With increased global competition for the scarce commodities available, it is expected that there will be more violence and military action.
Due to the need to protect and acquire resources, government spending on the military has to rise.
Let us now analyze the potential of investing in defense.
Since history, many wars and acts of destruction occurred because aggressors wanted more resources.
With today's resources becoming lesser and lesser, there will be more reason for waging wars because violence will be tomorrow's way countries use to survive.
Coupled with political, religious and social factors, hostility will worsen and today's events are already showing signs of it.
In August 2008, Russia invaded Georgia.
Looking deeper, it can be seen that this was done because Russia wanted control of the Baku-Tbilisi-Ceyhon (BTC) pipeline that carries oil from Azerbaijian and Caspian Sea to Western countries.
With control of it, Gazprom and its country Russia can control energy supplies to Europe and ultimately to the US.
With commodities being extremely limited today, gaining control of it can also bring Russia greater wealth in the future as prices are expected to rise.
To add on, this move can deter nations from building pipes outside Russia, expanding Russian sphere of influence in today's world.
Since this may threaten America's superpower status in the world, it supports the fact that the US will attempt to interfere and this will translate into increased spending on the US military.
However, Russia has many advantages over the US in this issue.
This is because it is more resource-rich, making it more able to dictate future prices of commodities.
In addition, it is closer to Georgia than the US and members of the former USSR could rejoin Russia to control oil supplies.
Furthermore, besides Russia, even China has advantage over the US because its government plays a more active role in resource exploration by helping its companies militarily.
To add on, given low labor costs and abundant resources China and Russia have respectively, they will be in a better position to afford higher spending in the military.
All these factors will push the US to further spend more on its overextended military, increasing its deficits and inflating its debt bubble.
Hence, with this need for resources in place, there is a great impetus for the world to increase spending on defense.
Here, there will be a cycle because when a nation spends more on defense, the other would want to spend further more than her to avoid losing out.
Thus, I believe that defense will be the next pot of gold.
Today, defense spending only makes up 4% of GDP in the US, unlike 12% during the Korean War and 6% in the 1980s where there was an arms race with the USSR.
This shows that it has potential to rise and entering the market now is still cheap.
To add on, defense investments belong to the rare ones that can profit from negative news.
For example, defense stocks were one of the few groups that outperformed the market with very solid gains after 9/11.
Hence, to conclude, given its expected profitability and low costs of entry, it is reasonable to say that defense can be a good buy today.
However, investors ought to study the market well because it is always changing.
Do your due diligence faithfully and you will get rewarded with greater wealth!
Due to the need to protect and acquire resources, government spending on the military has to rise.
Let us now analyze the potential of investing in defense.
Since history, many wars and acts of destruction occurred because aggressors wanted more resources.
With today's resources becoming lesser and lesser, there will be more reason for waging wars because violence will be tomorrow's way countries use to survive.
Coupled with political, religious and social factors, hostility will worsen and today's events are already showing signs of it.
In August 2008, Russia invaded Georgia.
Looking deeper, it can be seen that this was done because Russia wanted control of the Baku-Tbilisi-Ceyhon (BTC) pipeline that carries oil from Azerbaijian and Caspian Sea to Western countries.
With control of it, Gazprom and its country Russia can control energy supplies to Europe and ultimately to the US.
With commodities being extremely limited today, gaining control of it can also bring Russia greater wealth in the future as prices are expected to rise.
To add on, this move can deter nations from building pipes outside Russia, expanding Russian sphere of influence in today's world.
Since this may threaten America's superpower status in the world, it supports the fact that the US will attempt to interfere and this will translate into increased spending on the US military.
However, Russia has many advantages over the US in this issue.
This is because it is more resource-rich, making it more able to dictate future prices of commodities.
In addition, it is closer to Georgia than the US and members of the former USSR could rejoin Russia to control oil supplies.
Furthermore, besides Russia, even China has advantage over the US because its government plays a more active role in resource exploration by helping its companies militarily.
To add on, given low labor costs and abundant resources China and Russia have respectively, they will be in a better position to afford higher spending in the military.
All these factors will push the US to further spend more on its overextended military, increasing its deficits and inflating its debt bubble.
Hence, with this need for resources in place, there is a great impetus for the world to increase spending on defense.
Here, there will be a cycle because when a nation spends more on defense, the other would want to spend further more than her to avoid losing out.
Thus, I believe that defense will be the next pot of gold.
Today, defense spending only makes up 4% of GDP in the US, unlike 12% during the Korean War and 6% in the 1980s where there was an arms race with the USSR.
This shows that it has potential to rise and entering the market now is still cheap.
To add on, defense investments belong to the rare ones that can profit from negative news.
For example, defense stocks were one of the few groups that outperformed the market with very solid gains after 9/11.
Hence, to conclude, given its expected profitability and low costs of entry, it is reasonable to say that defense can be a good buy today.
However, investors ought to study the market well because it is always changing.
Do your due diligence faithfully and you will get rewarded with greater wealth!