Why Afghanistan Matters to Investors

Non-political Macroeconomic Investor News

With the fall of Kabul, part of the fallout may be the strengthening of the China and Russia relationship.

The primary concern is that if the Russian and Chinese navies combine forces, it will be harder for the US, India, Australia, and NATO to keep the sea lanes open for trade in the south China Sea and Indian Oceans.
Control of the South China Sea and other oceans is vital to investors because so companies they invest in can make the products to sell.
This, in turn, creates profits resulting in value for the investors.
As a result, a large percentage of the trade will be stopped or delayed out of the Indo-Pacific area, causing havoc in the world’s supply chains.
The supply chain disruptions lead to businesses becoming less profitable or failing, which hurts investors.
The disruption of the supply chain is a national security risk, a cause for a shooting war, and an economic game-changer for investors. However, also remember “change-is-opportunity” for investors.

Where is the US’s oil going to come from going forward?

Why is where our oil comes from important to investors? In the past few years, the US has enjoyed the economic, pricing, homeland security, and geopolitical benefits of a surplus of oil production.

Hence, we transitioned from being an oil importer to an oil exporter in just a year.
Unfortunately, new the petroleum tides have reverted to the “bad ole days” of depending on people who want to destroy the US for our oil.
For example, if China and Russia team up with Iran in controlling and trolling the Straight of Houmas chokepoint, that is a war sparking disaster for the US economy.
Plus, if China and Russia control access to the Malacca Straits, that could starve Europe and the US of goods.

Alternative Energy Sources Resulting in Less Energy Dependency

Businesses and investors want reliable energy to produce their goods at a cost-effective and stable price.

Being dependent on our energy from people who seek our demise is NOT a reliable source of energy.
As I was flying over Kansas and eastern Colorado this week, I noticed the proliferation of windmills or energy production. Nine out of ten windmills seemed to be working, and the others seem to be broken.
Anecdotally, I know a wind generation experiment did not entirely pay for itself without a charitable subsidy, which is silly.
Most business people are for green energies as long as it pays for themselves and is reliable.
Cheap and domestically generated energy solves many problems for business people and investors.
Hopefully, Elon Musk and other entrepreneurs can solve our oil import issue with green energy.
Until then, businesses must have a reliable fossil fuel source.

Rare Earth Mining – A Periodic Chart Problem for Investors.

It’s good for the US to be energy import neutral or have an energy production surplus to export.

However, many rare earth minerals are ingredients in the manufacturing of batteries to store the energy that green energy production creates.
Electricity must be used right when it is produced, or it is wasted.
The options are to use it right then, store it in batteries, or waste the electricity with costs but no benefit.
Without access to a consistent supply of rare earth minerals, the US is vulnerable to economic extortion by hostile countries.
As a solution to the problem, On April 29^th, 2021, “DOE Awards $19 Million for Initiatives to Produce Rare Earth Elements and Critical Minerals.
These grants are evidence that the government is concerned about this issue for economic and national security reasons.

How does a Shooting War Affect Investors?

There are now two flashpoint areas for a shooting war. Either will impact investors.

The South China Sea
The Middle East

The shooting was changes the game for investors’ plans. Therefore, if war breaks out, investors need to have both offensive and defensive investing back plans and contingencies for various scenarios.

Investors need to watch the news and seek out “negative beta” opportunities that will create value. Examples of negative beta niches are:

Domestic Rare Earth Element production
Water desalination plant construction
Domestic pharma plants (anti-biotics and other pharma produced in China)
Domestic production of most anything only produced in China
Projects supported by grants

In Summary

There is an excess of geopolitical risk that needs to be considered. “Change is opportunity,” so investors need to look for and evaluate emerging niches to reduce risk and be more successful.

Kabul and the Geopolitical Economic Ramifications for Investors