“A new war cycle has now begun.” “Wars, revolutions and chaos will spread and sink major economies. They will drive global commodities into a depression. But they will also create a tidal wave of flight capital” 

I first read Larry Edelson’s treatise on the Cycles of War more than a quarter-century ago, when his daughter and my son were attending our K-8 Weiss School here in Palm Beach Gardens.

One day, Kari posed with Anthony for a school photo, and soon thereafter, she handed me her father’s Cycles of War report, while uttering these simple words: “Please read this. It’s from my Dad.”

I was so impressed, I decided Larry should join our research company.

He wrote that the next major war cycle would not begin until the 21st century. But when it did, he insisted, the consequences would turn the world of investments inside out and upside down.

The Prediction 

Fast forward more than two decades to January 2013. That’s when Larry and I spoke together at our Weiss Wealth Summit at the PGA National Resort. And that’s also when he pinned down the timing more precisely — with this prediction:

A new war cycle has now begun. It will start to ramp up immediately and continue to do so until the year 2020. Wars, revolutions and chaos will spread and sink major economies. They will drive global commodities into a depression. But they will also create a tidal wave of flight capital from the Middle East, Europe and Asia to the only major nation and only major market in the world that’s still perceived as relatively safe and stable — the United States and its blue-chip stocks.

At the time, few believed him. Fewer still understood how a nonfinancial phenomenon could become a major factor for financial markets.

Yet, here we are, nearly three years later, and not only are wars spreading just as predicted, but global markets are also following Larry’s script practically to the letter.

To better understand how, let me ask you …

Four Intriguing Questions

With Four Surprising Answers

Q: How many major economies in the world are currently improving?

Answer: Virtually none. Almost every one — including the European Union, United States, China, Japan, Brazil, Russia and Canada — is sinking, slowing or just muddling along.

Q: How many major world commodities are in an uptrend?

Answer: Very, VERY few. Just in the last 12 months, energy prices have been sliced nearly in half, with crude oil down 44%, heating oil down 40% and gasoline down 36% … foods have been clobbered almost across the board with coffee off 38%; sugar off 19%; soybeans off 15% … and metals have also taken a shellacking — nickel down 39%; zinc down 28%; copper down 26%; aluminum down 25%, and silver down 11%.

All major commodity indexes — for energy, food, raw materials, and metals — are at or near the lows they made in the 2008-09 debt crisis. 

Q: What about corporate profits?

Answer: We’re witnessing the first back-to-back quarters of earnings declines since 2009. It’s an earnings recession. And it’s here.

Q: The toughest question of all: With all four of these powerful forces so
blatantly negative, why have the U.S. stock averages been marching
higher since the end of September? 

There are several good answers. But for us, the most blatant and obvious is the same theme we have been harping on for the past three years …

The Global Money Tsunami

This is the term we’ve coined for the massive influx of flight capital that Larry began forecasting nearly three years ago — mostly flowing from major trouble spots overseas and mostly going to large, high-quality, U.S.-based blue-chip stocks.

Tracking this giant money wave is no easy feat. But you can see it in the persistent strength of the U.S. dollar … the chronic weakness of major foreign currencies and … most of all, in the recent, die-hard strength of major U.S. stock averages.

Why are global investors so desperate to escape their local markets and rush to the United States?

One reason is the slump in their economies I just told you about. But in many countries, the most emotional and powerful reason is the war cycle.

Money is rushing out of the conflict zones for the same reason that millions of migrants and refugees are flooding to Western Europe: fear. 

Whether they’re wealthy investors wiring millions or they’re destitute citizens clinging to their last belongings, the giant motivator that drives them is the wars, revolutions, and chaos. 

The key facts:

Fact #1. The violence is spreading. Not long ago, the conflict was concentrated mostly in two countries — Iraq and Afghanistan. Now it has spread to at least seven more — Syria, Egypt, Libya, Turkey, Yemen, Nigeria, Bangladesh, and, to a lesser degree, even Israel.

Also not long ago, it was widely believed that the impact of the chaos could be strictly contained to Arab countries. Now, with the migration crisis, it’s overflowing massively into Greece, Macedonia, Serbia, Croatia, Slovenia, Hungary, Austria, Germany and beyond.

Until just a few days ago, it was widely assumed that the world’s air transport industry was safe. Now, with last week’s crash of a Russian tourist airline in the Sinai Peninsula, a new fear is spreading that it may no longer be safe to travel.

Fact #2. More and more countries are joining the war. Not long ago, most regional and world powers were involved very tangentially, supplying little more than some money and assorted equipment. Now, they’re being dragged in far more directly:

• The United States has been leading a 62-nation coalition in nonstop bombing of the Islamic State. The coalition partners include …
• Britain, which deployed its first RAF airstrikes in September of 2014, using its Tornado GR4s to drop Paveway IV laser-guided bombs. 
• Australia, which authorized missions by RAAF Boeing Super Hornet fighter bombers in October 2014. 
• Canada, which began its first air strikes in November, when the Royal Canadian Air Force CF-18s began dropping GBU-12 bombs on Islamic State positions near the Euphrates River in Iraq.
• Jordan has deployed a series of its own F-16 Fighting Falcons. 
• Plus Belgium, Denmark, Netherlands, France, andTurkey plus Arab states like Bahrain, Saudi Arabia, and the United Arab Emirates which have also joined directly in the battle.

  Total number of U.S. coalition air strikes in Iraq and Syria so far: 7,300.

