The Geopolitics of the New World Order

The New World Order – Part Two

Thoughts of a private investor

‘When you’re going through Hell, keep going’ Winston Churchill

 

Chapter one – the geopolitics of the new world order

Democracy vs autocracy

The post-war generation, of which I am a member, grew up believing that democracy, the rule of the people by the people, for the people, was inherently superior to any other form of government. You didn’t need to look far for proof – in the recently-ended Second World War, the democracies of America, Britain and France (though, it has to be said, in alliance with Russia, which was and still is a dictatorship) had defeated the dictatorships of Germany, Italy and Japan.

The strength of rule by a single person (dictatorship) or a small group (oligarchy) is that it’s easy to get things done because there is no opposition, but there are weaknesses too – the personal limitations of the ruler or ruling group, together with the fact that there is no mechanism for replacing them as they get older, wearier and more paranoid. Dictators come to see threats everywhere. Power becomes a habit, and they are afraid that once bereft of its protection, they will be at the mercy of all the enemies they have made in their years of power.

But democracy has its limitations, too. The more people are involved in a decision, the harder it is to make. Eventually, decisions have to be devolved to small groups, a process which carries its own risks. At least in a democracy, the voters have a regular chance to remove a weak or under-performing government. The fairest form of democracy is proportional representation, but the result of this system is often a large number of parties in the assembly, none with a working majority, leading to a series of coalitions which fail to agree about anything, and endless new elections – as in the Weimar Republic in 1920’s Germany and in modern Italy.

The debate between systems is not a new one. Ancient Rome (founded in 753 BC) was a monarchy for a couple of centuries until the overthrow of King Tarquin the Proud in 509 BC. Roman citizens were so incensed by this oppressive character that they decided on a system where two consuls took charge for a year at a time, and then, before power could begin its corrupting process, they had to step down and spend a year away from Rome as proconsuls ruling one or other of the provinces. However, as the empire grew to encircle the Mediterranean and beyond, decision-making power became too diffused, and the republican system broke down. Though he didn’t have the title, Julius Caesar was the first Roman emperor. He was assassinated by enraged republicans (44 BC), but the need for a figurehead was so strong that the imperial system was established soon afterwards. Many of the emperors (Caligula, Nero, Commodus) were worse than useless, but the Republic was never restored.

The last twenty years have witnessed a rising tide of autocracy. In China, the president took command for a five-year term, which could be extended for a further five years, after which they had to stand down. But in 2018, the two-term limit was abolished, making Xi Jinping President for life unless he chooses to stand down. In Turkey, when his term as Prime Minister came to an end, Mr Erdogan was elected to the largely ceremonial role of President, whereupon he invested that office with executive powers and abolished the office of Prime Minister. Now in his twelfth year as President, Erdogan looks ever more like a lifetime incumbent. To be on the safe side, he has just had his main presidential rival, Mr Imamoglu, arrested. In Russia, Mr Putin served two six-year terms as President, before becoming Prime Minister, installing his loyal ally Mr Medvedev as President. He subsequently served a further two terms as President and was then elected in 2024 to an unprecedented fifth term, taking him to 2028, when he will once again be eligible for re-election. In other words, he’s President for life.

The America of Donald Trump shows every sign of moving in the same direction. The US Constitution created a balance of power between Congress, the judiciary and the Presidency, which has lasted for the last two and a half centuries. It is now under threat from a President who has turned the exceptional power of the Executive Order into a daily habit, sidelining Congress into a body akin to the Chinese Parliament or the Russian Duma which exist merely to rubber-stamp presidential decrees, who describes any legal challenge to his actions as a ‘witch-hunt’, threatens to impeach any judge who opposes him, and will declare any election his party loses as ‘stolen’.

