Crediblock.com LLC - Second Sight Markets Analysis 7/3/2020 -- A second civil war is brewing in America and by some accounts has already started. Regardless of your opinion and proclivities you can't deny that things are going to get more chaotic before they become more stable. War is always a volatile situation but we have extensive experience trading through wars. This is an intelligence brief for traders and investors it is not meant to be a comprehensive guide or a particular recommendation.
First, examine the facts. Learn how to be an analyst. Any war throughout history including modern war is primarily an information war and secondly a kinetic war. Traders favorite book "The Art of War" needs to be read again. It is perhaps why there has been so much censorship on social media recently. Here we are going to look at what to buy, what to sell, and what markets are interesting.
On February 1, Defense Secretary Mark T. Esper signed orders directing NORTHCOM to execute nationwide pandemic plans. Secretly, he signed Warning Orders (the WARNORD as it's called) alerting NORTHCOM and a host of east coast units to "prepare to deploy" in support of potential extraordinary missions.Seven secret plans – some highly compartmented – exist to prepare for these extraordinary missions. Three are transportation related, just to move and support the White House and the federal government as it evacuates and operates from alternate sites. The first is called the Rescue & Evacuation of the Occupants of the Executive Mansion (or RESEM) plan, responsible for protecting President Trump, Vice President Mike Pence, and their families--whether that means moving them at the direction of the Secret Service or, in a catastrophe, digging them out of the rubble of the White House.
So how do we make money and protect our portfolios?
What to go Long
These all may seem 'obvious' but remember this is only the beginning. When going long don't buy the high, take a small position to be in and then buy the dips, nothing goes straight up. These are demand driven fundamental plays.
1 $SWBI Smith & Wesson Brands
Smith & Wesson is an American manufacturer of firearms, ammunition and restraints. The corporate headquarters is in Springfield, Massachusetts.
Remember that Civil War 2 will be fought in urban areas by mostly civilians. So stocks to go long would be small arms, things that individuals could buy. The US Military's limited involvement will likely use a wide array of non-lethal weapons. To read up on this see https://jnlwp.defense.gov/
Other gun manufacturers will do well, of course. But not the Lockheed's - remember it's small arms and improvised devices that are going to be used.
2 Raytheon $RTX
Raytheon invented the Microwave, developed the majority of 5G technology in use today, as well as many Active Denial Systems (ADS) which can literally make crowds disperse.
Raytheon also provides the security for Area 51, and controls the weather:
Raytheon Technologies delivers key weather capabilities
In September 2015, Raytheon Intelligence & Space delivered AWIPS II, the next-generation upgrade to the AWIPS system. The AWIPS update includes powerful new capabilities that help meteorologists deliver more precise forecasts sooner. As the architect of the AWIPS evolution, Raytheon Intelligence & Space designed, developed and deployed the system's next-generation hardware and software. AWIPS now supports forecasters in the field and responding on location to weather emergencies. It now features simplified code and system performance coupled with a reduced maintenance burden. All of this has been achieved while retaining a system look and feel that makes the AWIPS evolution appear familiar to the user.
Updated AWIPS Capabilities Include:
- Scalable from laptops to servers, enabling forecasters to work on location with emergency responders
- Data from all kinds of sources, such as weather radars and environmental satellites orbiting in space
- Highest resolution available from each sensor – enabling precision forecasts
- Open-source software enables low-cost maintenance, stability, and most importantly, continuous improvement to forecast accuracy and timeliness
- A variety of data types are processed in real time, allowing video game-like visualizations and interaction
- Maps display and re-project nearly instantaneously, with seamless scrolling and zooming
- Automated text generation allows weather statements — such as watches and warnings — to be issued rapidly to help protect lives and safeguard property
3 $CAT Caterpillar Inc.
In an urban warfare setting, what we will see is buildings burning, and why not Israeli style bulldozers refitted with battle armor displacing "CHAZ" residents from terrorist controlled territories? No matter what the scenario, war means physical destruction of real property, which will be rebuilt. CAT is not the only reconstruction play for sure, but it's a USA-first household name that certainly will be a first choice if whoever is tasked with rebuilding needs to order 100 cranes in short order.
4 & 5 Microsoft $MSFT & Amazon $AMZN
These 2 Mega Cap companies are so deeply involved with the Federal government it's hard to see where one entity stops and the other begins. Some reports say that half of military spending goes to private contractors, but rumor is the number is much higher.
But remember our thesis, Civil War 2 is not a traditional war, so traditional weapons software systems builders like IBM will not profit so much like MSFT and AMZN. Although, both companies have had a big push to enter the defense industry in recent years.
Adopting cloud computing is critical to maintaining our military’s technological advantage. Our nation’s warfighters deserve the most innovative and secure solutions at the tactical edge – whether on land, in air, or at sea. The Amazon Web Services (AWS) Cloud provides secure, scalable, and cost-efficient solutions that help agencies meet mandates, drive efficiencies, increase innovation, and secure mission-critical workloads across the U.S. Department of Defense (DoD). That’s why the DoD trusts the cloud with the most tools, technology, and accessibility at the tactical edge.
