Can America Afford Another War? Or, Investing in Ugliness

It’s funny. Hours beforehand, I was talking to a friend. At the other end of the world. About imagining a moment where we might never see each other again. As war engulfed the world. And then the bombs began to fall.

You know that I always have a feeling about these things, and it’s usually right. Maybe you do too.

Today we’re going to talk about America’s new war, the economy, finance, and your life. A new war is not a good thing. For many, many reasons. But this is where we are in the world, and in America, in particular..

I heard from one of you in sessions the day before the bombs fell that your financial advisor told you not to worry. Because war would be a good thing. My God. That’s not just morally repugnant, ethically bankrupt, and historically impoverished, it’s also terrible advice. Using war as an excuse to keep you…in…the typical American portfolio? That’s pretty Trumpy, when you think about it. 

This is the measure of the terrible, terrible advice many of you are getting. To go against your own moral instincts, and buy into beliefs as foolish as: “war is going to be good for you.” How much is that costing you? Not just financially, which is getting clearer if you listen to me, but also morally, emotionally, and relationally? Don’t live this kind of lie, my friends. You are better than that.

Don’t invest any part of you in ugliness and obscenity. That’s a general rule for life, and it’s a good one for wealth, too. Why?

What this latest war represents is continuation of a Macro Trend. I always teach you to think about the world in those terms, and if you do, then you will always be ahead of the curve. In this case, it’s the Breakdown of Global Peace and Order. 

A war made just like that—snap! Without Congressional approval or even debate—represents a profound breakdown of not jjust international rules of law, norms of diplomacy, and so forth, but even basic American constitutional principles. And while this war might seem noble and justified to some, maybe even many, the truth is that the breakdown of global order is why risk is accelerating across economies and markets. It has a real price, And you’re paying it. In stagnant growth, in bleeding portfolios, in the ongoing loss of wealth. 

So let me take a moment to teach you about how the world is changing now, and how conflict and economics intersect.

There are those who’ll still profess “surprise.” Didn’t Trump “give them two weeks?” By now, we should all know the kind of psychology we’re dealing with. Trump’s MO is exactly what anyone should expect from a malignant narcissist. It’s predatory. I give you a “reprieve.” From hurting you. Then I renege. It’s a double cross, after intimidation. So my eerie feeling—the bombs were going to fall that night—was really just that.

And if we know that’s the case, then we also know that this war isn’t likely to end here. Will it be World War III? Hopefully not. But if it all keeps escalating? Nobody much can say. But there’s a pretty good chance. 

That is what risk is. And what risk means is that another war is eminently not a good thing. Please, understand that for a moment, because…

Let me teach you what’s actually going to happen. 

Wars are expensive. America can scarcely afford another war. Its fiscal position is already shot to hell, precisely becauseof decades of futile wars. Why do Americans have such poor standards of living? Because all that money should have been invested in social goods like healthcare, education, and retirement. But now nobody much can afford those. And worse, there’s little room to ever have them, because the money’s all been spent.

What will happen if this war continues? American bonds will tank. They’ll probably tank all week, in fact, because of course, every large pool of capital in the world understands all this, and the last thing they want to do is invest in a) an America that’s already heavily indebted b) one where Donald Trump already probably will default on the debt and c) is now spending even more money on another war.

So this war already, even the hint of it, puts America’s economy in an even more fragile position than it already is. Capital flight’s already begun, and the last thing America needs, really, is to have asset prices tank further—but that’s exactly what’s going to happen.

What about the stock market? Won’t stocks “go up”? Probably not (though we might see weak minds buying the dip, like they’ve been conditioned to.) It’s more likely that global stocks will fall thanks to this war, because it will cause an oil shock, which will affect everything from shipping to manufacturing. Where does America get imports from? Oceans away. A war whose effect is to raise oil prices is eminently not good for its economy or the corporations in it. So if your finance guys are telling you “war is good,” they’re not just sort of gross, they’re also, let me put it bluntly, dumb.

And of course, all that means that the macroeconomy will be affected, too. House prices are already on the brink. They’ll freeze and fall. The job market’s in tatters, and do you think hiring’s going to pick up when the economy is slowing that much more, as asset prices fall?

“War” can be “good” for the economy, but only in a very misunderstood way. Really, it’s massive investment in decades of research and development, alongside institutions, that can be. And even then in a defensive way. That’s a form of collective investment, by the way. But that is a world away from “let’s drop bombs.”

I want you to understand the point. Really understand it. In ways that sadly American media won’t teach you. 

The breakdown of global peace has consequences. And they’re not abstract ones. They’re real ones. Like rising risk premia for every asset in the economy. The ones you own. And so you end up paying the price.

Some of you know that you pay the price for war in the opportunity cost of the social goods never invested in. But not enough of you grasp, because nobody teaches you, that this Macro Trend, the breakdown of peace and order, means something even deeper and more lethal. As risk consumes everything around us, the value of our assets falls. The certainties of yesterday—the stock market will rise forever, don’t worry—melt away. You are left holding the bag, and it’s on fire.

Unless we are wise enough to center our lives around Havens. That’s what I try to teach you about and guide you towards.

Listen to your instincts. They tell every sane and thoughtful person that war is not a good thing. They have never been righter. Don’t get burned. It is never a good idea to invest in ugliness.

As always, just reach out if you need advice. I’m always here.

Lots of love,

Umair (and Snowy!!)

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