During his first term, Mr Trump remarked to China’s President Xi Jinping that the American people wanted him to be elected for a third term, and he has repeated the claim in various forms since. Under the constitution, this couldn’t happen, though President FD Roosevelt died early into his fourth consecutive term, an exception being made because of the Second World War. Trump would doubtless be waved through should America be at war or embroiled in some equivalent crisis at the end of his second term. Alternatively, he might be able to muster the two-thirds majority needed to deliver an amendment to the Constitution. The election of Mr. Vance as President would guarantee the continuation of MAGA policies, with Mr Trump as the unelected power behind the throne.

The drift towards more authoritarian, longer-lasting governments could not have happened without at least a measure of popular support. Democracies tend to elect centre-left and centre-right ‘neo-Liberal’ parties, none of which have been able to stem the rising tide of wealth inequality. Electorates feel marginalised and tend to punish the incumbent government at the ballot box, creating a game of electoral Musical Chairs in which administrations are voted out before they have time to deliver meaningful changes, though there have been notable exceptions such as Angela Merkel in Germany and Tony Blair in the UK.

 

Russia and Ukraine  

Vladimir Putin has been in power in Russia for a quarter of a century, giving observers great clarity on who he is and what he stands for. Mr Putin grew up in St Petersburg, formerly Leningrad, which suffered unimaginable horrors during the siege of Leningrad (1941-4) in which as many as 1.5 million people died, mainly from starvation. The siege ended just eight years before Mr Putin was born. Putin’s father, another Vladimir, fought in the defence of Leningrad. Mr Putin was brought up in an atmosphere of intense patriotism, allied to a hatred of capitalism and the West.

In the years before the invasion of Ukraine. Putin was interviewed regularly for television and came across as intelligent, articulate and reasonable. He has learned to talk in the Western idiom. Underneath the polished veneer is a man whose life’s work is the restoration of the Russian empire, which dissolved in the late 1980s. For him, the end justifies the means. Whoever opposes his vision of the restoration of Russian greatness must be weakened or otherwise removed.

Property rights in Putin’s Russia are relative. The state, backed by a pliant judiciary, will help itself to any assets it decides to appropriate. Power and wealth are held at the behest of the state and can be reclaimed at any time. London is full of Russians who remain fabulously wealthy until the state decides they aren’t. Russia is one of the world’s leading countries for wealth inequality as well as for corruption.

Over time, all possible sources of opposition have been suppressed. People have been imprisoned for calling the Ukraine war a war. Nothing remains that could possibly oppose Russia’s evolution into a fully militarised state, ready to seize on any opportunity to rebuild its empire, whether in Georgia, Azerbaijan, Moldova or the Baltic States (Lithuania, Latvia, Estonia).

The flipside of the need for empire is a feeling of vulnerability. Russia lacks America’s natural borders and has been invaded over the centuries by the Mongols, the French and the Germans (twice). Mr Putin sees NATO as an enemy that has crept inexorably closer to Russia’s borders. When Germany was unified, the former East Germany left the Russian sphere of influence and became part of NATO. At the time western leaders guaranteed that NATO would not move a yard further east, but when Russia’s NATO equivalent the Warsaw Pact collapsed in the mid-nineties, ex-Pact countries joined NATO, bringing it closer to Russia’s borders. For Putin’s Russia, the best way to counter this sense of vulnerability is to control Russia’s ‘near-abroad’ – the best form of defence is attack.

Russia’s annexation of Crimea in 2014 was bloodless because most Crimeans see themselves as more Russian than Ukrainian. One of the complexities of the Ukrainian situation is that most of the country passionately sees itself as Ukrainian, people in the eastern oblasts (Donetsk, Luhansk, Zaporizhzhia and Kherson) are divided, while Crimeans on the whole see themselves as Russians.

When Russia amassed 135,000 troops on its border with Ukraine in February 2022, I was unable to believe, despite the overwhelming evidence, that Putin would actually give the order for an invasion. He had got away with Crimea, but this was a completely different order of magnitude. Even if Russia were able to overwhelm Ukraine in a couple of weeks, there would be punitive sanctions if not a counter-offensive. Europe is under no illusions about the threat that Putin’s Russia poses to its security. Six months into the war, I couldn’t see how it could continue much longer. Russia had lost the element of surprise, Ukraine turned out to be braver and better organised than could possibly have been expected at the outset, and the combined might and superior technology of the allies would surely prevail. I was wrong both times.

