YWR: Trump 2024 and the Tarkin Doctrine
Personal views only. Not investment recommendations.
Consider the self-interest of the Core Worlds, unwavering in their exploitation of the Outer Systems for their resources; the Outer Systems themselves, undermined, by their permissive disregard of smuggling and slavery; those ambitious members of the Senate who sought only status and opportunity. By partitioning the galaxy into regions, we, The Empire, actually achieve a unity previously absent; where once our loyalties and allegiances were divided, they now serve one being, with one goal: a cohesive galaxy in which everyone prospers. For the first time in one thousand generations our sector governors will not be working solely to enrich Coruscant and the Core Worlds, but to advance the quality of life in the star systems that make up each sector — keeping the spaceways safe, maintaining open and accessible communications, assuring that tax revenues are properly levied and allocated to improving the infrastructure.
— Grand Moff Tarkin, in Star Wars: Tarkin
Most will see this friendly G7 picture of Macron, Biden, Boris, Trudeau, etc all hugging in the Alps as a happy picture of global unity. Gone are the awkward moments when Trump would attend these events and get into disagreements with the other members about trade, the environment or NATO payments. Now the group is harmonious again and united over their view on the Ukraine. I see that, and in the developed markets that’s how it plays, but I think the 6 billion EM world is quietly seething. It’s a generalisation, but here is how I think the non-OECD sees this picture.
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“How do you 7 countries get to hang out in the Alps at some rich resort and decide how the rest of the world is run? We are tired of your control of the financial system with your sanctions, your KYC’s and AML’s, which aren’t about money laundering, they are about control. Your control. Why do you decide who can pay who, anywhere in the world? And why do you get to run huge deficits, give out COVID checks to your populations and print money unendingly, and yet if we do anything like that our currencies crash, we are financially crushed and we have to beg the IMF for help (which at the end of the day is you). We are also tired of your ESG. How is it once you have developed and used cheap resources to build your advanced economies and industries, you now decide we all have to drive electric cars we can’t afford and build our infant manufacturing industry using solar panels? And oh, by the way, how are we supposed to pay for all of this, since you are trying to phase out the fossil fuels we produce and sell to you. Don’t think we don’t notice the irony of Norway’s $1.4 trillion sovereign wealth fund, built on oil money, deciding it will no longer fund oil and gas projects across the world. Oil and gas projects in our countries. Now that you have made your money you are shutting the door behind you and investing in solar panel companies, that we are now required to buy if we want to be ESG compliant and still access the global financial markets. All for the sake of the environment, but really all for the sake of you. We are tired of your system and trying to be good little emerging markets that if we just do the right thing, and check all the boxes we will one day be in the club. No. We are done with that. It isn’t working. Instead of getting ahead we are falling behind. We aren’t emerging we are submerging. We don’t know the future, but it isn’t trying to be in your club. We are starting our own club. Have fun hugging each other in Schlos.”
And you know what those smiling guys and gals in the picture think?
“We get that you don’t like we are rich and run everything, but you don’t have any choice. The global system (US$, Euro, Fed, ECB, G7, World Bank, UN, NATO) might not be perfect, but it works pretty well and we don’t see any alternative. So enough with your Shanghai Cooperation Councils, and Belt and Roads. It’s not going anywhere. You are a collection countries who don’t stand for anything. We at least have values and stand for something. Some of you are democracies and some are dictatorships. How is that supposed to work? You have no leader and don’t even like each other. The only thing you have in common is you are grumpy. And as for the financial system? What do you propose? Do you all want to trade with each other in gold? So how is that going to work? So, anytime anyone wants to buy something anywhere they have to put gold on a plane and fly it to the other person? Or, would all the gold sit in one bank somewhere and then just be moved across electronically? OK. And who gets to run the gold bank? China? And by the way, aside from China none of you have any money anyways, so where is all this gold going to come from? And as for renewables, they are happening. The train on that left a long time ago and we have codified all the policies and procedures to make sure this is impossible to stop, so get on board. At the end of the day, you either play ball or we cut you off from the system and make life very difficult for you. You decide.”
And that is the uneasy situation where we are right now. You have India, Turkey, Saudi, Israel, Brazil, South Africa all watching the new world order and trying to figure out where the power is shifting. Maybe the US is weak. Maybe China and Russia are the new world powers. For all the sanctions and oil embargoes Putin is still standing. Maybe the US isn’t what it used to be. Maybe it’s time to switch sides. Maybe the era of the dollar is over. And on and on. And you will see lots of editorials and experts predicting this is the way things are going. The end of the US era. The start of a multi-polar world order. Or, maybe not.
This global state of play can also be the set-up for an entirely different path forward than everyone is expecting. A big surprise if you will. I see China’s silence during this entire Ukrainian crisis and reticence to get involved as a sign they see over the horizon to this potential other way things could play out. This other path forward would not be the end of the US leadership role in the world, but rather the gradual transition from the US as a Republic, to the US as an Empire.
