Author Topic: Russian invasion this weekend? What it means for markets.  (Read 1232 times)

svosavvy

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Russian invasion this weekend? What it means for markets.
« on: January 19, 2022, 08:28:10 AM »
Hi All,

I pose this question for group insight on the upcoming geopolitical "train wreck" (word quote-Vladimir Frolov).  I recognize that odds making speculation is maybe a little insensitive to the affected parties as this whole thing will likely cause massive suffering and pain.  I am attempting to place non trivial amounts of capital "strategically" to hedge and/or make a small gain.  I am a wierdo that is intellectually stimulated by this whole chess game.  It almost goes without saying that this is not a financial advice post and I am not an expert. For wargame speculation purposes only.  I am by and large a buy and hold Vanguard 500 long term guy.  I also pray nearly daily for peace throughout the region and for its people.  That being said:

We have heard reports out of Ukraine basically the last year or so that there has been a troop build up of unusual significance on their borders.  We saw toward end of last summer and into the fall strange excuses out of Russia on why they were not supplying the usual gas capacities to Europe as per the usual supply build going into the winter months.  Thus leaving Europe in the lurch gas wise.  We see today the announcement that Fridays bigwig powwow is pretty much the last chance to blow out the fuse on this time bomb.  Do markets on Monday look like crap?  Who knows.

I will put out my wildest speculations here and hope they are completely wrong for everyones sake:  Russia rolls in from the north and south in a pincer type move encountering little resistance effectively splitting the country in two 65% west 35% east.  Claims to be a liberator from foreign threats and upcoming aggression.  Forces a referendum at gunpoint.  Try voting anti Russia with a tank pointed at you.  Phony referendum lends the whiff of "validity" to the whole exercise.  This destabilizes the entire surrounding zone of countries including the balkans.  Places like Bosnia already mildly destabilized by populist resurgence of an independent Republica Srpska again.  Said entity rejoins with Serbia and aligns with the east.  Other former satellites run by populist strongmen enter the throng in support of the east.  Kyiv is spared an invasion as it would be a military quagmire.  Like mentioned eastern 35% lives under occupation and military digs in for the long haul.   

Western response will be more muted than anticipated due to several factors.  SWIFT is a Belgium entity not a US one (cut off not a foregone conclusion).  US is loathe to enter another no mans land war, but, will do punishing sanctions.  However, Russians are experts at suffering.  German conservatives argue Nord 1&2 are economic concerns not war levers (who doesn't love cheap gas). This will cause a rift in the unified EU front that will ultimately get resolved.  China will be happy to buy Russian gas and maybe while not technically joining that side bilateral trade will keep Russian economy from completely tanking from the sanctions that will come (thanks belt and road).  It seems Russia's foreign outstanding debts are down to about half a trillion allowing for a defensive economic position (kinda like someone who only buys with cash and has little debt ,but, no credit).  The whole bear who sits quietly and eats honey thing. 

Turkey eventually aligns with the east (if not militarily at least economically) due to Erdogan desiring to stay in power and he most likely will.  This bizarre economic experiment he is doing blows up in his face and will require a shotgun marriage to an economically stronger country (China, Russia, both) to backstop major economic losses and depleted forex reserves. 

Questions:

1. What do you think the economic fallout is for investing Americans and/or Western countries?

2. How long does this last?

3. What are the outliers (second derivatives) both extreme and less consequential?

4. Is this thread a major overreaction to reading too much into this?

5. Any insight in general?

Moves I have made since the summer:

Like always long the S&P 500 through Vanguard products for the most of our stuff.

1.  Long nat gas

2. Short Russian equities through leap put buying of the RSX

3. Long oil

4. Long quite a lot of USD with position hedged by diversifying with some FXF (CHF ETF)

5. Short TKC through leap puts in July 2022

There it is.  The musings of a first world American.  Any investing thoughts?

mntnmn117

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Re: Russian invasion this weekend? What it means for markets.
« Reply #1 on: January 19, 2022, 12:26:47 PM »
I could see him taking a little more of Ukraine, but the further east he goes the % of ethnic Russians and Russian speakers drops off. Reason's against Putin's success are:
Crimea is too fresh on everyone's mind.
Kiev is thoroughly modern and westernized.
Putin turns 70 next year, this whole thing is a ploy to stay in power and eventually he will just age out of it.

