Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering walls
Right now fully one third of the world’s countries have built (or are building) walls.
Two months ago in an article entitled “7 Steps To The Easiest Short In Recent History” we looked at a combination of factors supporting the inevitable disintegration of the Euro currency experiment:
- Importing Hatred – mass immigration from countries the west is bombing.
- The Rise of The Right – Political correctness out the window.
- Borders Close – Threats become evident.
- The Victims Retaliate – Vigilante violence escalates. An increase in racism.
- Isolation – internal borders drawn within countries. Laws passed isolating classes of society.
- European Integration Disintegrates – Inward looking, rising popularism. Divisions along ethnic/tribal lines.
- Banking pressures add pressure to the Euro – The financial pressures accelerating all of the above.
If you look carefully at each of these steps you’ll notice they all entail in some way either physical or psychological barriers being built. Often both.
Today we’re taking a look at the incredible global shift taking place towards more physical barriers and then we ask some questions about what this means for us all and how we may protect ourselves and profit from what appears to be an unstoppable trend.
According to a recent article in the Washington post:
“In 2015, work started on more new barriers around the world than at any other point in modern history. There are now 63 borders where walls or fences separate neighboring countries.”
Most of these walls are being erected within the European Union which is not surprising. As mentioned before, Brexit is as much about the refugee crisis, stopping mass immigration, and what is seen by many as the islamization of Britain as it is about the myriad insane regulations the Eurocrats in Brussels foisted on our scone eating and tea drinking friends.
But Europe is not alone. Walls are being constructed across the Middle east, Asia and Africa, making this a global trend.
The quite brilliant Dr. Pippa Malmgren the former US presidential advisor and author of Signals: The Breakdown of the Social Contract and the Rise of Geopolitics wrote an excellent article on the topic of walls being built around the globe arguing that countries can put up walls but that capital will pull them down again.
“Walls don’t usually work or last. Hadrian’s Wall didn’t stop the Scots. The Great Wall of China didn’t stop the Mongols or the British. The Berlin Wall too was overwhelmed by the tide of history. In the end, capital finds a way to flow to wherever the profits are, on either side of walls. But, for now, it looks like money will flow, as it usually does, to the side of walls that permits the greatest freedom of movement, whether that be a movement of people or capital or goods.”
While I don’t disagree with Pippa, timeframes matter. Walls can remain, and hamper capital flows for long timeframes. The Berlin wall hampered trade and capital flows for 28 years. As an investor this matters to me – a lot.
Why These Walls?
These walls are quite simply a manifestation of the economic consequences of policy decisions taken over the course of multiple decades.
As mentioned the vast majority of the walls being built are in Europe. European politicians are erecting these walls while failing to understand that it is socialism and the welfare state in particular that attracts migrants. Walls do a poor job of keeping out uneducated angry people of a different language, different race, different religion, and different culture. Far better, change the system.
Imagine for a minute that there was zero welfare in Europe, which is going to happen for simple reasons of mathematics anyway. Imagine further that in order to gain entry to live in any European country immigrants needed to prove their worth, by way of education, capital, skills or even cultural beliefs, and be able to pay their own way, by way of savings, working, and contributing to the society which they wish to enter. With no handouts and serious repercussions for not pulling their weight (starving) the entire migrant crisis that engulfs Europe today would be a complete non-event.
Instead the misguided globalist elites continue with unsustainable welfare policies whereby free food, free housing, free medical care, and free schooling are provided to both citizens and immigrants alike.
When cultural differences rise up, instead of holding steady to their existing chosen culture, they resort to a political correctness justifying, explaining away and by default condoning behaviours which are anathema to the citizens. They then scratch their heads at the problem of millions of Africans and Arabs swarming in to get a slice of the good life. A 10 year old can piece this together.
Every one of us would do the same thing. The problem isn’t that Europe is being flooded by immigrant’s. The problem is that Europe isn’t attracting the “best and brightest”, but instead importing millions of people who’ve spent their lives picking up bad habits from political, economic, and social conditions which hark back to the dark ages.
The Power of Numbers
When a single person or family with bad habits migrates to a new society, the social and economic forces prevalent in that society tend to force them to assimilate or be rejected. Bad behaviour gets them into trouble pretty quickly and they are generally ostracised. Many leave and return to their homelands as a result. The culture shock is too much for them.
On the other hand, when hundreds arrive they quite simply bring with them their own culture and begin enforcing it in their new homeland. There are now areas across Europe where it is no longer safe to go… even for the police.
This massive culture clash is what is fuelling the frantic wall building we now see.
The good news is that this will accelerate the end of the Euro and the end of the socialist welfare state which is now well and truly in motion.
Of course walls don’t build themselves and so it’s the rise of “strong men” that provides the narrative and populism for these barriers.
One reason Putin is one of, if not THE most popular head of state in the world, is due to his stance of looking after Russia and Russians and not bending to the nauseating political correctness that has pervaded the