For Vladimir Putin, Ukraine is a war that Russia must win. He couldn’t tolerate a Ukraine that increasingly turned towards Europe, aspiring to an economic miracle akin to Poland’s and to membership of the EU and NATO. Without Ukraine, a new USSR couldn’t be achieved. As ever with Putin, the end justifies the means. On the one side, you have NATO countries supplying weapons to Ukraine but stipulating until very recently that they must only be used against Russia in Ukraine, and not on Russian soil from which attacks were launched. Ukraine’s supporters fear escalation, and particularly the use of nuclear weapons, whereas Russia continually threatens the use of nuclear weapons, though it hasn’t yet used them. Russia’s current policy is one of all-out attack, aiming to gain territory despite losses of 1500 men killed or wounded each day, together with vast quantities of materiel, while also conducting morale-sapping attacks on Ukrainian cities and infrastructure. The war has put great strain on Russia’s economy, where interest rates are 21% per annum to contain inflation, which has passed 10% and is rising fast, but the economy must be subordinated to the war. In Putin’s eyes, Ukraine is an integral part of Russia, which should never have become independent, and for him, the only satisfactory outcome of the invasion is one that prevents Ukraine from ever breaking away from Russia’s sphere, achieving full independence and turning towards the West. Combined, Ukraine’s allies are more powerful, but Russia is more ruthless and more determined.

What makes a state a state?

A question on which humans seem unable to agree. National identity is based on ethnicity, itself shaped perhaps by natural geographical barriers, on shared language, history and culture, and a sense of national identity among the people of that region. But it’s never simple, and together with religion, national boundaries have been the most common cause of war in modern history.

Judith and I went to Tibet some years ago. Tibet exactly fits the definition of a country – there is clearly a Tibetan ‘look’ which is strikingly different from that of the Han Chinese settlers in Llasa. Tibetans have their own language, history, culture, political identity and their own religion, Tibetan Buddhism. Tibetans are deeply devout. Their religion is a powerful unifying factor. But Tibet isn’t a country, it’s part of China. The relation between the powerful China and its poorer, weaker neighbour could be a mutually beneficial one, but according to the Tibetans we spoke to – and they were very keen to tell us – it is a one-sided, oppressive relationship. The presence of soldiers with machine guns on the rooftops in central Llasa left us in no doubt.

Scotland is a country with its own defined borders, history, culture, political institutions and unmistakable accent. What’s in question is its relationship with its larger neighbour, England. Historic oppression by the English plays a part in the debate. Whether Scotland’s long-term future lies within the United Kingdom or outside it remains an open question, which fortunately looks unlikely to be settled with violence.

Marshall Tito was able to unite the Balkan states (Serbia, Bosnia and Herzegovina, Croatia and others) for over three decades by the sheer force of his personality, but following his death, Yugoslavia exploded in a series of bitter conflicts into its component parts. Kosovo became independent of Serbia in 2008 and has been recognised as a state by the UK, US and most EU countries, but not by Serbia nor, ominously, by Serbia’s long-term ally, Russia. Kosovo consists mainly of ethnic Albanians, but the north, near the Serbian border, is populated mainly by Serbs, with no loyalty to their new nation.

In the run-up to the Second World War, Hitler used alleged abuses of German nationals in neighbouring countries as a pretext to invade and annexe those countries. NATO was founded after the war to prevent any recurrence of that type of gratuitous aggression. Article Five of NATO’s constitution states that

‘an armed attack against one or more of (its member states) in Europe or North America shall be considered an attack against them all’.

That’s very clear – any country that attacks one of NATO’s currently 32 member states will find itself at war with them all – a very potent deterrent. That’s why smaller or more vulnerable states – currently Bosnia/Herzegovina, Georgia and Ukraine- are keen to join the alliance.

