We have officially entered a new era where the United States of America have finally found a new enemy! For many years after the collapse of the “evil empire” that is Soviet Union, the US have largely remained unchallenged. It reigned supreme. Until the rise of the European Union that challenged the supremacy of the US where the Euro was thought to be a threat to the US currency.

The reason why US cannot allow an alternative currency to replace the Greenback is simply because it cannot afford to let demand for the US Dollar wane. The US need lenders to keep lending it money; the printing machines need to keep churning out the Greenback; and its leadership position in the world depends on the US being “too big to fail”. In a nutshell, the US is a debtor who is also a bully that screams at its creditors “what can you do about it?”.

With the Eurozone now in doldrums and the rise of China is evident, we are now in the midst of a trade war that brings us back to the early days of protectionism and Cold War.

Is the trade war all about trade? Yes and no.

In my opinion, the trade war is just episode one of a tear-jerking and sometimes draggy Taiwanese serial that can last for episodes 1001. The trade war is just an appetizer, or cold dish, in the Manchu-Han Imperial Feast that consists of 108 dishes.

If the US-Soviet Union arms race could last for 20-30 years till the latter collapsed, there is no reason why this nerve-wrecking trade war cannot last longer than we think it will. What is the next agenda after the trade war? Could it be Taiwan? Human rights? Animal rights? Anything.

Number of Nuclear WarheadsSource: Wikipedia [Chart on number of nuclear warheads]

Ostensibly, the trade war is about the US trying to redress the imbalance in global trade but the undercurrent that drives the trade war is the US’ desire to stop China’s rise as a global superpower. The US wants to, and it needs to, destroy China’s ability to influence the world.

The trade war will end although trying to predict its end is as good as guessing when the rain would stop during a monsoon season. Hence, we need to treat this episode as “trading noise” and refocus on fundamentals.

If corporate earnings are strong and the economy is robust while inflation stays low, why should stocks fall into a bear market? Valuations are there for all to see while fear is for all to become irrational. During this period of uncertainty, the fear that investors experience is driving valuations cheap hence rational investors will want to buy while stocks are cheap.

Remember that bad news makes stocks cheap while good news makes it expensive.

Gabriel Gan was a Senior Vice President at AmFraser Securities. He left to join DMG Securities (now renamed as RHB Securities) to take on a similar role. During his stints at the stockbroking firms, he dealt in equities, performed advisory role and executed corporate finance deals for his clients.

Since 2001, he has been invited by the media (both Mediacorp and SPH) for his stock market opinions. On radio, he spoke on 95.8FM for more than a decade; he now speaks every Wednesday and Thursday mornings on SPH radio 96.3 FM, delivering his opinion in Mandarin. On TV, Gabriel appeared on Channel NewAsia, the former Channel U and various Channel 8 financial segments including Good Morning Singapore, Hello Singapore and MoneyWeek. On print media, he continues to give quotes and comments on the economy and stock market for Lianhe Zaobao, Lianhe Wanbao and Shinmin Daily. On top of that, Gabriel was a columnist for the now defunct My Paper.

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