For those of you who would prefer to listen:
Another week with a constant flow of both news and noise out of Washington, and beyond. The Market has largely been ignoring the various geopolitical events and threats. But there will be a time when it no longer can. The big question is what and when, not if. Trying to keep track has been head-spinning.
There was quite a stir when President Trump expressed an interest in America acquiring Greenland. Those types of comments don’t happen very often coming from the White House. Of course this is, shall I say, a unique President. Unconventional is one word to describe. He seems to revel in stirring things up and keeping others on their toes. It’s happening both at home and abroad. That’s definitely the Trump way.
I have no interest in getting caught up with the politics of the President. That’s not our role. There are plenty of avenues out there for that. But you might be surprised to know that this is not the first time an American President has expressed interest for that big island in the Atlantic. There’s a history here.
First thing first; Some Facts. Greenland is the World’s largest island, comprising over 800K square miles. For perspective, that’s 3X the size of Texas. Greenland has a population of 56,000 people. That’s fewer than live in Walnut Creek. The temperature this week was in the 20’s. Summer sees highs in the low 60’s, while the coldest date ever recorded hit -93 degrees Fahrenheit. Now that’s cold! In fact, that December day in 1991 was the coldest on record in the Northern Hemisphere.
Greenland is not a country. It is a territory owned by Denmark. Its people are citizens of the Danish Kingdom. Greenland’s Economy is tied to seafood, tourism and basic services industries. It also receives an annual stipend of approximately $500 Million from Copenhagen. Greenland’s GDP was $2.7 Billion last year. It’s not a lot. That’s just 1/10th of what Wyoming produces in a year. And Wyoming has the lowest economic output of any state in the Union. Danish Prime Minister Mette Frederiksen has repeatedly said that Greenland is not for sale, but recently added, “If this is about securing our part of the world, we can find a way forward.” So, there’s that.
OK. So, what’s going on here you might wonder? Let’s dig in on the subject to try to make some sense of it.
To begin, I’m going way back, two centuries, to the infancy of our nation with what’s known as the “Monroe Doctrine”. You may recall from school that the Monroe Doctrine was the US foreign policy introduced by President James Monroe. He declared it in 1823. That was 20 years after Jefferson’s Louisiana Purchase. The doctrine asserted that the United States would not tolerate further European colonization in the Americas. It established the United States as a regional power in the Western Hemisphere. Monroe’s Doctrine basically stated: You stay out of our part of the World, and we’ll stay out of yours. It helped launch the Western movement and America’s Manifest Destiny. Of course, after World War II, America began playing a much bigger role across the globe becoming the Superpower that we are.
The dominant global powers are once again seeking to control vital sea routes, oceans, islands, communication networks and resources at the top of the World. It’s a stark warning of rising tensions and increased competition. Russia took Crimea in 2014 and invaded Ukraine a decade later. China has been active in the South China Sea and seemingly has plans for Taiwan. Acquiring the island of Greenland would aim to counter Russian and Chinese ambitions to dominate a region that is critical to America.
These recent declarations about the desire to buy Greenland, make Canada the 51st state and take back the Panama Canal have triggered flashbacks to the 19th-century goal for buffer zones around American interests. Key to America’s two-and-a-half-century success has been buffer zones against potential enemies. Two big oceans separate us from much of the rest of the World. But the World is more connected than ever. Digital solutions have enhanced qualities of life. But they also make us more vulnerable too. Protections and buffers are strategic. Some are referring to this new tactic as the “Trump Doctrine”.
The United States’ interest in Greenland is not new. Following the Civil War, President Johnson set sights on expanding American territory. In 1867, we purchased Alaska from Russia for $7 Million. The territory was placed under the control of the US Army. It became our 49th state in 1959. The Johnson administration explored buying Greenland back then too, but nothing materialized.
President Taft revived the idea again in 1910, eyeing Greenland’s strategic location between the US and Europe. The two sides discussed proposals to purchase the island outright or to swap it for US territory in the Philippines. But the First World War broke out. Attention turned to more pressing matters.
Denmark was invaded by the Nazi’s in World War II. It was liberated by the Allied partners in 1945. During the war, the Nordic nation played a vital role in the resistance, providing valuable intelligence to the Allies. Greenland was instrumental in that cause. The nations partnered with an agreement called Article X, which effectively gave the US the right to a military presence in Greenland for as long as was deemed necessary.
The end of the Second World War brought on the new, Cold War, pitting America against the Soviet Union. The US identified the Arctic as a likely route for any Soviet nuclear attack. Denmark became a crucial American ally, as part of the North Atlantic Treaty Organization (NATO). In 1946, before the official onset of the Cold War, President Harry S. Truman reportedly proposed to pay Denmark $100 Million in Gold for Greenland. The Truman administration coveted the island for its strategic location. It could help identify and defend against Soviet bombers flying over the Arctic Circle. Denmark ultimately declined the offer, but the two countries established a defense treaty in 1951 to build an Air Base. It was named Thule. It has since been renamed Pituffik.
