All Talked Out?

By Peter Tchir of Academy Securities

This is not something I can say every day, but I feel “all talked out.” 

We just concluded our annual Annapolis Geopolitical Summit. Turnout was amazing as the summit grows year after year. We covered a range of topics, with not only our Generals and Admirals (ret.) contributing, but also the influence from our former CIA officers and some of the industry specialists who participated in the summit was keenly felt. Clients were also able to share their insights.

Prior to the summit, I had the pleasure of having dinner in DC with the Under Secretary of War, Tony Tata, which was incredibly interesting.

I’m on my way to Toronto to take my father to watch the Blue Jays play the Yankees. Then off to Chicago and Milwaukee as we have numerous meetings and events planned. A really exciting time here.

So Many Narratives

If you missed last weekend’s Meandering Through the Narratives, that is worth a gander. We covered the i-shaped economy. Something we think will gain traction as being more “accurate” than either the K or k-shaped economy.

Russia’s frozen € reserves. That is the new twist as the administration (and potentially Europe) ramps up their pushback on Putin. This could be a pivotal moment for Europe (and the bond market).

A few of the topics deserve a bit more time.

Peace Through Strength

Peace Through Strength remains a theme. Our GIG (Geopolitical Intelligence Group) had a lot of thoughts on the 10-points announced in Quantico on Tuesday and the overall messaging. I think we are all digesting it, but my quick takeaways were:

• Some GIG members who I thought would have been against much of what occurred, were not, and vice versa.
• The points listed, in and of themselves, were not overly controversial.
• One risk, that was pointed out multiple times, is that while physical fitness, etc., is important, much of what drives a modern military is “brain power” and we would be remiss to create a culture that pushes out brain power. Nothing in particular happened on that front, but it is something to think about.
• While a “corporate rebranding” comparison remains valid, maybe some of the messaging and tone was possibly “more aggressive” than necessary?
• There was little support for the “enemy within” tone as the GIG, collectively, views the military (from senior officers to the lowest ranking soldier) as working together for the good of the services and the country.

ProSec

Production for Security. You might be surprised by how many tickers are being thrown at me. Every day it seems (because it probably is every day) that someone is sending me a new ticker to look at as a candidate for what we have been calling ProSec™. In last weekend’s report we wanted to make it clear, that yes, like many, we have concerns about longer-term ramifications and would like to see governance issues more clearly defined, but for now, keep investing on the basis of this admin taking new approaches to jump-start technologies and industries deemed critical to national security (which can also be described as critical to preparing for trade negotiations once again with China a couple of years down the road).

It is fun to watch (and fun to learn about) as these tickers are tossed our way, and also fun to profit from this view that hasn’t caught on (at least not as a slogan), but is working extremely well.

Electron Production

The shift from molecules to electrons, which Mike Rodriguez (our Head of Sustainable Finance and a decorated Marine) helped me to use as a phrase, is “blowing up.”

Every serious conversation about AI and Data Centers “devolves” or “evolves” into a conversation about electron production (electricity for us “luddites”).

Electricity production came up during almost every conversation at the summit.

We had clients who helped us and provided information that we have just started to digest (and probably won’t really complete our review until after today’s baseball game). This is in addition to the copious work Mike Rodriguez has done and continues to do. 

I could keep going on now, but I’m not well enough prepared, and quite frankly, I am “talked out” so expect more on this later in the week.

Cyber

Cyber came up in interesting ways at the summit. Everyone “knows” about cyber risk. Everyone is “doing something” about cyber risk. But are we doing anywhere close to enough?

How do public and private entities work together to protect each other?

A lot of “wins” go undocumented, for good reason, so the fears may be overly inflated. Adequacy of response – true deterrence – was discussed in detail. 

I was a little surprised by the focus on cyber, but maybe because it is morphing from an “everyone knows” to “everyone is really trying to figure it out” stage.

Space

On the final day of the summit, we hosted a “war game.” It is an interesting opportunity to “role play” and think about things. One “twist” that was given to one of the groups, was a Chinese missile “knocking out” a U.S. satellite. 

Space as both an investment opportunity and a domain of war, is something we bring up periodically, but need to focus on more.

Government Shutdown

We suggested people Prepare for an Extended Shutdown. We are getting some pushback that a deal could come as early as this week. Given the sources, it is plausible, but I’m still in the camp that this is going to drag on, and we are going to see some “surprising” announcements. In my view, the people saying, “this will end soon” are playing “politics as usual” or following “traditional norms” and I’m not convinced that is the right way to look at things.

Bottom Line

I managed to fill 2 pages while being “talked out.”  lot is going on and this seems like an ideal time to develop scenarios for the major themes so you can react as they evolve!