army) or the PLAN can stop a swarm of these missiles. In addition, the US submarine force is the most advanced in the world.

It is now apparent that China and Australia are in a trade war. China desperately needs iron ore from China to make steel. Reliable supply chains of iron ore from Africa are years away. Since most of Australia’s iron ore is mined in Western Australia, would China invade from the north through the famous and dangerous Northern Territory or from the west? The good news for Australia is that they are the only developed country in the world with a reducing Debt to GDP ratio. So, as long as Australia does not get into a shooting war, they will be in good shape financially. However, China will continue to impose punitive tariffs and other economic problems for Australia in 2021. On the other hand, Australia has a key ingredient to steel manufacturing that China must obtain by purchase or invasion.

5 – Trending Socialism and How to Invest?

Like in the movie RoboCop, it was said, “Good business is where you find it.” Some people will make money in 2021, and some will not.

In general, the rich will stay rich, the middle class will shrink, and the poor will have subsidies. Most people will have food, cable TV, a cell phone, transportation, and some sort of housing.
Consider focusing on companies that sell to the government sector and green energy.
Be on the watch for profitable assets being sold to raise fast cash. Buying undervalued assets may be the easiest investing tactic in 2021.
As mentioned in #3 above, use your inflation investing tactics.
College debt will most likely be eliminated and transferred to the US debt. Meaning many consumers with debt relieve will have more disposable income.
Hopefully, as more people get their COVID shots, the hospitality, restaurant, and travel industries will come back. There will be many investment opportunities for the surviving winners in these sectors.
If large companies are hurt by socialism, then consider investing in the surviving niche companies that have a good chance of capturing that revenue.

5 Concerns for Investors to Consider in 2021