But can NATO survive in the new world order?

 

American foreign policy under President Trump

US foreign policy appears to be underpinned by four guiding principles – to relinquish its role as ultimate guarantor of world security, to spend less money and to prioritise containing China. The surprising fourth objective is the new imperialism.

A review of US foreign policy this century could hardly avoid the conclusion that a huge amount of money has been spent for little return. The War on Terror announced by President George W. Bush immediately after the 9/11 attacks on the World Trade Centre and the Pentagon is estimated to have cost $ 8 trillion, accounting for nearly a quarter of the US federal debt mountain ($36 trillion). In contrast to earlier conflicts in Korea and Vietnam, which were paid for by taxes, the War on Terror was debt-funded.  Including debt interest and veteran support, the Afghan conflict cost $2.3 trillion. This war, the longest in US history, lasted twenty years, but within weeks of US withdrawal, their opponents, the Taliban, had retaken the entire country.

There is an urgent need for America to reassess its foreign policy priorities and what it can realistically achieve.

This, in effect, is what Mr Trump is doing, beginning with America’s peacekeeping role in Europe. During his first term, he was pointedly critical of European members of NATO for failing to abide by their commitment to spend 2.0% of national income (GDP) on defence. His point was well made. There is no easy answer to the question of why 500 million Europeans should expect 330 million Americans to defend them against 140 million Russians. European NATO members are responding – the UK, which has sensibly widened its definition of defence to include security, expects to spend £57 billion or 2.3% of its GDP on defence this year, increasing to 2.6% in 2027, though still nine out of the thirty-two member countries spend less than the stipulated 2.0%.

Mr Trump said many times on the campaign trail that he could end the Ukraine war in twenty-four hours. Progress on the issue has been delayed by the gulf that exists between the two sides – Ukraine and its allies see it as a sovereign country in international law, while Russia does not.

The American attitude to solving the conflict has taken many people, myself included, by surprise. In an inversion of the generally accepted view in EU and G7 countries that the invasion was an act of unprovoked aggression by Russia, the US government appears to share the Russian view that Ukraine, in some way, brought the invasion upon itself. In the notorious White House interview, Messrs Trump and Vance castigated Zelenskyy for ingratitude. Their master plan for Ukraine involves a proposal to exploit the country’s mineral wealth, in a joint venture which would see the US receive $100 billion, as repayment of aid given during the course of the war, before Ukraine received anything at all. Mr Trump quotes figures around $300 – 350 billion for US aid to Ukraine, whereas the independent Kiel Institute calculates the figure much lower at around $120 billion. The US argues that no security guarantee for Ukraine is needed, as the US presence would by itself deter the Russians from invading. Mr. Zelenskyy appears willing to consider this proposal, or at least a version of it.

Mr Trump’s apparent preference for Mr Putin and Russia over Mr Zelenskyy and Ukraine may have something to do with the fact that Russia, unlike Ukraine, is potentially a major force in world politics. Bearing in mind the US priority of restraining a resurgent China, would it not make sense to sanitise Russia and normalise its relations with the rest of the world? This prospect would be so attractive to Russia, which might regain its frozen assets and markets from which it is now excluded, that it could be detached from its alliance with China, becoming part of an anti-China coalition instead. Mr Trump appears willing to sacrifice Ukraine to this outcome.

We will soon see whether this is the true direction of US policy. Mr Putin, sensing that Mr Trump is deeply invested in a deal to conclude hostilities, is testing the limits of what demands he can get away with. He has suggested that any ceasefire should ‘address the underlying causes of the war’, which means the idea of Ukraine as a state independent of Russia. He has proposed the ending of sanctions before discussions can begin, and insisted on a presidential election in Ukraine, claiming that Mr Zelenskyy is not legitimate because his term of office has expired. (For his own part, Mr Putin sees a democratic election as a meaningless auction in which voters choose whichever candidate makes the biggest promises. He himself is careful to manage elections in such a way that he or his chosen candidate always wins.) Meanwhile, Russia continues to pursue its military targets with the utmost vigour and with its usual disregard for civilian casualties. Mr Trump is ‘angry’ and ‘pissed off’ with Russia’s lack of cooperation, but we have yet to see how much slack he will cut Russia in pursuit of the desired grand bargain.

