On Edge
The Biden Administration’s approval regarding Ukraine’s using of long range US made missiles to strike inside Russian territory has prompted a quick response from the Kremlin. Apparently, they have amended their level at which they can respond with nuclear weapons to “Any non nuclear state attacking Russian Federation and Belarus soil that threatens the sovereignty of the Federation or Belarus. Using supplies from a nuclear armed state is the same as if the non nuclear armed state was doing it” or words to that effect.
It’s curious as to why the Biden Administration would choose now to allow Ukraine to use those missiles as opposed to a year ago or when the conflict first started.
I can’t imagine that they would think “Hey, it’s Trumps problem now” or “Let’s show Putin we aren’t pussycats” or some other drivel.
Markets around the World have reacted as assets have flown into safety, Gold and oh yea, that safest of assets, Bitcoin.
Venturing to guess on how this will turnout is a fool’s game for sure but it is newsworthy and I have been reading a lot on the subject and I have come to the conclusion, I have no idea.
I have been wrong about this invasion from the get go so I suppose why ruin a perfect track record by keeping my opinion to myself.
Let’s look at the big picture here. There are many facets to this conflict and I think first and foremost, Putin will not pull the trigger on using the nuclear option.
There are lines that you cross and you make up some bullshit about Nazism resurfacing in Kiev or this land is our land and we want it back. 99% of the World leaders realize this is Putin being Putin and you can’t trust him as far as you can throw him. He is a megalomaniac and has some sort of aspirations of reuniting all of the former Soviet Republics and recreating what once was. Clearly, there are not enough soldiers or healthy men in Russia to perform this task and the line in the sand that has been drawn by NATO and the US is a lot harder to cross. But that SOB is going to have half of the healthy men in Russia killed or severely wounded just to try an attempt it. It’s a sad sorry state Mother Russia is in and Vlad Putin isn’t going to stand for it anymore.
Pressing the button on small scale nuclear strikes will be the last desperate act of Vladimir Putin and I am sure his good friend, Xi Jinping, President of China will back him on this move. Uh, that was a joke. Xi Jinping is no fool. He has enough on his plate at home and I doubt he will risk the wrath of the global community for blatant stupidity of some quasi communist leader. I don’t see Xi Jinping applauding a reckless act like dropping a small nuclear weapon on a military compound, destroying it and the surrounding communities and leading to a much more unified response from the United States. Trump or Biden will act accordingly and the response will fall on China to some extent for backing this psychopath.
Xi Jinping has no problem killing 20 or 30 thousand of his own people but he won’t be able to out run the economic response of the West should he back such an escalating move.
I have said repeatedly that as a rule, Geopolitical moves within one, two or three countries generally have a short shelf life as far as investing is concerned. The only asterisk attached would be regarding some sort of nuclear event. Be it Israel taking out half of Tehran or Putin dropping targeted nuclear weapons on a certain battlefield, I am not sure what the economic impact would be.Pretty safe to say, it won’t be good.
An important fact to be remembered is that this updated nuclear policy by Russia has been in the works for months so this is no surprise move to shock anyone. US Intelligence agencies were expecting the wording pretty much as written and I am sure they advised the President before he allowed the Ukrainians to use US military equipment inside of Russia.
My guess it’s a ploy by Putin so when President Elect Trump takes office in January, he has a stronger bargaining position when they finally do sit down at a table and talk. Who really knows though.
As far as what this will mean for the economy and markets, right now people are using it as an excuse to take some money off the table. Which after two very strong years, is not a bad move. I know a lot of advisors say keep your money where it is, it will blow over. Don’t panic and so on.
I have a slightly different opinion. There are tremendous gains out there, if you can afford the tax consequences of taking profits and it works for you, do so. I look at the market as more than fully priced and we are all very fortunate that there hasn’t been that slap in the face where the market is down 10-20% in a matter of weeks or days. One well place nuclear weapon can do that for sure.
My feelings are more about the pricing of things rather than an existential threat 3,000 miles away. Sure, if something does happen, the flight out of assets will be fast and furious and with that flight, the next shoe will be an actual economic result from an act of desperation, meaning will we slip into a recession? Will global trade once again come crumbling down? Will the ripple effects compound around the World and then what?
No one can predict any of this but upping your cash position at this point seems to me to be prudent.
Granted, I am probably one of the only people out there saying to take profits and pay the taxes and live to invest another day. It’s not only about geopolitical uncertainty but it’s pragmatic as well. The higher markets go, the harder and faster they fall.