617: North Korea - US Positioning for War - and Inflation
More objective guidance and insights for property investors. Our aim is to help you improve your investment returns, flag key risk areas and stimulate strategic thought so you can position your portfolio to maximize gain, for our five thousand website visitors a day and the thousands of people signed up to your Newsletter. This Newsletter cover two key topic:
1. North Korea and the threat of war with USA
2. Inflation in the UK
North Korea and the threat of war with USA
Appeasement? You might think this issue has gone away all gone quiet and the Winter Olympics led to some form of appeasement and reconciliation. This regrettably could not be further from the truth.
War on the Horizon: Lets be blunt about this. There is absolutely no way Trump and the Republicans will allow North Korea to have intercontinental ballistic missiles capable of deploying nuclear warheads. From all the tests and evidence it looks like Kim-Jong is very close now. He has probably calculated that if he gives up his nuclear weapons the USA will be able to overthrown him some form of invasion. His only solution to remain in power is to continue the nuclear programme so he cannot be threatened anymore. The US concern of course is that Kim-Jong will have the ultimate bargaining tool and be able to threaten the USA with impunity. Because they consider him an unstable and dangerous dictator that eradicates any opposition he has they are very concerned about him achieving nuclear missile capability.
Collision Course Recruiting for War: Regrettably this looks like a collision course and is exactly how wars start. We think some time in the next 6 months, mostly likely before August Trump will try some form of eradication of the North Korean nuclear threat. Do not underestimate the US resolve on this one. We think this is one reason why Trump recently replaced Tillerman (who is a peaceful businessman) with the head of the CIA. Trump also seems to be positioning for war in the form of starting a trade war with China with 25% tariffs announced 22 March. Trump appears to have lost patience with China on how they are influencing or failing to positively influence Kim-Jong. Around 23 March Trump then replaced his National Security Adviser HR McMaster with the very dangerous John Bolton who was the person that helped send the US to war against Iraq. Bolton is a proponent of unilateral pre-emptive strikes. Firstly this signals the end of the Iran nuclear deal. Then very aggressive actions against North Korea and Iran we think starting in May.
Electro-Magnetic Pulser and Cyberattacks then Missiles: We think the most likely outcome is Trump tries a shock and awe in North Korea some form of electromagnetic pulsing attack over the whole of the North Korean country that knocks out all electronic devices along with a simultaneous cyber attack on all computers then some form of targeted bombing of Kim-Jongs nuclear and military installations. The obvious threat is that Kim-Jong manages to successful launch some of his remote launch missiles and/or tries to mount an invasion of South Korea or fires a short range dirty nuclear device or gas attack. The North Korean conventional military machine is mighty the country has a huge number of submarines for instance and a million soldiers so if these are successfully mobilized in a coordinated fashion, the war could be awful with regard to civilian casualties.
The reason why we mention this is that we believe the world expects a peaceful resolution to this threat more of the same. But we dont think this is going to happen. We think there is at least a 70% chance of a significant war soon most likely in the next six months well before this coming winter. This would have a dramatic negative impact on the global economy, economic activity and confidence.
Bad Combination: We have Trump, Putin and Kim-Jong what a combination. In World War ii we had Stalin, Hitler and the Japanese Emporer three mad men. Now we have three new mad men one particularly mad Jim-Kong who knows all the history of the North Korean hate towards the USA from his father that goes back to the Korean war70 years ago. The previous US Administration did nothing to curtail Kim-Jong and as soon as he is 90% of the way to developing a viable intercontinental nuclear capability that threatens the USA the USA highly likely to take him and his capability out. This time dont expect the USA to seek UN approval for their actions if they believe there is a major military ever present threat or danger to US soil they will act unilaterally. The bottom line is they dont want Kim-Jong holding Los Angeles or any other US city to ransom. Jim-Jong is not likely to back down. We think the only reason why Trump will meet Jim-Jong is to tell him face=to-face - if he does not back down and destroy his nuclear missile capability, then the USA will destroy him and his capability first. The meeting will not be about peace it will be the threat of war. Lets just hope Kim-Jong backs down and/or there is no outbreak of war with North Korea particularly in view of potential massive numbers of casualties.
2. Inflation in the UK
The second part of this Special Report covers inflation and why it is so important.
Inflation all the way: We have a view that the UK governments and governments in general - will always print currency and inflate economies the currency will be worth less but prices will always rise in the UK in the long term and since there will always be shortages of UK supply of properties because building levels run at around 155,000 a year whilst demand needs to be around 330,000 units. As currency is printed you need to own hard assets things you can touch and feel like property (bricks and mortar), gold-silver, oil or artwork. People have known this for centuries dont expect to retain any wealth if you dont buy hard assets. Wealthy people use cheap currency the printed new currency to purchase hard assets that then normally inflation in price and hence the debt in real terms drops. Western developed economies are in such a state and the levels of debt are so high that the only way to pay the debt back is to print currency and debase the value of the currency. Because the rich own the assets they are protected. The poor will get poorer because food and services plus rental prices rise. Government try and reduce the impact on poor people by taxing the middle classes at ever increasingly high levels. As long as people own properties they are normally protected from the ravages of inflation and to a lesser extent taxes of course the government has massively increased stamp duty and buy-to-let landlord taxes to squeeze back as much as they can, but any more and no-one will want to build any homes so they need to be careful.
To get wealthy and avoid the ravages of inflation, you need to avoid spending money on expensive holidays, and expensive cars that depreciate fast and stuff that is worth less as soon as you buy it. Instead, leveraging up and buying property then having a positive cashflow and having the tenants help pay the mortgage is a good strategy in the inflating world we live in in the UK.
Remember the average property price was:
£1500 in 1950
£5000 in 1965
£15000 in 1975
£60000 in 1990
£150000 in 2000
£300000 in 2017
Assets are King: We think property prices will average around £600000 by 2035 simply because the Bank of England has a target to create inflation and they will always do this by printing currency if it does not happen naturally through business growth. They like to print currency to give the illusion of growth. Hence very long term even if Labour get into power as long as the overall economy does not implode long term then we would expect to see house price inflation. Building costs would rise, all costs and wages would rise but property prices would have to rise eventually unless the tax increases were so draconian in a way like they are in Venezuela that property prices stayed permanently depressed. But we cant see the UK population putting up with this for more than 4 years before a Tory government came back into power to clear up the mess again.
Disciplined Spending: So if you ae young and starting out it is very important to try and stay disciplined with your spending save as much as possible, avoid expensive holidays, expensive cars live in cheap rented accommodation and then you will eventually be able to afford to buy a cheap property. Once you own a property and you need to may be live in not such a nice flat or not such a nice area you can do the property up see prices rise then trade up. Many young people throw the towel in as soon as they leave college with large debts and end up living in a nice big flat on their own in a nice area spending all their money on this and expensive holidays the complain they will never be able to afford to buy their own homes. Very defeatist. You need to rise above this, and you might also get lucky and find the government scraps student loans even the Tories may do this to win votes before the next election. Dont let a student loan get you down long term it should not be significant also because inflation will reduce the size.
We hope this Special Report has given you some good insights. If you have any queries, please contact us on