Ukraine’s allies face the moral question of whether it is right to negotiate with a criminal organisation in order to make peace. This was the choice that faced Tony Blair when negotiating the Good Friday Agreement. He chose to bring Sinn Fein, the political wing of the terrorist IRA, into the talks and eventually brought about a lasting settlement. Here, too, moral scruples should probably be laid aside.

Russia has legitimate security concerns, and no meaningful peace can be achieved without Russian involvement, leaving aside a crushing military victory which would destroy Russia as a negotiating force. The ideal would be a settlement which addresses Russia’s concerns while containing Russia’s wider territorial ambitions.

 

America and China

Containing Russia’s territorial ambitions and China’s will be harder to justify now that America has territorial ambitions of its own. The theme appears to be resources, at least in the cases of Ukraine, Greenland and Canada. Mr. Trump’s pronouncement that the US would acquire Greenland ‘one way or another’, declining to rule out the possible use of force, is perhaps his most radical statement so far. It means that the US no longer explicitly supports the post-war consensus respecting the integrity of sovereign states, whether Greenland remains part of Denmark or becomes independent. It changes the justification for America’s commitment to the independence of Taiwan, from one based on principle, to a pragmatic unwillingness to allow China to become more powerful than it already is, and maybe a concern to protect Taiwan as a crucial supplier of memory chips. With such a pragmatic attitude to sovereignty, it is hard to see how the United States could stay in NATO, and without the United States, the very survival of NATO would come into question.

My generation grew up regarding the 1930s as ancient history. It seems we may be returning to an age in which might is right and all truth is subjective.

 

Is Russia a suitable partner for America in the New World Order?

The two countries appear to have interests in common. One is an autocratic state (one might say a dictatorship) looking to rebuild its empire, the other is moving towards autocracy and has imperial ambitions of its own. The two leaders appear to get on personally. Alliance with America could help Russia to slough off its pariah status and rebuild its international trade. Russia could be a formidable ally in America’s titanic struggle with China.

Europe and its allies would watch such an alliance with deep suspicion. It is hard to imagine trade ties being rebuilt quickly given current levels of distrust, and certainly no right-minded Chief Executive would invest in Putin’s Russia, which has long been a kleptocracy – a place where your assets belong to you until the state decides that they don’t.

Can Russia transition successfully from its present status as a gigantic arms factory? Its economy is ‘running hot’ with interest rates set at 21% to control inflation above 10% and rising. Will it be able to absorb several hundred thousand soldiers returning from the front? Can it cope with oil and gas prices at multi-year lows? Can it resist calls for it to pay for the rebuilding of Ukraine, at a cost of perhaps $1 trillion? Russia has itself been damaged by the war – it has lost around three-quarters of a million troops killed or disabled, and around 10,000 tanks destroyed or captured, likewise 20,000 armoured vehicles, 22,000 artillery systems, 1,200 multiple launch rocket systems, 370 planes, 330 helicopters, and 30 warships including its flagship the Moskva. Would Russia use peace to rebuild its armaments, or to make the lives of its citizens a little bit less grim?

Despite its vast size, Russia’s economy is smaller than that of Britain.

How secure is Mr Putin? He would be vulnerable unless he could end the war with tangible gains, a result which seems far more likely given America’s new priorities. There is nothing to stop a dictator from living to a great age – Robert Mugabe of Zimbabwe died peacefully aged 95 – but there could be conspiracies against Mr Putin, which by their nature would be kept very quiet.