The stage is set for Trump in 2024. I’m not trying to anger anyone, and I could be wrong, but the set up is there. The Democratic Party’s popularity is awful. They had their shot, stuffed it up and now there is no candidate for 2024. Kamala? Hillary again? Biden? Bernie Sanders? It’s all hopeless. That leaves a battle between DeSantis and Trump. DeSantis might give it a shot, but in the end the nomination will go to Trump. DeSantis knows time is on his side and he can takeover in 2028. If Trump is the Republican candidate he wins the national election, and it probably isn’t even close. This will change a lot of things. First, a President Trump in 2024 has massive unfinished business from his first term and it will be the Night of the Long Knives for everyone in the FBI, CIA and NSA. Big Tech should shift now if they want to avoid the fallout. This will create a fresh set of eyes and counter-parties for what will unfold next.
First Trump will cut a deal on the Ukraine. Putin, have your NovoRussia, draw your line where you want it and then this whole thing is over. Go take a mini victory lap and save face. Going forward you don’t decide what the Ukraine will, or won’t do. If you cross any lines anywhere in Europe again I am coming at you with everything. You want to threaten nukes? I will threaten nukes too. I can be crazy too. And there will be peace. In return Trump will cut all the sanctions and get back to what he was trying to do in his first term and and change the long-term relationship with Russia. Why does Russia always have to be the bad guy? There is so much economic and political upside to a friendly relationship with Russia. Bring Russia into the Empire. With a new CIA and NSA this change in thinking is possible.
China will also see the writing on the wall. “Where is this partnership with Russia going?” they will think. “We don’t really like each other. It is a temporary marriage of convenience.” Xi Jinping might see it or he might not, but the rest of China has to see the ‘Russia and China against the World’ idea is a dead end. Also lending money to countries across Africa and the rest of the world to build trains they can’t afford and then the countries defaulting and never getting paid back, is not a good use of money. At the end of the day China’s biggest customers are the US and Europe.
Yes, it would be nostalgic and great if there could be a China dynasty like in the past, but really the best road forward is to just accept the US is in charge and be like Japan and South Korea. Stop fighting it. Be a black Labrador. In return for China dropping it’s global ambitions, it will thrive economically, be back in the system, and investment will soar again. Trump will also hold out the possibility that maybe if China evolves democratically there could be a reunification of Taiwan and China down the road, maybe. It would not be a HK style takeover, more like an East and West Germany merger and only if Taiwan wants it, which possibly if things go well they might.
With China and Russia sorted everyone else falls into line. It’s the Tarkin Doctrine and the Rise of the Empire. Instead of China and Russia fighting the system they join it, and order is restored. Like post WWII the US goes back to creating a cohesive Galaxy where everyone prospers. With its position established, the US is more flexible on global issues and does a better job of growing the emerging markets. These are now its citizens too. Effectively, there is a peace dividend. After Trump, DeSantis continues the Tarkin Doctrine and gradually the new world order is engrained.
Market Implications of Trump 2024
2024 is two years away and lots will happen in between, but here are three long-term ideas:
Strong dollar. In this scenario the dollar doesn’t weaken, it strengthens. It further establishes its role as the one global currency. Yes, there will be inflation and the price of everything will still rise, as it always has, but against other currencies the dollar will strengthen. There will be continued pressure for EM countries to dollarize and it will be hard to fight.
Russian equities. The trade of a lifetime would be to go out and buy Russian equities either in Russia or frozen ADR’s in London and NY. The idea would be you are buying these shares for cents on the $ and in 2 years Trump is going to restructure everything and Russia will be accepted back into the financial system. The US and Russia will be friends, and these shares will trade again. A high risk, but legendary trade.
Chinese equities. China flips from an uninvestable pariah to a powerhouse now ready to finish the second stage of its economic transformation from an EM to a global leading economy. Chinese GDP per capita rises from $12,000 to $30,000 and the stock market soars. All of Asia benefits too.
Political Correctness Disclaimer! People get so angry about everything these days, so I will say it again. By outlining this scenario of Trump winning in 2024, further strength in the dollar, and increased US leadership I am not saying, what is good or bad, or what should or should not happen, or what I want to happen. I know MANY will find this entire scenario terrible and hate everything about it. Fine. I’m just an investor, and as an investor I’m always trying to predict the future. I look at every potential scenario, especially scenarios which could surprise the markets. And if you can find things which are going to surprise the markets you can make money. By writing this I just want to open your mind to a possibility I don’t see discussed. That’s all it is. I think we all know that.
Walk the Dog and Chill.
This week was kind of exhausting, and next week will be too, so I’m going to chill. I’ll probably go for a long dog walk, have a glass of wine and watch more House of Cards Season 6.
Have a good weekend!
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