A good day everybody:
Yesterday was Election Day for the European Parliament. It is still a more symbolic institution with limited rights. But given its low significance, voters express their real views more openly compared to national elections. So the results were extreme. Green parties are a clear winner. Mainstream got hammered everywhere. The Conservatives in the UK below 10%, the German social democrats not far from that.
This current state of politics is related to the third of the 10 long-term investment trends which we identified:
3. Erosion of governments and need for private safety
- Democracies to erode internally, lacking strength to provide order
- Local military conflicts continue to proliferate, developed industries will deliver weapons and services
In Europe the corresponding factors are already clearly visible:
- Ever increasing difficulties to form stable governments (IT, ES, DE, AT, etc.)
- Emergence of new, anti-establishment „movements“ (rather than parties) almost everywhere
- Autocratic governments trying to abolish democratic processes & civil society & free media (HU, TR, PL, RU)
- Disintegration movements (Brexit, Catalonia, Corsica)
The issue is that we all lived in a long, stable and peaceful period since WW II - and take the benefits for granted. Few people are still alive who have experienced the horrors in the first half of the 19th century. There is less and less willingness to fight for the status quo.
You may moan and bitch about it - but in my opinion that train 🚂 has already left the station long ago.
The (frequently self-inflicted) chaos within and between the old-school parties will lead either to the election of autocratic control-freaks (creating a need for privacy protection etc.) or ongoing instability in society with the emergence (or at least the perception thereof) of more crime, more dirt, more insecurity. That need will create a demand - private security.
The beneficiaries: defense sector, private monitoring and surveillance, security service companies, privacy protection, encryption.
The status in the US equally proves the point: absurd trench war between Reps and Dems, an autocratic president governing via Twitter, an exploding military and national security budget and the willing proliferation and fostering of local conflicts around the world.
Would I invest directly in the usual suspects to benefit from that (defense contractors) - no. But if you buy S&P500 ETFs you do it anyway. If you strip those out you „underperform“ because they will „outperform“.
As I said - that train is a goner. You may now ask why I am an optimist? Simple: people are not stupid. Eventually the‘ll get it. And things will change. And change is always an opportunity for the intelligent investor.
Feel free to comment and make this an active, interesting post on our blog.
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