Insights and Market Perspectives
Donald Trump’s Greatest Crisis
Author: Greg Valliere
September 17, 2019
TRUMP HAS ALREADY IGNITED A FIRESTORM IN WASHINGTON by stating that he will wait to see what the Saudis want him to do. His fawning to the Saudis apparently has no limits, which infuriates members of Congress (in both parties), many of whom howled yesterday that the Saudis should take care of the problem and not dictate U.S. military action. And besides, many said, billions of dollars in weapons sold by the U.S. to Saudi Arabia should be sufficient to thwart the Iranians.
TRUMP’S TWO VERY BAD OPTIONS: First, he could take the advice of hawks like Sen. Lindsey Graham and launch air strikes on Iranian oil fields and military installations; these targets were already identified by the Pentagon in June, when Trump called off strikes at the last minute. The problem: air strikes almost certainly would escalate hostilities, and Trump doesn’t want to get bogged down in a Mideast conflict ahead of the 2020 campaign.
THE SECOND BAD OPTION is to do nothing or very little. Trump quickly backed away from his boast on Sunday that the U.S. is “locked and loaded.” He said yesterday that there’s no rush, he doesn’t want a conflict, etc. This is why John Bolton left — he knows that Trump’s instinct is to blink. That sends a terrible signal to U.S. allies and adversaries, who wonder about America’s resolve. Even Barack Obama lobbed an occasional air strike at terrorists.
TRUMP APPARENTLY FEELS THAT he can convince any despot, from North Korea to Iran, to soften and cut a deal once he gets them in a one-on-one setting. And he feels inoculated by a defense budget that is approaching $750 billion annually. But huge defense outlays can’t always thwart small countries and rebel groups, which can inflict enormous damage with drones and cyber-warfare, neither of which costs as much as an aircraft carrier.
THE KEY FACTOR: Iran, crippled by sanctions, is itching for a confrontation with Saudi Arabia and the U.S. Fanatic Revolutionary Guard militants — and their proxies throughout the Mideast — want a fight, which Iran’s leaders believe will result in Western economic disruption and an eventual truce that could jump-start negotiations to ease the sanctions on Tehran.
THE IRANIANS THINK, CORRECTLY, that Trump is eager to bargain; he would have accepted a meeting with them at the United Nations next week — without conditions, he said — but the Iranians aren’t ready for that yet.
MANY WARS — WORLD WAR I IN PARTICULAR — began after miscalculations set in motion events that spun out of control. Trump, typically erratic, has tipped his hand — he now says he doesn’t want to fight. But the Iranians do, and they have absolutely no desire to negotiate now. More drone and missile strikes are probable, and there’s a growing risk that this crisis will get worse before it gets better.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.