While Putin remains in power, he remains a threat to Europe and the Near East – especially Ukraine, Georgia, Moldova and the Baltic states. Poland is arming itself rapidly against a potential invasion. Britain is in the crosshairs too – Russia sees it as isolated from both Europe and the US, and as such a likely candidate for destabilisation. A US/Russia alliance looks like the nightmare scenario for Europe. I imagine it is one that is being discussed very seriously at the moment.

A US/Russia alliance could be a very clever move to draw Russia’s poison as a terrorist state. Equally, it might be of limited use to America, while being a very hot potato that would complicate US/Europe relations still further.

 

Israel and the Arab World

Mr Trump’s proposal to turn Gaza into a US-controlled coastal paradise is entirely speculative. It is unlikely that Gaza’s neighbours would entertain the idea of absorbing two million reluctant refugees. Furthermore, Mr Trump’s Middle East strategy aims for a truce between Israel and Saudi Arabia. As in Ukraine, success would require the reconciliation of two irreconcilable positions. Saudi Arabia correctly sees the establishment of Gaza as a state (the ‘two-state solution’) as being the only workable long-term outcome, while Mr Netanyahu’s Israel refuses to entertain the idea. It’s hard to imagine a quick fix in this situation.

Debt

In our anxious New World Order, governments are accelerating programmes to defend their countries against attack both physical and cyber. The problem is, no one has any money, indeed most developed-world governments are critically indebted.

The UK, for example, had a relatively modest government debt to national output (GDP) ratio of 34% at the end of Tony Blair’s first ‘austerity’ parliament, but that was before the bailout of the banks in the Financial Crisis, spiralling welfare spending, Covid and the energy crisis. Today’s debt-to-GDP figure is 97%.

The UK is not alone. France’s debt-to-GDP ratio is 111%, America’s 123%, Italy’s 138%, and Japan’s an eye-watering 216%.

Governments, it seems, can always manage to borrow a bit more money, but the riskier a borrower becomes, the more interest the lender demands, and eventually there comes a point where no lender can be found. That no major country has gone bankrupt yet doesn’t mean to say that it couldn’t, and the IMF can’t bail out everyone.

Angela Merkel once remarked that Europe has 7% of the world’s population, 25% of its economic output and 50% of its welfare spending. Everyone agrees that a social security net is an essential part of any civilised society, but high and rising levels of government debt tell us that, with wealth inequality growing everywhere, it isn’t possible to run generous benefit systems and under-tax the richest 1%, while ratcheting up defence spending.

 

It isn’t all about Donald Trump

The new US President is adept at monopolising news headlines, and while he does so, we don’t get to hear about other issues, which remain as important as they ever were. One is climate change, an issue which won’t disappear, regardless of who happens to deny its existence. The world should have begun to respond to this crisis at least two decades earlier than it did, but the process has momentum now, and is likely to continue, while extreme climate events will continue unabated –in the UK for example, following the drought of 2022, we have had thirty months of abnormally high rainfall, followed by another emerging drought.

Another major concern is the inexorable growth in the number of failed and failing states, and the commensurate growth in migration. Rich nations welcome manageable numbers of skilled workers and aim to filter the others out, with only limited success. This situation will evolve over the next decades as the growing stream of migrants becomes a river.

Meanwhile, birth rates have fallen dramatically across the developed world, to the point where it is virtually impossible outside Africa to find a country with anywhere near a replacement birth rate. On current trends, China’s population will halve over the next 50 years from 1.4 billion to 700 million. Will it be possible to match the needs of the migrants with those of the declining populations?

The thoughts of a private investor

I’ll say it here – this article is not intended as financial or investment advice, and these are literally the private musings of a private investor.

I’m certainly not a contrarian investor – someone who looks at what other people are doing and then does the opposite. Instead, I think of myself as a value investor – someone who likes to own assets when their prices are below what I consider to be their fair value. But you don’t often find the best value in the most popular investments, which is, I suppose, why I often find myself on the wrong side of the consensus.

