The Computomatix Times

I will start off by wishing you well in these challenging times and by saying that the picture I paint in the following observations is not the picture I wish to be true; it is the picture that I believe to be true based on what I have learned and what the indicators that I use to objectively see things now suggest is true.
As a global macro investor for over 50 years who has needed to study all things that affected markets over the last 500 years to know how to deal with what’s coming at me, it appears to me that most people tend to focus on and react to the attention-grabbing things that are going on at the time—like what is going on with Iran now—and miss the much bigger, more important, and longer-term-evolving things that are driving what is going on and what is likely to happen. For today, that is most importantly that the US-Israel-Iran war is just part of a world war that we are in and that isn’t going to end anytime soon.
Certainly, what will happen with the Strait of Hormuz (most significantly, whether control of passage through it will be taken away from Iran and which countries are willing to spend how much blood and treasure to make that happen) will have many enormous repercussions all around the world. There are also the issues of whether Iran will still have a capacity to inflict harm on its neighbors with missiles and the threat of nuclear weapons, of how many troops the US is sending and what they will do, of the cost of gasoline, and of the upcoming US midterm elections.
All these near-term issues are important, but they lead people to miss the really big, even more important things. More specifically, because most people tend to have this short-term perspective, they now expect, and the markets are pricing in, that this war won’t last long and that when it ends we will get back to “normal.” Virtually nobody is talking about the fact that we are in the early stages of a world war that isn’t going to end anytime soon. Because I have this different perspective, I will now explain it.
Here are the really big things going on that I think we need to pay attention to:
1. We are now in a world war that isn’t going to end anytime soon.
While this sounds like hyperbole, it is indisputable that we are now in an interconnected world that has a number of shooting wars going on (e.g., the Russia-Ukraine-Europe-US war; the Israel-Gaza-Lebanon-Syria war; the Yemen-Sudan-Saudi Arabia-UAE war that also involves Kuwait, Egypt, Jordan, and other related countries; and the US-Israel-GCC-Iran war). Most of these wars involve major nuclear powers, and there are also significant non-shooting wars (i.e., trade, economic, capital, technology, and geopolitical influence wars) that most countries are in.
Together, these conflicts make up a very classic world war that is analogous to past “world wars.” For example, past “world wars” consisted of interrelated wars that were generally slipped into without any clear start dates or declarations of war. Those past wars combined into a classic world war dynamic that affected them all, as is happening with the current wars. I described that war dynamic in detail in Chapter 6, “The Big Cycle of External Order and Disorder,” of my book Principles for Dealing with the Changing World Order, which I published about five years ago, so it’s there if you want a more comprehensive description. That chapter covers the arc of what we are seeing happen and what is likely to happen.
2. Understanding how the sides are lining up and what their relationships are is very important.
It is quite easy to see objectively how the sides are lining up via indicators such as their treaties and formal alliances, their votes at the United Nations, their leaders’ statements, and their actions. For example, one can see how China is aligned with Russia and Russia is aligned with Iran, North Korea, and Cuba, and how that group is largely opposed to the United States, Ukraine (which is aligned with most European countries), Israel, the GCC states, Japan, and Australia.
These alliances matter a lot in imagining how things will go for the relevant players, so they need to be considered when observing what’s going on and what’s likely to happen. For example, we see this reflected in China’s and Russia’s actions at the UN on Iran needing to open the Strait of Hormuz. Similarly, as another example, while it’s said that China is particularly harmed by the closing of the Strait of Hormuz, that is wrong because China’s mutually supportive relationship with Iran will probably allow oil going to China to get through, and China’s relationship with Russia will ensure that China will get oil from Russia. China also has a lot of other energy (coal and solar) and a huge inventory of oil (about 90-120 days’ usage). Also noteworthy is that China consumes 80-90% of Iran’s oil output, which adds to the power of its relationship with Iran. All things considered, it appears that China and Russia are the relative economic… continue on X ↗