That said an Aerospace and Defense ETF might not be that bad as they seem to have lagged the overall market so it may be their turn anyway. Maybe Lockheed Martin is the next big meme stonk. The Ukraine is Weak....

waltworks

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Re: Russian invasion this weekend? What it means for markets.
« Reply #2 on: January 19, 2022, 12:36:18 PM »
Is this a joke? I'm sure there will be lots of great investable moments... in hindsight.

Of course, every Friday (or whatever day you want) is a pretty decent investable moment. That's why I'm FI.

-W

Michael in ABQ

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Re: Russian invasion this weekend? What it means for markets.
« Reply #3 on: January 19, 2022, 12:41:27 PM »
Russia is posturing. They're threatening invasion of Ukraine to get concessions from the west. Namely, to leave Ukraine in Russia's sphere of influence/control and not as a part of the EU or NATO. Ukraine is practically in Russia's heartland. There are no natural barriers between it and Moscow, and they have a long history of being invaded from the west. The only real defense they have is depth. Having NATO on their doorstep feels very threatening. Just like we felt threatened during the Cold War by having a Soviet presence in Cuba.

Also, any focus on external problems allows Putin to deflect internal attention from all the internal problems (corruption, inflation, poor economy, etc.) inherent in an autocracy.

ArnoldK

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Re: Russian invasion this weekend? What it means for markets.
« Reply #4 on: January 19, 2022, 12:42:05 PM »
I was born and spent my early life under soviet block, outside USSR.
People are trying to guess what Putin is thinking, and assume that logic can be in use.
Well, should not. This is about bringing the soviet glory back, no matter if taking (the whole) Ukraine is not economically viable. This is about slavic/orthodox supremacy crap, and Putin own survival.

It seems to me that Europe will be in trouble (investment/economically), especially with energy political play.
America/Canada, if the conflict is not going too wide, should in short/mid? term OK, supplying oil and especially gas. But there is lots of risk of trouble here too.

For starters, please do not invest in anything RU related :)

@svosavvy: your geopolitical thoughts make sense to me (China, Turkey, Serbia).

UPDATE:
Are we paranoid about Putin?
"My guess is he will move in. He has to do something,” Biden said.
https://apple.news/ADreU48DZQOWsbYT5YiptQQ

It really feels that Putin crossed the line of no return. This is different this time.
« Last Edit: January 19, 2022, 05:19:43 PM by ArnoldK »

MustacheAndaHalf

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Re: Russian invasion this weekend? What it means for markets.
« Reply #5 on: January 19, 2022, 06:10:08 PM »
Putin could be posturing, and then invading if he doesn't get good concessions.  Having invaded Ukraine before, I think it's likely.  Biden expects Russia to do a "false flag" operation, where Russia claims it was attacked, and then invades in response.

Then the U.S. will discuss sanctions, and Russia will threaten to cut off gas supplies to Europe.  That's why I think Putin waited for winter, and will need to act while there's still months of winter left.

Last time the Crimea invasion didn't move the stock market (which I looked up weeks ago when Russia moved into position to invade).  I expect the same this time: no move in the stock market.

DaTrill

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Re: Russian invasion this weekend? What it means for markets.
« Reply #6 on: January 19, 2022, 06:42:42 PM »
1. What do you think the economic fallout is for investing Americans and/or Western countries?  None.  I have a few friends from that area of the world and we were at a conference and someone made a comment that one of their home countries was being invaded/some kind of civil or ethnic war/some other disaster and another immigrant from a different country said "Sounds like a Tuesday" and that was it.   

2. How long does this last? 1-50,000 days

3. What are the outliers (second derivatives) both extreme and less consequential? Biden puts Harris in charge of "solving" the issue.   

4. Is this thread a major overreaction to reading too much into this? Yes.

5. Any insight in general? Ignore

All your trades could work or take you out on a stretcher.  If you are using futures, understand the leverage you are using as it can wipe out anyone in a few minutes. 

Abe

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Re: Russian invasion this weekend? What it means for markets.
« Reply #7 on: January 19, 2022, 08:11:41 PM »
The markets will roll around on the floor for a bit, poop, then walk away. That may also be my neighbor’s dog. They will be affected equally in the long term (I.e. in 3 months).

PDXTabs

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Re: Russian invasion this weekend? What it means for markets.
« Reply #8 on: January 20, 2022, 02:41:00 PM »
For the markets as a whole, I doubt that it will mean much. A couple thoughts that are worth what you paid for them:
1. Russia is only 0.3% of the global stock market.
2. Cutting off energy to western Europe might do some things to the economy.
3. Further hampering trade with Russia will impact the western companies that were involved in that trade. I don't know how many companies that is, a lot got out after 2014. But there are still some left.
4. Ukraine has a real software outsourcing scene. I don't know how many of those companies are publicly traded, but some of their customers are big name US firms.