6 & 7 $LOW Lowe`s Companies Inc & $HD Home Depot Inc
Wartime demands supplies, rebuilding, makeshift equipment and other items found easily in these 2 companies. In many warzones such as Iraq there was no HD or LOW you can bet if there was, they would be constantly restocking supplies. They may shift their inventory to focus more on staples and less on luxuries (more generators, less flowers) - but that will only make their business better. They are spread out all over USA mostly in suburban areas, not near hotzones which typically have been downtowns.
Other longs include $ADT home security, Zoom Video Communications $ZM, and related companies. On private markets it's possible to buy Impossible Foods, Digital Ocean, and other companies that are benefiting from the "COVID times" and it seems will continue to do so.
What to go Short
War will be disruptive for inner cities. Any company that relies on the consumer in cities like Los Angeles, New York, Chicago, or Miami will be disrupted and potentially suffer long term consequences. What do big cities thrive on that are butter and not guns? Most obviously, hotels, fashion, restaurants, tourism, and physical entertainment. These are wants, but not needs. The shift is from the physical to the virtual. People will stay in their homes and stream movies instead of going to theaters.
1 $DRI Darden Restaurants, Inc.
Sorry to say that, during times of war including civil war, people will stock up on food, cook from home, and not go out to eat. Not necessarily for security reasons, it will just be a sign of the times. COVID is another factor, people will just stay at home and order Door Dash (You can go long Door Dash in the private equity markets if you are accredited @ www.preiposwap.com). So some restaurants will survive based on their delivery business, but Darden is all in on the dine in formal concept. They will evolve, but there can be a lot of pain and suffering until that evolution becomes a reality.
2 $TIF Tiffany & Co.
Luxury goods are going to plummet, while consumer staples will explode. People will stockpile toilet paper, batteries, dry food goods, toothpaste, and other items. It's true that the wealthy who shop at Tiffany will be largely unaffected and/or able to maneuver through society unlike others of less means, during war traditionally gold and jewelry is sold or traded. Also, retail locations can be targets for looters.
The windows on the Tiffany & Co. store in downtown Red Bank were boarded up Tuesday morning. (Photo by John T. Ward. Click to enlarge.)
The rear entrance and windows of the Tiffany store were boarded over, while neighbor Cos Bar was not. (Photo by John T. Ward. Click to enlarge.)
Tiffany will suffer the same fate as other luxury goods retailers, it is just the most well known brand. They will reinvent themselves like the restaurants, perhaps selling gold bars or gold plated bullet necklaces all online to their rich customers holding down their castles. But that will take time, and during the peak violence it will be disruptive at the least and terrible for their short term bottom line in the worst.
3 $M Macy's
Civil War 2 comes on the back of an already weak retail market. The whole sector will get hit hard. Companies that are the size of Macy's will also reinvent themselves, but the investment in physical infrastructure and their physical business model is huge. In the meantime, sales will suffer, and Macy's is a luxury store for many shoppers (you can get clothes at cheaper places that are not in shopping malls). Plus, why pay retail when you can get the 5 finger discount?
The whole fashion industry is going to get hit but particularly high fashion. Makers of common jeans and shirts, socks, and staples may see a boost. What's also going to get hit hard is the bricks n mortar stores in any big city.
Here's lists of publicly traded fashion companies
4 Short Fiat Currency
During times of war, FX is usually the market to trade. As one side wins or achieves a major victory, its currency and that of its allies will usually appreciate. The issue is here that the war is internal. But even if you wanted to short the US Dollar that wouldn't do you much good, because the USD backs most other major currencies. So for example it's logical to think if the USD goes down the EUR might rise. But the Euro is 55% backed by the USD, and has just as much inflationary policies as the Fed. Central Banks are in an agreement on global macro policy, and the dissenting Swiss were taken out by brute force in 2011 (The Swiss Franc was previously backed by Gold and a unique commodity backed currency).
So the only way to short fiat currency is to buy physical assets such as Gold, commodity rich real estate that's not inflated artificially, or a business in those markets where real physical assets that can't be copied, manipulated, or diluted can still be purchased. Wait - didn't you just suggest a move from the physical to the virtual? Yes, in the cities - but for example people in San Francisco and New York are dumping their apartments for country houses.
For the past 10 years, markets have not gone up the value of currencies has gone down. This is a physical macro economic fact - because the Quantitative Easing policies of all central banks has not only created more supply, but in many cases, the Fed is actually buying assets driving up prices. During the "COVID crisis" the Fed increased this inflationary policy substantially. For a good read on this topic see Splitting Pennies - Understanding Forex.
Prices of food will go up, this can be traded in futures markets. Markets that will do well (go up):
- Wheat, Corn and other Ag
- Metals, especially Gold & Silver
- Meat, Pork Bellies, Feeder Cattle, Lean Hogs*
*Most futures, with the exception of financial futures, are based on physical commodities which will experience asset inflation, that means go up
Markets that will suffer during this time:
- Insurance and its derivatives
- Airlines, tourism, transportation
- Real estate in general (it will be volatile from market to market)
Conclusion for traders
Buying $AMZN and $MSFT and forgetting about the position for 5 years is one strategy that looks promising. But if you are an active trader, none of these ideas are going to go straight up or down. But the advantage you have is now you understand the fundamentals behind the moves that will happen in the next 6 months, especially leading up to the election. October is typically the month of revolution so we can expect a big event, perhaps a terrorist attack in a city in need of renovations - perhaps Baltimore - to create chaos just before the election.