Upon occasion, I have addressed here in Oil & Energy Investor matters that may not appear directly related to the energy sector – global security, cross-border flash points, and the impact of geopolitical events, for example.
There are basic reasons for this – reasons that also provide some choice investment picks.
That’s because there is a connection. How the energy markets react to these apparently disparate elements reflect two overarching factors:
- Concerns over economic and market performance,
- Perceptions of risk or volatility.
These two considerations, in turn, have a lot of impact on energy prices.
Over the past year, I have introduced into the Model Portfolios of Energy Advantage, Energy Inner Circle, and Micro Energy Trader holdings that are more directly viewed as military/defense plays.
In each case, there has been an energy reason for the initial move.
The selection resulted from security considerations impacting energy sources and transport (tensions in the Persian Gulf or South China Sea, for example), or because of technical advances that have applications to both military and energy uses – for example, battery breakthroughs, off-the-grid power systems, more efficient communication networks, security systems, or improved computerized applications.
How to End a Cold War – And Start a New One
The Intermediate-Range Nuclear Forces Treaty (INF) was signed by Ronald Reagan and Mikhail Gorbachev in December of 1987 after considerable negotiations, and formally approved six months later.
The arms control agreement phased out all land-based ballistic and cruise missiles, along with their launchers and on-site control systems. These weapons were defined as having ranges of 310-620 miles (classified as short to medium-range) and 620-3,420 miles (intermediate range).
The treaty does not cover either sea-based weapons or those fired from aircraft. INF eliminated almost 2,700 missiles by mid-May 1991 with a ten-year period or verification thereafter.
Last October, President Trump announced that he was withdrawing from the accord, contending that Russia had violated the treaty.
What was technically a U.S. suspension of treaty compliance took effect last Friday, on February 1. Russia suspended its adherence the next day.
Weapons systems have certainly evolved over the three decades since Reagan and Gorbachev signed the accord, but the great concern emerges now that all of Europe can be targeted from Moscow.
Similarly, Russian contacts remind me that with Washington pulling out, INF-enjoined missiles can easily be placed on NATO territory bordering Russia.
There is some anecdotal information coming from Europe that tends to support the U.S. position on Russian violations of INF. On the other hand, the Russian side is “unofficially” telling me the questioned weapon system do not fall within the range restrictions under the treaty.
My sources are telling me that, while the U.S. suspension move publicly calls out Russia as the reason for the action, it has more to do with American needs to offset rising Chinese weapons deployment and territorial expansion intent in the South China Sea.
The ongoing South China Sea crisis is a major concern for energy development and transit. It also comprised one of the initial reasons for my taking subscribers into the military/defense/security sector.
The debate over who has done what will continue. The “he said, he said” repartee makes for some interesting – and inconclusive – political conversations but is not what I want to address today in Oil & Energy Investor.
Because this change in global security tension levels, regardless of who is at fault, lets us move on a very well-positioned stock pick.
A New Cold War and Its Profit Opportunities
BWX Technologies (BWXT) has been in the Energy Advantage Model Portfolio on several occasions, providing some very nice returns.
I recently had subscribers move back in. At close of trade yesterday, BWX is up 5.4% for the most recent week (3.3% in the two days since it was put back into the Portfolio) and 21.6% for the month.
BWX is right in the center of the INF.
The company provides nuclear weapons technology, support, and fuel preparation for both the U.S. defense establishment and energy applications (the reason it was put on the list of those providing services to both the energy and defense sectors).
We may have a new arms race developing here.
However, the genuine need for a massive increase in short-to-intermediate range missiles may be questioned given the primary usage of sea and air-launched cruise missiles and drone systems.
This is the beginning (or continuation, rather) of what has been referred to as the “New Cold War.”
Nonetheless, the uncertainty and tension levels being introduced by the U.S. and Russian INF suspensions are sufficient to keep the focus on BWX and provide an incentive for rising share value.
Because of these rising tensions, the U.S. intelligence community is devoting almost all of its time and resources in two places: Russia and China.
And when you see this shocking satellite footage, you’ll understand why…
Some people are even calling this China’s “Doomsday Plan.” Whatever you want to call it, the situation is ominous, indeed.
This video here exposes China’s entire master plan to usurp American supremacy.
But America, as always, is more than ready to fight back.
In fact, we’ve got a top-secret $1.743 trillion defense strategy up our sleeve.
Once you see what it is, you’ll likely want to toss some of your own investment dollars into the companies at the forefront of keeping America safe as a global Super Power today and for decades to come.
I’m so confident that folks could see substantial returns on these investments that I’ve recommended these crucial defense companies to my premium subscribers at Energy Advantage.
Take a sneak peek here.
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