ChpBstrd

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Re: Russian invasion this weekend? What it means for markets.
« Reply #9 on: January 21, 2022, 02:44:42 PM »
[quote author=svosavvy link=topic=126073.msg2964641#msg2964641 Questions:

1. What do you think the economic fallout is for investing Americans and/or Western countries?

2. How long does this last?

3. What are the outliers (second derivatives) both extreme and less consequential?

4. Is this thread a major overreaction to reading too much into this?

5. Any insight in general?

[/quote]

1) The war in Ukraine will not likely affect S&P 500 profits, except for defense industry firms like RTX, LM, GD, NOC, and BA in the long term. I think Ukraine is the last straw for NATO to admit we have a new cold war / dictator-rolling-through-Europe situation on our hands, and the reaction from the US and Europe may be to arm up to deter an attack on the Baltic states, Poland, or other allies. Putin may pivot to take the rest of Georgia at the same time. Thanks to the current correction, no one can say these developments are "baked into" defense stocks that are lower than they were pre-pandemic. Maybe buy ITA. Obviously the moves you described would have been prescient if done a few months ago, but there is a risk tensions resolve and they flop now. 

2) I think Russian forces will will conquer Ukraine and appear the border with NATO members Poland, Hungary, and Romania in 2-3 months. The larger fallout will continue for decades.

3) Western and Eastern democracies will finally start to "get" Putin's strategy. He is rebuilding the USSR by propping up a series of dictators from Venezuela to Syria, and from Belarus to Kazakhstan. Any time a dictator faces mass protests or the threat of a free election, the Wagner green men come in and snuff it out. In return, these dictators offer Russia military/intel bases and tribute. There's also the intelligence-sharing that makes opposition very difficult to organize in any of these countries. It's a very "1984" strategy. A cold war with regional proxy conflicts is inevitable. Hopefully, the concept of oil/gas as blood energy will prompt Europeans to wean off the stuff forever, but then again all the repressions in the Middle East did not elicit such a response.

4) I don't think this is a day trading theme, and I wouldn't significantly change my AA in response to Eastern European instability, except maybe to buy a small allocation of ITA. Recent history says the stock market can rally while millions of people lose their lives and freedom and disastrous wars break out.

5) Then again, Biden has been missing some pretty easy layups over the past couple of years, and is not exactly the sort of decisive, aggressive, or blunt leader to rally Europe to resist authoritarianism. A forceful resistance against Russia would fit perfectly with his domestic theme of protecting American election integrity and the American form of government, considering that corrupting elections is a key Russian tactic. Perhaps the Biden of 20 years ago could have done such a thing, but so far he's haplessly flailing with Congressional dickarounding instead of making obvious connections and rallying entire populations. Biden might seriously dawdle his way through his next 3 years just as he did his first.

If that happens, a right-wing president DeSantis or Cotton or Taylor-Greene would likely be more friendly to Russian interests than NATO's.

It is similarly unclear whether Europeans will accept what they don't want to believe: that their way of life with microscopic military budgets, massive social spending, and US protection cannot continue as it has in the past. Maybe they'll make excuses for the end of Ukraine and carry on as they always have, falling like dominos as the latest dictator exploits their piecemeal conflicts of interest. The Collective Action Problem has historically doomed Europeans to live under the specter of war, and if they leave their defense entirely in the hands of Americans, they are just waiting for the next Trump to come around and not be there for them.

ArnoldK

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Re: Russian invasion this weekend? What it means for markets.
« Reply #10 on: January 21, 2022, 03:02:57 PM »
Agreed with above. (but not expecting to attack Poland, Hungary (his friend), Romania). Hmm, but not sure about the Baltics...

My primary thinking is that for Putin, it is NOW or "never" (he might wait for Trumph back, but Putin's progressing age is against him).
And the winter will soon be over, and he needs the winter to play with Europe heating needs. Also, can't wait for Europe to switch to green energy too much.

This is his live mission/legacy - undo the Soviet Union disintegration.

Another reason for the now, is that he eliminated any opposition in Russia. Also, the russian economy is in so bad shape that he will provide the war games instead of bread, as a deflections from internal problems, to stay in power as a strongman.

Michael in ABQ

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Re: Russian invasion this weekend? What it means for markets.
« Reply #11 on: January 21, 2022, 04:54:44 PM »
If that happens, a right-wing president DeSantis or Cotton or Taylor-Greene would likely be more friendly to Russian interests than NATO's.


