During the years 1815-1914, when Britain, through the Royal Navy, was the de facto world’s policeman, some leaders of smaller countries would see how far they could provoke Britain, without precipitating serious consequences. In other words, “twisting the lion’s tail.”
Currently, we have the Philippines recently elected President, Rodrigo Duterte, threatening to distance his country from the U.S. in favor of better relations with Russia and China. Considering China’s adventurism in the South China Sea and the Philippines vulnerability and dependence on the U.S. Navy, this could be considered as “ruffling the eagles feathers.”
Of course President Duterte is not the only politician who, usually to score political points with various domestic factions, finds it attractive to indulge in some level of U.S. baiting.
While these provocations have the potential to spiral out of control, investors should assess each event carefully, but also consider the extent of the risk.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®