F.I.T. Focus - Podcast Recommendation

Todd Rebori |

Invest Like the Best – Peter Zeihan

Click here to listen to the podcast.

The post-World War II global economic and geopolitical order has been one of ever-increasing global economic integration, with the U.S. being the economic and security focal point that holds it all together.  In general, this order has produced massive global progress and wealth unlike any other period of human history.  The U.S. led global order seems to be the foundation that markets have operated under for as long as most of us can remember.

But what if that foundation changed?  What if the global order turned to a less cooperative disorder, which has actually been more of the norm throughout history?

According to Peter Zeihan, the author and geopolitical strategist featured in a recent podcast episode of Invest Like the Best, the transition from global order to disorder is already underway and has been for some time, with huge potential implications for global economics and trade. 

He posits that the U.S. has already begun the process of backing away from the order that no longer necessarily suits its long-term needs.  While recent events, such as trade wars, are front and center, he would argue that they are simply symptoms of a transition to a disorder that is already in process. 

What is interesting about these views is that we believe it challenges the status quo view of the world order and draws some quite surprising conclusions about which countries end up as relative winners and losers.  While the U.S. fares well in this world view given its natural advantages and military might, you might be surprised to learn that Zeihan believes China and Germany are not well positioned for this possible world.  Other winners in his view – Japan, France, Turkey and Argentina.  Yes, that Argentina.  And the most important trade partners for the U.S. – Mexico and Canada, not China.

From an investment point of view, we would say that this outlook is not a Wall St. consensus viewpoint.  But Wall St. can often be wrong.  We’re not sure if Zeihan is correct or not, and are not espousing his viewpoint or conclusions.  But in light of the world we live in, we believe it pays to consider an outlook that may not be considered the “consensus”.  Investing is a probabilistic exercise in risk management.  Even if this outlook is on the lower end of the probability spectrum, it might have a significant impact on markets if it materialized over time.  If nothing else, it is interesting, entertaining and we learned something from it.  We hope you do too!

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