The UK has been an unpopular investment destination for many years now, particularly since the Brexit vote in June 2016, which was viewed by many overseas investors as an act of political self-harm. Years of political turmoil followed. Then Covid, a bout of inflation, the Ukraine war, the cost-of-living crisis and the mercifully short-lived Premiership of Liz Truss, another melt-down the following year caused by nothing in particular, the General Election, an ill-advised Budget and the return of MAGA to the White House. The result of all the above – the FTSE-100 index of leading shares is a pathetic 18% above where it ended the last century.

Being an investor in UK assets has been no fun at all, except in short periods, ever since the Financial Crisis almost two decades ago. The UK stock market has shrunk to just 4% of the world’s stock market by value – easy to ignore when there are such easy returns to be made in the US and in Bitcoin.

In the UK, advisers have started saying that investors shouldn’t bother with the UK either – when we are already living here and owning property here, why put all our eggs in one basket? Far better to spread the risk by investing overseas. I do the opposite. Having lived in the UK all my life, I feel I know the UK, its people, its laws, its regions, its strengths and weaknesses, better than I know anywhere else – and therefore am less likely to make mistakes when investing in my home market. And the UK is cheaper than I have seen it in my 41 years as an investor. When we think of the UK, we tend to think of our politics. We have had a series of weak leaders, and there is much that is unsatisfactory and needs to be addressed. We also have world-class companies, both larger and smaller. It’s the companies we’re investing in, and not the government.

When looking at a boat in sunny weather, we have to imagine how it will handle at night in a raging sea. Investing is no different. We have had our fair share of raging seas in the last few years and plenty of opportunity to see how our shares have performed. It has to be said, not all have come through intact, but most have, and they are now stronger, slimmer, and much, much cheaper.

When looking to invest in a company, the overriding question is Can I trust this company to survive? I ask Do I understand what it does? No, do I really understand what it does? Has it been operating long enough to establish a meaningful record? Is the company following a sensible strategy that evolves from one year to the next, rather than flip-flopping from one thing to another? Is the management team talented, experienced and stable? Is it vulnerable to changes in fashion? Above all, what does the balance sheet look like? The balance sheet tells you how prudent the managers really are, rather than how prudent they might say they are. A balance sheet with a lot of debt and no cash is risky, while one with a lot of cash and little or no debt is safe. A company with a proven business model, able and prudent management and a cash-rich balance sheet is likely to survive almost anything.

When investing in funds, I look for managers who think the same way about the assets they own as I do.

I don’t enjoy these sharp sell-offs, like the one we saw after ‘Liberation Day’. I don’t enjoy losing money any more than anyone else. But at these times, we can learn a lot. I imagine myself as a mouse that’s trapped in the claws of a cat. I am passive but highly alert, because the market movements tell me what investors are really thinking. On a day when the market goes down 2%, some things go down 4%, and others don’t move. Next day, if the market goes back up 2%, the relative movements are different. While the mouse is looking for the moment to escape as the cat’s attention wanders, I’m looking for opportunities to buy the goodies that have been priced out of my reach hitherto. I’m also looking for signs that any of my trusted assets show signs of weakness under the stress of the current crisis. Each crisis is a new learning experience, and I am learning to enjoy them.

There is a ray of hope for the UK, especially in the event of a trade deal with the US, and if the Bank of England finally decides that recession is more of a threat than inflation and lowers interest rates. Keir Starmer might emerge as a leader of leaders, as Mrs. Merkel once did.

It may be that the world situation becomes so bleak that there’s no choice but to raise cash and wait. But that hasn’t happened yet. For now, I’m fully invested in some excellent and very cheap UK assets.

 

Tony Yarrow

April 2025

Please note – this article contains the personal opinions of Tony Yarrow, a private investor. They may not be aligned with the investment policy of Wise Investment and are, in any case, not intended as financial or investment advice.

Sources

The Economist. The Financial Times. The Guardian. The Wall Street Journal. The New York Times. Wikipedia. The BBC. Interviews with defence analyst Michael Clarke on Sky News. Various websites. All of the facts and figures in this article are publicly available, and I have done what I can to check them against each other.