A long well reasoned article but here’s the bottom line:
Ultimately, the investment impact of the Russia-Ukraine crisis will come down to how serious Russia is. If I am wrong about Russia’s intentions – if Russia really is preparing for a full-scale invasion of Ukraine – the West will react with sanctions against Russia that will reverberate throughout the global economy as energy prices and food prices surge upwards. If this happens, you ain’t seen nothing yet with inflation. It’s precisely because of this that I rate the probability of full-blown invasion as fairly low – it’s mutually assured destruction.
If things continue as they have been – continued dialogue leading to some kind of resolution, or at minimum a stalemate – expect more of the same, i.e., in the short-term, higher energy prices, a weaker ruble, downward pressure on Russian equities, and upward pressure on key Russian commodities, like wheat, fertilizer, and nickel, in the coming months – all of which present interesting opportunities for the brave of heart if, as geopolitics suggests, this situation resolves itself without a full-scale war.
I felt like I should have taken a bigger position on this from an investment perspective. I hedged by shorting SPY and also shorted a few Russian stocks. But I could have done 10x bigger and it’s looking like that was the right call…
I think the question is, what will trigger sanctions by Biden’s handlers and the euro weenies? As the article says, tough sanctions are mutually assured destruction so they will put up with almost anything from Putin. The second question is, how long before the markets catch on to the kabuki dance and stop reacting with the vapors to rumors?
if they can paper everything over, everyone comes out looking like a hero. So my tendency is to buy the dips. I guess that’s what makes a market.
The White House said Biden would soon issue an executive order “that will prohibit new investment, trade, and financing by U.S. persons to, from, or in” the two Ukrainian regions under the control of Russian-backed separatists, Donetsk and Luhansk.
Long Russia pitch from a hedge fund guy that’s been nailing his macro calls the last few years.
Making the case they won’t even do much in the way of sanctions and all the noise out of the US about this was just for domestic consumption rather than that Biden and company actually cared about Ukraine.
Covered my hedges, made a whole lot more on the short Russian stocks than I did on shorting way more SPY - right call, bad allocation. I’m long a bit of RSX a now betting the sanctions aren’t going to matter much.
Biden going to be saying some mean words along these lines at 1pm today.
BIDEN ADMINISTRATION HAS PREPARED EXPORT CONTROLS TO HIT RUSSIAN COMPANIES WITH ALLEGED MILITARY TIES AND DENY RUSSIANS ACCESS TO GLOBAL TECH, INCLUDING ELECTRONICS AND COMPUTERS -SOURCES
As I write this the S&P 500 & VTI are down ~1% and Oil is up 4%
Not that huge of a impact at the moment in my mind. Maybe the market has already adjusted assuming the war would happen?
Assuming that US has no intention to do more than sanctions, does a war in Ukraine really have much impact on the US ? I can’t really imagine Americans will really care to do much about it honestly. How many of us can place Ukraine on a map… ?
I have heard and tend to believe it is true that it will increase prices for various goods. You mentioned oil but they are apparently a large agricultural producer. I am not sure how much the US relies on Ukraine specifically but assume there will be some impact. ie wheat/grain commodities go up a few percentage points.
This is of course wonderful news on top of the existing inflation. /s
