Gordon T Long

Gordon T Long

Global Macro Research | Macro-Technical Analysis 

TIPPING POINTS

GEO-POLITICAL EVENT

 

GEO-POLITICAL TENSIONS ROOTED IN SHIFTING SENTIMENT

As we outlined in the June 2020 UnderTheLens video, Peter Turchin’s cycle of social integration and disintegration outlined in his 2016 book Ages of Discord concludes:
 
Human history manifests cycles of social disintegration and integration in which the impulse to cooperate in large social structures waxes and wanes.
 
The current Geo-Political conflicts outlined in the Addendum below suggests this is exactly what is presently occurring in America and Globally.  In the largest context sentiment is becoming increasingly negative, fearful, cynical and protective. We have the advent of a Crisis of Trust on many dimensions.
 
Historically, long term major secular sentiment shifts typically have culminated in Wars.The 1920’s-1930’s analogy I outlined in the latest LONGWave video: ‘The Greater Depression’ additionally fits this historical precedent. First came currency wars (1921-1936). Then came trade wars (1930-34) and then finally a shooting war (1939-1945). As I concluded in this years 2020 Thesis Paper (Global Conflict – the latest updated version is available at MATASII.com)) I am not suggesting a traditional war is ahead but rather a new form of conflict fought with new weapons. 
 
The well followed James Rickards recently wrote the following in Is War Next? – James Rickards:
 
Are we heading for another shooting war with China? The signs are not good.Trade war tariffs can be weaponized to pursue geopolitical goals. Trump is using tariffs to punish China for its criminal negligence (or worse) in connection with the spread of the Wuhan virus to the U.S. and the rest of the world.This also has historical precedent.
 
Between June and August 1941, President Franklin Roosevelt placed an oil embargo on Japan and froze Japan’s accounts in U.S. banks. In December 1941, the Japanese retaliated with the sneak attack on Pearl Harbor. Will China now escalate its retaliation to the point of armed conflict?
 
We’ll find out soon, possibly in the South China Sea or the Taiwan Strait. The latest reemergence of tensions in Hong Kong only adds kerosene to the fire. Investors should prepare for U.S.-China geopolitical tension to grow worse. Maybe a lot worse. That’s the lesson of history.
 
SITUATIONAL ANALYSIS
 
IS THE US DEFENSE SECTOR’S MAJOR CONTRACTORS THE WAY TO PLAY GLOBAL CONFLICT?
 
The MATASII Strategic Investment Insights currently follows 14 Defense Sector securities. As the following graphs from the October 2nd, 2017 report on Northrop Grumman (NOC) the results were extremely strong even relative to a strong equity market. 
 
Our analysis suggests the present investment ideas (versus tradable ideas) are not currently within the major US defense contractors. Our SII research indicates important opportunities can be found within new emerging Cyber Security and High Altitude Hyper-sonic Weapons, until such time as the overall equity markets adjust to reflect PE valuation multiples more inline with real US and Global economic growth. 
Our latest update on Northrup Grumman shows a number of technical tradable pattern IDEAS. All suggest that like most of the main defense contractors that they are within various forms of consolidation patterns at major support & resistance levels. Though I will leave the various tradable pattern IDEAS to the subscriber section of the MATASII.com site the following Daily and Weekly charts for NOC illustrates the key support / resistance bands, trigger levels and potential MATASII HPTZ targets. 
 

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