There was some precedent in land dealings between the US and Denmark. Three decades prior, the United States purchased the Virgin Islands for $25 Million in Gold from Denmark due to fears that the German government might annex Denmark during World War I and use the islands as a naval base. Washington did not want the Germans in our part of the World.
Back to present day, President Trump has said that the United States needs to control Greenland to ensure international security and for the “protection of the free world”. Importantly, as stated earlier, Denmark is a NATO member and Greenland’s surveillance systems are tied into the North American Aerospace Defense Command (NORAD) through the Pituffik Space Base.
Then there’s this: Greenland has been pushing for increased independence from Denmark for decades. In 2009, the island territory passed an act which allows for more autonomy and self-government. It has its own Parliament and Prime Minister. Ultimately, complete independence seems to be the Greenlander goal.
A big reason America is interested in Greenland: Shipping lanes. Greenland has become geographically more strategic with climate change. The shrinking of the Arctic ice caps has created new shipping routes through the Northwest Passage and the Northern Sea Route. Ships are increasingly traveling around the North Pole. These new routes have reduced travel time and fuel consumption between Europe and Asia by as much as 40% by bypassing the traditional routes through the Suez or Panama Canals. And Russia controls much of the North Pole shipping lanes. Fortunately, Canada does too. Although relations with our northern neighbor have, shall we say, been strained a bit of late. Having a formal presence in Greenland would be very advantageous.
Another reason America is interested in Greenland: Rare Earth Minerals. Greenland is believed to be home to one of the richest Rare Earth deposits in the World. These are minerals that are critical inputs to everything from kitchen appliances and mobile devices to advanced weaponry, satellites, batteries and MRIs. Greenland is said to possess 39 of the 50 minerals the US considers critical to national security and economic stability, such as zinc and nickel.
Rare Earths are a new opportunity in Greenland. Until recently, these minerals had been untapped, buried deep below ice and dirt. The frigid conditions were beyond challenging. It was simply too expensive and unworkable to set up mines there. But the Earth’s climate has changed over the years. Ice sheets have melted in the Arctic making these valuable minerals much more accessible. The economic opportunity is significant. Denmark has expressed interest for private investors to commit capital to grow Greenland’s mining operations. Global powers have Greenland on their radars again.
Rare Earths are essential for the Digital Age. China has large quantities. America does not. It’s estimated that China has over 20X Rare Earth deposits than the United States. A case can be made that Rare Earths are to the 21st century what Oil was to the 20th. It’s one of the reasons the White House is seeking Rare Earths from Ukraine.
China’s involvement with Greenland enhanced the island’s growing importance. China has been actively pursuing economic and strategic interests in Greenland, particularly around natural resources, infrastructure, and research. China has invested in a number of mining projects considered rich in uranium and Rare Earths. This has sparked concerns about China’s growing influence in the region and potential security implications. China has also shown interest in developing Greenland’s infrastructure, including seaports, airports, and power plants. The nature of these projects has been met with some skepticism by Greenlanders and the Danish government. They like the money but are wary of China’s growing presence in the region.
Greenland’s government has sought to maintain a balance between its relationships with the United States and China. While Greenland values its security cooperation with the United States, it also sees China as an important economic partner. An independent Greenland stands little chance of resisting Chinese ambitions. The likelihood of America outright acquiring Greenland seems quite remote at this time. The chances of anything passing in bipartisan fashion has been close to zero for years.
What do the people think? Polls indicate 85% of Greenlanders do not want to become a part of the United States. Nearly half say they see President Trump’s interest as a threat. That said, Greenland is very much on guard to China’s intentions too; Perhaps more so. Greenland is wary of China’s growing military presence in the Arctic and the potential for the Asian nation to use its investments as leverage for its own strategic interests. An expanded American alliance seems very likely in the not-so-distant future. And Greenland ultimately becoming an American territory, like Puerto Rico or Guam, doesn’t seem as far-fetched as first thought. There’s an election in Greenland around the corner. The island’s path ahead sure seems to be on the ballot box.
Back to the Market:
The constant flow of political and geopolitical rhetoric hasn’t derailed the rally one bit. But price action seems to have lost its luster. The explosive nature in the wake of the election has calmed. The tremendous uncertainty out of Washington is starting to weigh on investor confidence. Tariffs, foreign policy shifts and a looming debt ceiling are among them. Those are nearer-term issues. The situation around Greenland and beyond are definitely longer-term issues, but China and Russia are moving, whether we are ready or not. Geopolitics are getting extremely complicated.
Tired, but resilient; That’s a way to describe the recent price action which still saw the S&P hit a fresh, all-time high this week. Participation has broadened again. Financials and Energy continue to lead in 2025. Tech has taken a breather. It’s setting up for something though. That something is likely Nvidia, which reports earnings next week. The AI-trade will be on full display. It will, without a doubt, be Market-moving. Until then…
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
