We’ve had some good news on North Korea lately. As of last October, the U.S. and North Korea were on a definite path to war. Beginning with a thaw in relations around the time of the Olympics last February, the situation has improved to the point where President Trump and North Korean leader Kim Jong Un will meet at a summit conference, probably in June, to discuss peace on the Korean peninsula.  It remains to be seen whether Kim is dealing in good faith, but so far, the news is positive.

Iran is another hot spot that has flared up because of Trump’s decision to tear-up the Joint Comprehensive Plan of Action, JCPOA, negotiated among Iran, the U.S. and our allies in 2015 regarding Iran’s nuclear weapons program. That puts the focus of the world on a potential war involving Iran, Israel, Saudi Arabia, the U.S., and possibly Russia or Turkey. That bears watching, but it will take years to play out.

Meanwhile another hot spot has even more potential to trigger a war than North Korea or Iran. That involves the increasingly confrontational approach being taken by China in the South China Sea. China insists that all of the South China Sea is a virtual “Chinese Lake” based on some artificial islands that have been dredged up around existing rocks and atolls. The U.S. insists that these are international waters with rights of free passage and navigation.

As this article reports, China is putting advanced weapons systems on these fake islands. The U.S. is stepping up its naval patrols in the area to demonstrate freedom of navigation. The world’s two largest economies are on a collision course that could trigger World War III. Investors need to factor these confrontations into their allocation decisions.

An increased allocation to cash and gold is prudent at this stage of world history.

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