Given the events of the last 24 hours, I decided that I am going to write a special Substack and go over the Invasion of The Ukraine. Yes, it is an invasion, not a war. A war denotes two sides and battles between two (or more) adversaries. Yesterday’s invasion didn’t appear to have much resistance and while I am not on the ground, nothing that has been reported so far tells me otherwise.
Obviously, this invasion has rattled World markets and that is to be expected. Even though markets, for the most part, started pricing in a confrontation at least a month ago, the actual event has put more pressure on a slightly fragile market and should weigh on markets for at least a week.
Geopolitical confrontations usually disrupt markets in the short term. Investors want to take risk off while awaiting something definitive regarding that geopolitical situations. An invasion such as this usually creates a vacuum of information( in the short term) and markets abhor a vacuum.
The first round of sanctions will take a while to effect Russia and they know it. Right now the Russians have a substantial reserve of currency and that should protect the government from collapse. The people of Russia don’t have such reserves and they will be the ones to feel it sooner. Like Russian leaders in the past, Putin could care less if his people suffer. Keeping that in mind, look back and see how The Romanov dynasty ended. What happened under Stalin. Russia has a history of mistreating its own people for its leaders grandiose plans. Time will tell if Putin will end up like Czar Nicholas or Lenin.
The sanctions against the oligarchs is different. As I stated in yesterdays column, these players put Putin in and I am sure they can take Putin out. It might not be as easy as it was getting Yeltsin out but trust me, when there are billions on the line, men will rise above and do what is right, protect their billions. That will take time because I am sure these oligarchs have shielded themselves from sanctions with sophisticated financial instruments and they feel pretty safe in their palaces, for now. It will take the US and European authorities time to unwind these riches and put a hold on them but they will do it.
That pressure from within is really the only thing that can stop Vladimir Putin. The West, other than sanctions, doesn’t seem to have a cohesive plan in place. I do understand that the NATO alliance was set up for the protection of its members but a military invasion right next door should provoke some military response as well. There is saber rattling and then there is Putin invading a sovreign state.
While I try not to bring up Donald Trump much anymore I think it is key to recall that he was adiment about NATO footing more of the bill and preparing themselves better to protect themselves and not to expect America to come to their rescue because they refuse to take their defense seriously. He was right.
Unfortunately, where I think he was wrong is that should this actually turn into a real on the ground and in the air war, America will be asked to take a much larger role in protecting Europe from aggression and of course, we will. Should that happen, this invasion could be the start of something our generation has actually never experienced, an all out war.
I think one “once in a lifetime” event is enough.
I am sure it can be argued that this administration, so far, has not done a particularly good job at pretty much anything they have tried. It started with shutting down the Keystone pipeline two weeks after getting into office. Then, you have an administration that wanted to unwind Trump’s border policies and not actually have a policy to replace it. You have seen how well that has turned out. On top of all of these missteps, you have the economy and the pandemic, which I know are separate but both have been examples of government overreach. Spending trillions after trillions to boost an economy that most likely would have done just fine without all the government handouts while cities and states went their own way dealing with the pandemic.
Granted these are very unusual times and I certainly don’t have the answers but looking back it’s easy to see no one else did either. What we have experienced over the last two years is unprecedented and leadership was demanded and unfortunately, I don’t think it was up to the task.
The Ukrainian crisis needs leadership. This is the best chance the Biden Administration will ever have at turning its legacy around. Mess this up and not only will your legacy fall below that of Jimmy Carter and Warren Harding but the Map in Europe will change as well.
Excellent article, Thank You for the insight.
For a side note from a past article......"A followup to that story: A friend of mine at Goldman knew the analyst and someone had pointed out that a guy on the floor is betting you his salary versus yours that oil will hit 35 dollars a barrel before it ever hits 100. His reply was “What a putz.” YEP;)