If you’re just waking up to President Donald Trump’s sanctioned assassination of Iran’s military leader this morning, the trade seems obvious.
Sell tech. Buy oil. Sell airlines. Buy gold. Sell consumer. Buy the military.
That means dump Amazon (NASDAQ:AMZN) and maybe Apple (NASDAQ:AAPL). Buy Exxon (NYSE:XOM) and maybe Schlumberger (NYSE:SLB). It means sell McDonald’s (NYSE:MCD) and buy Lockheed Martin (NYSE:LMT), maybe Boeing (NYSE:BA).
Mainly, get liquid. Stocks were trading down roughly 1% before the market opened, and I would expect similar price action throughout the day.
Most important, take Bette Davis’ advice in All About Eve. Fasten your seat belts, it’s going to be a bumpy ride.
That’s the trader’s reaction. But what should investors do?
A Turning Point
I wrote when Trump was first elected that he was a Bizarro World version of Jimmy Carter. He is Carter’s opposite in every way, and on every policy.
Carter was using a Cold War playbook that was approaching its sell-by date. Trump seems to be using the Oil War playbook which replaced it. It has now reached a sell-by date. Trump’s policy is based on controlling resources. His alliances are with Saudi Arabia and Russia, the two other oil powers in today’s world.
The OPEC+ (OPEC plus Russia) deal reached last month has bulls predicting $100 per barrel of oil, and they may get their wish in the short term. But can Russia be trusted?
The real oil story is that, just as technology makes alternatives like solar and wind cheaper, it also makes it easier to find new pools and exploit older ones through fracking. During 2019 new fields were discovered in Russia, Guyana and off Cyprus. There were new finds in Iran and the Gulf of Mexico.
Slowly, the oil era is ending, while that of technology rises.
The Gating Factor
In the battle to sell their supplies against a backdrop of efficiency, war is oil’s ally. The Trump years have seen nationalism stoked around the world. The result is growing conflict between nations and groups.
But there’s another force against which nationalism has no answer, climate change. This is shaping up to be a year of utter disaster on the climate front. There’s a growing reaction against what is happening. The losers in the near term are technology companies. Many were overbought in the late-decade run-up. They’re bound to sell off.
But technology, which can reach across borders, remains the major trend of our time. Wireless networking, cloud computing and cheap devices have brought over 1 billion people into the global market, and the global conversation in the 21st century. They’re not going away.
Jack Dorsey of Twitter (NYSE:TWTR) and Square (NYSE:SQ) isn’t the only technology executive looking for talent in Africa. Africa’s median age is under 20, half what it is in the United States, at a time where the gating factor to growth is human capital.
Smart, motivated, educated and mainly young people are the source of most money today, not resources. People can create new battery designs, windmills that don’t kill birds and more efficient solar panels. They can also put intelligence into everything, creating efficiency, and make DNA a programming language.
The Bottom Line on Iran
The year 2020 will go a long way toward determining whether mankind has a future, not just your investments.
The present economic path is unsustainable. A new path has opened in the last decade.
Expect a lot of volatility in the markets over the next few months. Expect to lose money. But on the other side of the present crisis is a new era. That’s where you should place long-term bets.
Dana Blankenhorn is a financial and technology journalist. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and AAPL.
