Global human deaths in conflicts since 1400, Our World In Data, 2022 (link)
A recap of a previously discussed framework is important given the current environment.
Our species has a habit of killing each other for scraps of land with imagined value.
We are overdue some bloodlust; this is one of the longest periods in recent history without a significant war. We are the same species we were a brief 600 years ago - so we shouldn’t expect anything different this time around.
Indeed, we are the same species we were 20,000 years ago. Put a dog in a spaceship, it’s still a dog.
A bored historian may note:
On an average-sized planet, one of many trillion, a species with a tiny population but an impressive delusion of grandeur decided, for the umpteenth time, that it was up for a fight. It split into two groups, in a process one may call Fractionisation, both with ideologies about how their world should be run. To us, it would be like splitting an atom into its quarks and squabbling over it. We can only assume that they habitually thought it was a good idea due to their slow processing power. They had the ability to see that the world was far larger than their ‘world,’ but were not able to comprehend what to do about it. In any case, they deemed this self-culling process quite necessary, quite frequently.
The pieces are falling into place.
One of the main limitations preventing China from sparking conflict has been their lack of resources/ potential for isolation from these resources if major conflict broke out. Russia’s invasion of Ukraine and the Western response has sparked the required process. Supply chains (including that of all-important energy) are changing so that a Russia/China/allies block forms and a Europe/America/allies block forms.
China has managed to get much of Africa in an economic stranglehold. When the cards are laid on the table (in 5-10 years), India will have a choice and may well sway the tide of war.
This process takes time. Here’s the military expenditure of key players prior to WW2:
Source link: Military Spending Patterns
Similar patterns are seen prior to other major wars - there is a buildup where military expenditure increases and the population is prepared for war, beginning around 6 years prior to the onset.
Writing about this a few years ago, there was no increase in expenditure. This was during fear over the Trump tariffs. It was obvious that, aside from worsening relationships, they weren’t going to cause a war.
Populations weren’t prepared. Guns weren’t being made.
For traders, it became a classic wall of worry that was scaled right into the Covid Crash.
A few short years later and the rhetoric is here- very much an ‘us and them’ forming. Our imaginations are just strong enough to imagine value where there isn’t any- and it drives us. For better and for worse.
The military spending has begun:
So we have the ingredients for the next round of pointless bloodshed. However, the process is just underway so, give or take some trigger-happy-person-even-more-idiotic-than-the-rest-of-us, we are looking at another 6+ years buildup - perhaps even into the early 2030’s.
Plenty of time for a bull market in stocks.
I’m in the camp we get another major leg down before the Bull starts - but when the fear takes hold at the lows, it’s worth keeping in mind that WWIII is most likely a while away.
My week so far
It’s been a busy few days.
Some notables:
CADJPY Long
First trade got ripped to shreds but another opportunity arose on Tuesday morning with the Pelosi setup.
It was the first geopolitical buy signal there’s been for a while and although it would have been nice to get it at SPY lows, the market dutifully had a strong push higher once it was relatively clear we weren’t about to head into WWIII - just yet:
Glad this Tweet got at least one person on my side!
The first CADJPY long was taken out at the X (below), the second one is still running. The technical setup was:
price around the 102 mark
previous liquidity zone
testing under the 100 DMA.
Pelosi setup is in the pic, having been noted just before taking the trade.
First trade was -1.35% loser. This one is at break-even, was about 6 pips away from take profit today before price reversed. +2.68% if it hits target.
GBPUSD Long
Start of the week, NZDUSD was at break even so I had no short USD risk and it was a pretty decent rally v’s USD last week. That + expected continued equity strength (for now) = I wanted to take another short USD trade.
It’s been pissing about all week (as has most of the market), but survived BOE’s Bailey today saying the UK economy was going to be horrendous for years (compare that to the US ‘we’re never in a recession’ Fed). Just under entry level at the moment:
Target is 1 : 2.59 and it’s a 100% taker if it gets there - if USD continues to weaken, I’ll have NZDUSD on a trail.
Update on other trades
SPX long - take profit: +2.46%
AUDUSD long - take profit: +2.11%
NZDUSD long - moved to break even
EURGBP long - final trailing stop taken out at ~0.5% profit.
A disappointing trade all round as the spread between German & UK bonds has moved as expected but the pair has been stuck in the mud. I’m watching to re-enter….and will probably now miss the real move…
New trade - U.UN (Sprott Physical Uranium)
Decent week last week
Small-sized trade; will wait to see if it shows more strength before adding
Weekly chart below, showing a decent little volume spike last week and 30 & 40 weekly MA’s (right way around but will need to start pointing up before a full position goes on):
The next few days:
Oil long. It’s just a trade
Notice how quiet the oil bulls have become. Compare that to a month ago when oil was supposedly going to the moon.
It’s now ~30% off its highs. Copper has also had a decent little bounce.
And there’s a technical area to hang a trade from.
So, I’m looking at a long.
This is the weekly. Another few % lower and it hits the 2021 high:
The 2021 close, around $75.5, is a better entry - would have the 100 week MA coming in there too.
However, if it dips early tomorrow and then rallies, it could keep the hope of a flag forming between $94 & $120. Target of top of that flag is around 1 : 6.47 r/r - a bet worth taking.
If it doesn’t work and oil heads even lower, there’s a greater chance of a $75 entry working which would at least get the whole idea back to break even.
Guess I can turn bullish on oil for now - it’s just a trade.
Be patient; trade well.