TOKYO -- Investors are turning to U.S. Treasury securities as a safe asset amid growing geopolitical risks over Ukraine, according to Richard Bernstein, who manages Richard Bernstein Advisors, an independent investment advisory firm in the U.S.
"Treasuries, not gold, are apparently the safe haven," Bernstein said on his Twitter feed on Aug. 14.
Since 2011, Bernstein has kept warning financial markets of grave impacts from the Sept. 11, 2001, terror attacks on the U.S., stressing that instability around the world triggered by the terrorism is comparable with the shaky global situation after the Berlin Wall came down and the Soviet Union collapsed.
Bernstein was a chief equity strategist at Merrill Lynch, which is now Bank of America Merrill Lynch, when the terror attacks occurred. The leading U.S. investment bank was in an office building across the street from the World Trade Center in New York, which was destroyed by the attacks. Merrill Lynch workers were killed in the attacks.
As the New York Stock Exchange, located five minutes by foot from the WTC, was forced to suspend trading, market mechanisms were paralyzed.
The attacks also damaged the real economy. Confidence among company managers and consumers was dampened and U.S. airlines suffered as travelers stopped flying.
"Geopolitical risk" has since become a major focus among investors. There are two reasons for this.
Market players continue to pay attention to geopolitical risks for two reasons.
First of all, the world is shifting to a "winnerless age."
In September 2002, I visited Henry Paulson, then-CEO of Goldman Sachs, at his office, a 10-minute walk from the WTC site, and asked him to assess the meaning of the terror attacks. He said, "We are going to be looking at globalization through the lens of Sept. 11."
An analysis of changes in the world after the attacks shows that they happened to occur just as the age of the U.S. as the only superpower began to end.
The U.S. government and Federal Reserve Board prevented the bottom from falling out of the U.S. economy by resorting to bold monetary easing and economic stimulation. The measures resulted in the housing bubble that led to the Lehman shock of 2008. A new world, which could be described as having a "multipolar" structure, has emerged since the crisis.
Markets reflect such changes. The term "BRICs," an acronym that initially stimulated investment in four nations with high economic growth -- Brazil, Russia, India and China -- and then in other emerging economies, was coined in 2001 when the terror attacks occurred. With U.S. hegemony shaken since then, the value of the dollar has dropped by more than 20% on a long-term basis.
Market uncertainties mirror the winnerless age. "It has become more difficult to analyze the global economy because the multipolar world is more complicated," said Christian Keller, global head of Economics Research at Barclays of Britain.
The second reason is that the threat is changing. During an interview with the Nikkei Asian Review, Peter Hancock, CEO at major U.S. insurance house American International Group, said, "The nature of terrorism is evolving and we need to evolve with it."
Hancock voiced his strong concern about cyberterrorism. "The capability to use cyberattacks is to not only steal data but to cause physical damage and bodily harm," he said.
AIG offers insurance to cover damage caused by hacking and information leakage, and premium revenues from it have been increasing at a rate of over 25% annually.
On Wall Street on Sept. 2, the stock price of Home Depot fell on word of a cyberattack on the leading operator of do-it-yourself centers.
Along with its high economic growth, Asia has become the epicenter of geopolitical risk. The global investment community actively reacts to news of confrontations near the Senkaku Islands, which China calls Diaoyu. In the 13 years since 9/11, financial markets around the world have become sensitive to security threats and quickly reflect the daily news in stock and commodity prices.