Investing for a New Cold War

China is flying military aircraft into Taiwan’s airspace and Russia has a hundred thousand troops massed on the borders of Ukraine for “maneuvers.” It is unlikely that either China or Russia will take steps to provoke all-out war but they will continue to test the limits of what they can get by with. The USA and it allies are, again, in a Cold War with Russia and China. We look at investing for a new cold war from two viewpoints. How should and will the US military prevent armed conflict by preparing to win should war break out. And, how should you be investing for a new cold war?

Cold War and Boiling Peace

Defense 360 published a series of articles about investing in a new cold war from the military point of view. They highlight what they believe to be both good and bad ideas. And they note that what is necessary to achieve superiority or at least mutual assured destruction with Russia and China, not to mention North Korea or Iran, may be different what is needed to contain smaller flare-ups. What infrastructure is needed to stay ahead of or at least keep up with Russia and China? How much spending needs to be devoted to air power, naval power, cyber weapons, the three arms of the nuclear deterrent, and more? How much spending needs to be devoted to maintaining force readiness in all branches of the service? And, how much time, planning and money needs to go into preparing for “brush fire wars” as opposed to an all-out conflict with a major power.

Supply Chains and Industrial Capacity

We have written a fair amount recently about supply chain concerns related to both the Covid-19 pandemic and a possible conflict with China. As reshoring and investments in America pick up one ought to keep investing with a new cold war in mind when prioritizing one’s investments. Basic materials and products such as lithium, cobalt, other strategic minerals, lithium batteries, and computer chips come to mind immediately for your investments. Besides ramping up onshore production of necessary parts, American industry needs to bring heavy construction capacity back to up previous levels. At the start of the Second World War the USA and Japan had similar numbers of aircraft carriers. During the war Japan built four more while the USA turned out 151 more! As the risks entailed in offshoring so much heavy industry to China become increasingly apparent, we will hopefully see more critical heavy industry moved back onshore. These industries should be investment options when they emerge onshore again.

Investing for a New Cold War

Information Cyberspace War

Getting there with the “firstest with the mostest” was how a Civil War general explained the path the victory in battle. Today this is achieved with intelligent logistics and top of the line intelligence. Here the USA has the advantage of being home to Silicon Valley and some of the smartest computer minds on the planet. Hackers from Russia to Iran to North Korea get a lot of press but victories by US cyber command, the NSA, military intelligence, and the CIA don’t get published. From Microsoft to small startups there is the potential for profit investing for a new cold war in the cyber realm.

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