Why Geopolitics is More Important Than Ever

Guest post: A proactive approach with Tuttle Ventures

By Darin Tuttle, CFA .

Hey Guys,

This is a Guest post by?Darin Tuttle.

Here are some of his recent posts that I enjoyed:

• Bonds Never Lie
• How to invest in a tough economy

Check out Darin’s?Newsletter:?Tuttle Ventures Newsletter: (what follows is the Substack link)

Tuttle Ventures Newsletter

We invest so you can do the rest. Actionable market insights with unique ideas and interesting research to make you a better investor.

By Darin Tuttle

• What is Geopolitics?
• Why Geopolitics is now more important than ever
• A proactive approach
• Final word

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What is Geopolitics?

"Geopolitics is ultimately the study of the balance between options and limitations. A country’s geography determines in large part what vulnerabilities it faces and what tools it holds." —Peter Zeihan, The Absent Superpower

As a young kid, I remember playing Risk, the popular Hasbro board game.

In the game of Risk, the goal is simple: players aim to conquer their enemies by building an army, moving their troops in, and engaging in battle across the known world.

Over a Sunday afternoon — diplomacy, conflict and conquest played out among friends with the roll of a dice.

This fictional board game also plays out in real life across company executives, traders on Wall Street?and political leaders — who are not quite as friendly.

The textbook definition of Geopolitics is the study of how geography influences the international policies of nations.

In practice, Geopolitics can trace its historic roots back to the principles of military strategy. Whether by land, sea, or air; the tactics and strategy of a nation's military and political leaders allowed great empires to be built and profits to be made.

Geopolitics has real-world implications for an investor's bottom line.

Understanding global affairs and history did not matter much to investors before 1985, until now.??

Why Geopolitics is now more important than ever

To understand the rise of geopolitics, one must first understand why and how globalized power is so closely tied to financial markets.

*Multinational corporations have entered the chat.*

According to the?World Federation of Exchanges, there are some 60,000 Multinational corporations worldwide, controlling more than 500,000 subsidiaries. They are responsible for half of all international trade.

If Facebook were a country, it would be substantially bigger than China. The size of Facebook's user base translates to almost two in seven of the global population using it each month - around 1.9 billion people.

The rate of technological change has always been greater than the rate of human adaptability.

Geopolitics affects every global organization, from strategy to supply chain.

How we deal with the politics and affairs of other countries as an investor really only has two options: proactive or reactive.

The war in Ukraine is a perfect example of the importance of a skillfully crafted Geopolitical strategy and the stark differences in a proactive or reactive approach.

Did McDonald's ever assess the disruption and the impact the war in Ukraine would have on their business?

The truth is —many companies struggle to assess and manage affairs that are outside their home country.

A proactive approach

“An Ounce of Prevention Is Worth A Pound of Cure.”- Benjamin Franklin

Entrepreneurs, market participants, and central bank officials view geopolitical risks as key determinants of investment decisions and stock market dynamics.

In a Gallup 2017 survey of more than 1,000 investors, 75 percent of respondents expressed worries about the economic impact of the various military and diplomatic conflicts happening around the world.

As a portfolio manager and value investor, I have often taken a proactive approach to Geopolitical risks.

George Friedman, the author of The Next 100 Years, has had the biggest influence on me as an investor.

Understanding the major players and political forces allowed investors and newsletter subscribers with?Tuttle Ventures?to be prepared for supply chain disruptions in the fertilizer industry?Don't Hate on Phosphate?and a shift in energy markets?Back to the Future: Investing for a transformation in Energy and the Monetary System.

Just like multinational corporations, everyday investors may find it difficult to know which Geopolitical risks to prepare for and which they can ignore.

To fill that gap, companies like Stratfor, Blackrock, and Ernst and Young now have entire Geostrategic Business Groups which help companies translate geopolitical insights into sound business strategies.

These companies design and build a geopolitical framework which focuses on how human geography and international affairs play out across history, current affairs, and the distribution of potential outcomes.?

In contrast to a proactive approach, a reactive approach is one that only responds to events after they have happened.

This was the case for many investors during the Arab Spring uprisings in 2010-2011 and the European debt crisis in 2012.

Many did not know how to react when these geopolitical forces came into play outside of their control and sold at a loss on their investments.?

Be prepared.

Final Word

If the last year has taught investors anything, it is that high geopolitical risk leads to a decline in real activity, lower stock returns, and movements in capital flows away from emerging economies.

To understand the impact on your portfolio- we would recommend hiring a trusted partner with the experience to provide unique insights and a second opinion on risks that you may not be aware of.

With the help of a trusted financial advisor, you as an investor can make sense of the world with confident proactive investing decisions.

If you would like to learn more about how we can help you achieve your financial goals you can visit?www.tuttleventures.com.?

Best,

Darin Tuttle, CFA

Founder and CIO of Tuttle Ventures

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Important Disclosures?

NOTE - This is not investment advice. Do your own due diligence. I make no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information contained in this report. Any assumptions, opinions and estimates expressed in this report constitute my judgment as of the date thereof and is subject to change without notice. Any projections contained in the report are based on a number of assumptions as to market conditions. There is no guarantee that projected outcomes will be achieved. Unless there is a signed Investment Management or Financial Planning Agreement by both parties, Tuttle Ventures is not acting as your financial advisor or in any fiduciary capacity.