The GAME

For the last 200 years global stock markets have risen and fallen on the geopolitical fortunes of the Anglo-Saxon Superpower(ASS). The first ASS was Britain. At the end of the 19th century the British Navy and colonial armies controlled 87% of the Earth's surface. Alongside its physical empire of colonies Britain had a military empire of alliances with the advanced armies of Canada, Australia, New Zealand, and the two Boer Republics in South Africa, plus it could pull almost limitless quantities of superb native troops out of India. Queen Victoria handed out colonies to her grandson Kaiser Wilhelm, ruler of Germany, as Christmas presents. Earth had a one world government devoted to free market capitalism. The only thing that could shatter this stock market paradise was a civil war within the ranks of Britain's military empire. That is exactly what happened.
At the dawn of the 20th century Britain attacked its two strongest allies, the Boer Republics. This would be like America today attacking Canada and England. The physical British empire emerged intact from the Boer War, but Britain's military empire was mortally wounded. The result was two world wars and bear markets in Europe that lasted for 60 years or more.
A global secular bull market only returned when the second ASS arose, America. Today's ASS has the same vulnerabilities as the original one: decay in its global military alliance structure, which I call the GAME. In yesterday's blog I mentioned the treaty between Egypt and Israel facing a potential threat. That treaty is a linchpin to the GAME.
The US Congress is spending $7 billion to take power away from the Pakistani Army and channel it into the corrupt Pak civilian government. This is hurting the GAME and is one of the reasons why the Pak Army is not attacking the Taliban full throttle anymore. The Congressional policy is bearish for stocks. On the other hand, the White House has managed to restart Pak/India peace talks. This helps the global alliance structure and is bullish for stocks. If India and Pakistan were to hammer out a treaty, then they would both automatically become much more closely allied with the US and eventually they would become allies with each other as Egypt and Israel are today. If Pakistan then defeated the Taliban on its own soil it would be well placed to send troops overseas to help in the Long War, as South Korea does today.
Let me give one last example of good news for the GAME: The defense minister of Germany is pushing to eliminate its big sloppy conscript army and rebuild a smaller more lethal all volunteer force that could then be used in Long War hot spots around the globe. This is unpopular in Germany but the US is letting Germany pull 100% of its troops out of Afghanistan and is pushing for reform.
The overarching point is this: What's good for the GAME is good for stocks.