Investing during times of military tension and conflict
Following up on a previous post, it will be noted that the Doomsday Clock was set last week by the Bulletin of Atomic Scientists to the same reading of the previous year: 100 seconds to midnight - the closest in the 75-year history of the clock to the apocalyptic scenario. What largely kept it from being moved back from midnight was China’s and Russia’s respective brinkmanship on Taiwan and Ukraine.
A review of Barton Briggs’ 2008 book, Wealth, War and Wisdom, does provide some interesting suggestions for investing during times of military tension and conflict. Here are several main points:
Military tensions and conflict can cause stock markets to sell off sharply at times. But staying with stocks is often the better course, says Biggs. From 1900 to 1949, a span when two world wars occurred, stocks in Allied countries outperformed other asset classes, notching an average annual real return of 4.2 per cent.
Buying stocks on the “sound of cannons” can be lucrative, too. When World War II broke out, legendary investor, Sir John Templeton, bought dozens of stocks selling for under a dollar on the NYSE. In 1946, they were sold for a gain of approximately 300%.
When Russia invaded the Ukraine in 2014, Warren Buffett, remarked on CNBC that even if he knew it would lead to a major war, “I will still be buying stock.”
Stocks in the losing and Axis countries, however, had negative real returns in the 1900 to 1949 period. So, diversification is important: assets should be held in several countries and currencies.
Another one of Biggs main recommendations was to acquire a small farm in an out-of-the-way location. Military tensions often bring inflation, and real property can be a way to inflation-proof wealth. Moreover, a rural farm can be an independent food source, as well as less likely to be subject to property destruction or expropriation.
Precious metals in the form of bars or coins can be useful too. But be careful with the storage. Alan Turing, the math whiz who cracked German war codes and pioneered computers, buried some silver bars during WWII, but after the war ended, he was unable to locate them because important landmarks had been changed.