Global Opportunities Beyond the Radar

Our Secret War: How Markets React to Crisis


The year was 1963.

The competition between the United States and the Soviet Union was escalating.

Tensions were boiling over into armed conflict in Southeast Asia.

But, no, this wasn’t the Vietnam War. Not yet. This was something else.

They called it Konfrontasi — Confrontation.

Few people alive today can remember this event now, but the stakes back then were incredibly high. This was a real turning point in our history:


Australian soldiers embarking on a mission to search for Indonesian infiltrators.
Source: The National Museum of Australia.


President John F. Kennedy, himself a veteran of World War II, was perceptive enough to anticipate all this.

Just a year before, in 1962, Kennedy made a speech at West Point Military Academy. He explained that the world had changed radically. It was now experiencing a transition from total war to limited war:

‘Korea has not been the only battle ground since the end of the Second World War. Men have fought and died in Malaya, in Greece, in the Philippines, in Algeria and Cuba, and Cyprus and almost continuously on the Indo-Chinese Peninsula. No nuclear weapons have been fired. No massive nuclear retaliation has been considered appropriate.


‘This is another type of war, new in its intensity, ancient in its origin — war by guerrillas, subversives, insurgents, assassins, war by ambush instead of by combat; by infiltration, instead of aggression, seeking victory by eroding and exhausting the enemy instead of engaging him. It is a form of warfare uniquely adapted to what has been strangely called “wars of liberation,” to undermine the efforts of new and poor countries to maintain the freedom that they have finally achieved.


‘It preys on economic unrest and ethnic conflicts. It requires in those situations where we must counter it, and these are the kinds of challenges that will be before us in the next decade if freedom is to be saved, a whole new kind of strategy, a wholly different kind of force, and therefore a new and wholly different kind of military training.’ 

Indeed, just as Kennedy had predicted, ethnic conflict would play a key role in the Indonesia-Malaysia confrontation:


New Zealand soldiers showing vigilance on jungle patrol. Source: Stuff


As diplomatic ties broke down, Sukarno decided to act. He launched a campaign known as Ganyang Malaysia. Crush Malaysia. Tensions soon escalated into bloody conflict:


Sukarno and Suharto in happier times. Source: Quora


This struggle would rage on for three years. But, eventually, the Indonesia-Malaysia confrontation would come to a shocking end:



A shadowy legacy?


The Indonesia-Malaysia confrontation was a momentous event for those who lived through it — but today, it remains a blind spot in our history:


The Labuan War Cemetery in Sabah, Malaysia, where our fallen heroes lie interred.
Source: Commonwealth War Graves


It’s also important to note that the Indonesia-Malaysia confrontation set the template for other unconventional wars to come. Not just in the 20th century, but the 21st century as well:

So, as value investors, we want to learn the correct lessons from the past.

Geopolitical shocks come. Geopolitical shocks go. But in the long run, they have surprisingly little impact on the trajectory of the market. Prosperity marches forward: 


Source: LPL Research


Source: Russell Investments


So, right now, here’s what you need to think about:



It’s time to have your say


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John Ling

Analyst, Wealth Morning

(This article is general in nature and should not be construed as any financial or investment advice.)

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