Starting today, my weekly column is moving from Saturdays to this Monday slot; Larry Edelson will be here on Wednesdays; and the rest of our team will continue in their regular days, as before.
The main reason: With so many divergent — and powerful — forces unfolding in the world today, we feel, this is the least we can do to help give you the clearest guidance.
And that’s especially true for one of the greatest forces driving global money transfers today: Fear of spreading wars and conflicts. Because …
When investors are frightened, they move their money; and the scarier it gets, the faster the money moves.
Right now, for example, even though I’m on the other side of the world and the conflicts are many thousands of miles away, I feel threatened by the horrors in Syria and Iraq, and I imagine you do too.
Well, imagine how you’d feel if you lived somewhere in or near the area?
Put yourself in their shoes.
You wake up in the morning. You turn on your TV. You see the news about the ISIS terrorists taking over city after city. And the words roll off your lips in slow motion: “Oh … my … God!”
You rush to your wife or husband, and you say: “We’ve got to get our money the heck out of here. We’ve got to get our family the heck out of here. We’ve got to find a way to get our grandchildren and all their cousins out. Fast!”
I know. Because I’m in contact with middle and upper class families in the region all the time — via Skype, Facebook, WhatsApp, Viber, WeChat, iChat, and more.
In a moment, I’ll tell you where they’re moving their money. But first, I want you to hear the stories of three families in the Arab world — as I’ve heard them — and as I interpret them in the context of the latest news.
Voice from the Maghreb
One family is in Morocco, the Maghreb region of North Africa. Although it’s a country among the most stable and most distant from the troubles in the rest of the Arab world, it is not far from some of the worst turmoil.
“We’re the lucky ones,” says my friend who lives in a suburb of Casablanca.
“We have a multi-cultural, multi-religious, society. We have Muslims and Christians working and living together in peace. We have good relations with Israel, the E.U. and the U.S.
“But still, we’re deathly frightened by what’s happening. Algeria, is our neighbor. It virtually surrounds us from the East and the South. Its government threatens our borders, and its terrorists threaten its government. In fact, your State Department just issued a new travel advisory for Algeria. They say there’s a high chance of terrorism and kidnappings there. So ‘don’t go,’ they warn.
“But around here, whenever we say Algeria is bad, someone always reminds us that Libya, which borders Algeria to the East, is much, much worse. In fact, from here, at the Western end of North Africa, it seems that the further we move to the East, the greater the danger. I have never gone that way, probably never will. If we move, it will be to Europe, maybe Barcelona, Spain. In the meantime, we’re acting swiftly — to at least get all our family’s liquid assets away from here.”
My Friend in Egypt
Nearly 2,200 miles to the East, near Alexandria, Egypt, another Internet friend is equally frightened — but for a very different reason.
“I’m not worried about terrorism in Egypt right now. I was before, but not anymore. For now at least, the new military government has thoroughly smashed the Islamists.
“Sure, we all know that not all Islamists are terrorists. Only a minority is. But the fact is there are some terrorists among them. They’ve been defeated for now. But what we’re beginning to fear is the next round of revolution. You see, although we do have security now, the price we pay for the security is extremely high. It’s a brutal military dictatorship. And we fear that the brutality of our government and of our courts is going to lead to a new, even more brutal revolution.
“Is this a problem for me and my family today? No. We now enjoy the fact that we can go out at night and feel safe. But we know that there are millions of Islamists in this country who don’t see it that way. We know many of them personally. We know they’re seething. Some of them, especially among the youth, are going to rise up again. They’re already trying to do so.
“Egypt is a giant pressure cooker that’s going to explode. Before that happens, we must get our family fortune away from here — as fast and as far away as we possibly can.”
Lost Family in Iraq
The third family was in Mosul. But they’ve disappeared from the Internet. I can’t find them on Skype or Facebook. And they don’t respond to my emails.
I’m afraid to guess why.
Mosul was a modernizing city with a sizable, Western-oriented middle class. The son whom I spoke to regularly was a computer programming teacher at a prominent Mosul university, and I helped advise him on Master’s degree opportunities abroad. The father traveled extensively around the world for business and pleasure.
But then, just last month, Mosul fell. The richest, most well-armed, most powerful — and most BRUTAL — jihadist organization in the world, ISIS, took over their city and converted it into the de-facto capital of their new “Islamic State.”
In their zealous frenzy, ISIS set fire to Mosul’s 1,800 year-old church.
They bulldozed at least six Shiite mosques and even destroyed Sunni shrines that did not conform to their own narrow concept of Sunni Islam.
Where did the family go? I don’t know, and that’s what worries me.
|1,800-year-old church burned down last month by ISIS in Mosul, Iraq.|
Regardless of their religious background, the ISIS terrorists gave Mosul residents three possibilities: Flee, convert, or die. And not everyone got to choose.
Fortunately, today, the U.S. is finally responding. Thanks to U.S. airstrikes, Kurdish and Iraqi special forces have retaken the Mosul Dam — the same dam which I told you about here two weeks ago (before it was prominently on the White House’s radar screen).
Unfortunately, though, retaking a dam in an unpopulated area is one thing. Taking back Mosul, with its nearly two million people, is going to be another matter entirely. It’s impossible to bomb the city without massive civilian casualties. Nor is it feasible to mount a head-on attack by land. Dislodging ISIS from the city is going to be next to impossible any time soon.
|Shiite Mosque, bulldozed by ISIS, also in Mosul.|
And yet, Mosul is a large metropolitan area that ISIS is mining for tremendous sums of money and potentially tens of thousands of new recruits. It’s a base of operations for ISIS that’s a hundred times more powerful than any base that Al Qaeda might once have had in the remote regions of Afghanistan.
Now do you understand why so many people in the region are so frightened?
How can we fight back? This questions matters. It’s something the White House is finally beginning to worry about. And it’s about time.
But it’s the next big question that most investors are asking:
Where Is the Money Going?
The money these three families have moved — or are moving — is not huge. But if you multiply those sums by the millions of families in a similar plight, it adds up to serious money. And if you add the funds moved by the thousands of super-rich families in neighboring OPEC countries, the numbers begin to get large indeed.
I will leave it to Larry to give you more details on Wednesday regarding the impact this money is having, or could have, on financial markets around the world. And I’ll leave it to Mike to give you specs on Friday about one particular sector in the United States that’s benefiting.
Right now, suffice it to say that this money — and other flight capital from around the globe — is too large for illiquid, thinly traded investments or for niche markets. Most of it is looking for havens that are in:
- Distant, safe, militarily strong countries …
- Broad, deep, actively-traded markets …
- Big, Steady-Eddy companies and institutions, plus …
- Investments that are good hedges against crisis.
That’s one reason why the U.S. stock market has been strong.
That helps explain why the U.S. dollar has been rising sharply.
That’s another reason to like gold.
And that’s also why even U.S. Treasuries, despite their historic low yields, are still being bought in large amounts.
How long will this continue? Which markets stand to benefit the most?
Stand by. We’ll start giving you more answers this week.
Good luck and God bless!