United States authorities have also just announced a new U.S.-sponsored alliance between Arab and Kurdish forces to mount a ground offensive against the Islamic State in Syria, while a U.S. State Department official told Congress last week that America’s Arab allies are also considering sending their own troops into the fray.

• Iran has been an active participant in the war against the Islamic State practically from the outset, with a major escalation of its military involvement beginning in June 2014. Until then, most military observers thought Iran would provide strictly logistic support, but there’s now abundant evidence that it has also sent in troops, heavy weapons, and even fighter jets. 
• Lebanon’s Hezbollah, largely sponsored by Iran, has provided more foreign troops in the Syrian war than any other country or group.
• Russia launched its direct intervention in the Syrian war this past Sept. 30 with over 1,630 air strikes just in the first five weeks of operations so far. This ushers in a new and more dangerous phase of the war because, according to State Department testimony before the House Foreign Affairs Committee last week, 85-90% of those air strikes are aimed at U.S.-backed rebels. 

Thus, according to BMI Research, Russia’s targeting of Western-backed Syrian rebels will seriously raise tensions with the West, while the West will be largely powerless to halt Moscow’s strikes. 

Moreover, Russia itself risks getting caught up in an unintended clash with the West or being dragged into an open-ended conflict.

The most immediate risk, BMI writes, is “some sort of incident between Russian and NATO/Gulf aircraft in and around Syria, such as a collision or provocation, especially if it results in fatalities.” Another risk, they say, stems from ground forces that Moscow has sent into Syria to assist its air campaign. 

Plus, adding momentum to the escalation, last week Russia sent anti-aircraft missiles to Syria to safeguard its jets. 

Fact #3. Most of this chaos is deeply rooted in the past and will endure for many years into the future. This is not a single episode that comes and goes quickly. It’s the culmination of centuries of escalating tensions that trace their roots to …

The death and succession of Muhammad, splitting Shias from Sunnis in the 7th century …

The Crusades that pit Christians against Muslims in the Middle Ages …

The fall of the Ottoman Empire, as Britain encouraged an “Arab Revolt” against the Ottomans in the early 1920s…

Cold War proxy battles between the United States and the Soviet Union — a time when the CIA provided arms to Osama bin Laden in Afghanistan, and now …

A free-for-all series of military actions by two opposing military forces:

• Western nations and their Sunni allies — most notably Turkey, Saudi Arabia, Qatar and other Gulf nations versus …
• Russia and its Shiite allies — especially Iran, the Syrian regime, Hezbollah and, surprisingly, even Iraq.

The key point: These two global alliances are split along the same fault line between Sunni and Shiite Islam that first appeared after the death of Muhammad 1,383 years ago. 

It’s obviously not a new conflict.

It’s not going away any time soon.

And now, two major world powers — the U.S. and Russia — have not only taken opposing sides, but they’ve also joined the battle. 

“Peace” Talks?

Yes, there were Vienna talks on Oct. 30. But they were everything but peaceful.

Instead, it was mostly a forum for Saudi Arabia (Sunni) to directly attack Iran (Shiite). And the two sides vowed never to agree about the critical issue in the war — the fate of Syria’s dictator, Bashar al-Assad.

The Saudi foreign minister restated the Saudi position that peace could not be achieved as long as Mr. Assad stayed in power: “He should leave this afternoon. The sooner the better.” The Saudi official also insisted that Iranian forces would have to be withdrawn as part of any agreement … threatened to step up support for moderate Syrian rebels … and vowed to send them more lethal weapons. Meanwhile,

The Islamic State continues to score victories.

Despite peace talks … despite thousands of air strikes by both the U.S. and Russian sides … despite the direct intervention by so many nations in the region and beyond … the Islamic State continues to hold most of its gains and even advance in some areas. 

Just recently, Islamic State fighters captured the Syrian town of Maheen and mounted a major offensive against Sadad, a mostly Christian town. This brings the Islamic State to within 13 miles of the main road linking the Syrian capital Damascus to their main base in Homs.

And this expands their hold on the North and East of Syria after the group overran the town of Tadmur, home of the ancient ruins of Palmyra in May and took the town of Al-Qaryatayn in August.

Moreover, despite U.S.- and Russian-lead campaigns against rebels in Syria, neither side has done hardly anything to stop the spread of terrorist organizations beyond that war zone.

Islamic State, their affiliates and other terrorist organizations have claimed credit for the downing of the Russian passenger plane in Egypt last week … for violent bombings at peaceful demonstrations in Turkey’s capital … for new suicide attacks in Nigeria … for still more bombings in East Africa … for a series of assassinations in Bangladesh … and much more.

What would you do?

If you’re an investor in any of these countries, in any of the regions near these countries, or any of the economies impacted by their chaos, what would you do?

Would you stand idly by and let your money lay fallow in their banks, stock markets or real estate? Or would you make every effort you possibly can to get it the heck out of there?

That’s what a growing number is now doing — not only with their money, but with their families, their life and their entire future.

And that’s the key factor that’s driving U.S. markets higher despite negative economic cross-currents.

We have no doubt the Global Money Tsunami will continue to be an important factor for months to come.

Whether or not it will continue to be the prevailing factor, however, remains to be seen.

Good luck and God bless!

Dr. Weiss founded Weiss Research in 1971 and has dedicated the past 40 years to helping millions of average investors find truly safe havens and investments. He is president of Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. And he is the chairman of the Sound Dollar Committee, originally founded by his father in 1959 to help President Dwight D. Eisenhower balance the federal budget. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recesssion and Depression.