Sunday, February 27, 2022

Cold War Equals Cold Markets

 Russia’s invasion of Ukraine is the first salvo of a New Cold War. It is Russia’s direct challenge against the global preeminence of the US and, one way or another, it is joined by China.

Western economies are based, almost 100%, on consumer spending. But the New Cold War will immediately require massively increased government spending on everything from personnel and armaments to spy satellites and foreign aid.  Meaning: sharply higher taxes and sharply lower private spending.

Do the math for corporate earnings, multiples, and share prices.

UPDATE: Germany just announced it is raising its defense budget by almost 50% from 1.40% of GDP TO 2.0%.  

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