I'm curious why you think this? Most Republicans have been calling out the threat from Russia for years. Back in the presidential debate in 2012 Romney was mocked when he said Russia was our largest geopolitical threat. Trump focused more on China - which frankly is a much larger threat on every metric (military, economic, cultural, information, etc.) except perhaps number of nukes - and they've still got more than enough to kill most Americans.

Is this based on the "Russian collusion" charge that boiled down to the Clinton campaign generating a bunch of made-up BS (the Steele Dosier and everything associated with it) and using a compliant media/government to spread those lies for years on end?


Russia ranks 11th in GDP, between South Korea and Brazil - about $1.4 Trillion compared to the US at $20 Trillion

Russia ranks 9th in population, between Bangladesh and Mexico - 146 million (and falling) compared to the US at 333 million (and growing)

The only thing they have is an outsized military relative to their size - and a whole bunch of nuclear weapons to always hold as an implicit threat.

beee

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Re: Russian invasion this weekend? What it means for markets.
« Reply #12 on: January 21, 2022, 05:35:09 PM »
My primary thinking is that for Putin, it is NOW or "never" (he might wait for Trumph back, but Putin's progressing age is against him).
And the winter will soon be over, and he needs the winter to play with Europe heating needs. Also, can't wait for Europe to switch to green energy too much.

This is his live mission/legacy - undo the Soviet Union disintegration.

Another reason for the now, is that he eliminated any opposition in Russia. Also, the russian economy is in so bad shape that he will provide the war games instead of bread, as a deflections from internal problems, to stay in power as a strongman.

Imho, a big war won't happen because Russian elites "want to rule like Stalin but live like Abramovich (EU citizen now, btw)". They earn money in Russia but keep and spend it in EU and US, where their assets are protected by law. Their families are abroad too (EU/US), they don't care about Russia's future because their future is not in Russia.

Russian elites won't support Putin if he decides to start a real war.
Proxy wars or small wars somewhere far away are ok for them though because they won't lead to serious consequences for them.

ArnoldK

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Re: Russian invasion this weekend? What it means for markets.
« Reply #13 on: January 21, 2022, 05:54:04 PM »
My primary thinking is that for Putin, it is NOW or "never" (he might wait for Trumph back, but Putin's progressing age is against him).
And the winter will soon be over, and he needs the winter to play with Europe heating needs. Also, can't wait for Europe to switch to green energy too much.

This is his live mission/legacy - undo the Soviet Union disintegration.

Another reason for the now, is that he eliminated any opposition in Russia. Also, the russian economy is in so bad shape that he will provide the war games instead of bread, as a deflections from internal problems, to stay in power as a strongman.

Imho, a big war won't happen because Russian elites "want to rule like Stalin but live like Abramovich (EU citizen now, btw)". They earn money in Russia but keep and spend it in EU and US, where their assets are protected by law. Their families are abroad too (EU/US), they don't care about Russia's future because their future is not in Russia.

Russian elites won't support Putin if he decides to start a real war.
Proxy wars or small wars somewhere far away are ok for them though because they won't lead to serious consequences for them.

True to some extent. Putin has made the elites. And he can unmake them at his whims. Regards.

beee

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Re: Russian invasion this weekend? What it means for markets.
« Reply #14 on: January 21, 2022, 07:28:22 PM »
Quote
Putin has made the elites. And he can unmake them at his whims

You give Putin too much credit. He was selected by elites to keep the status quo (he did not come to power on his own). And he is successful with it, only jailing/forcing to immigrate a small number of powerful people.

Making new elites is a long and dangerous process. It doesn't happen "at his whims", it takes time, resources, connections.

Putin is in power because a lot of powerful people are depending on him to keep the status quo. The status quo is pretty lucrative, btw (117 billionaires in Russia). A big war is a big risk to this, nobody will take it.

Mrs. Burning Bush

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Re: Russian invasion this weekend? What it means for markets.
« Reply #15 on: January 22, 2022, 06:14:00 PM »
Hi All,

I pose this question for group insight on the upcoming geopolitical "train wreck" (word quote-Vladimir Frolov).  I recognize that odds making speculation is maybe a little insensitive to the affected parties as this whole thing will likely cause massive suffering and pain.  I am attempting to place non trivial amounts of capital "strategically" to hedge and/or make a small gain.  I am a wierdo that is intellectually stimulated by this whole chess game.  It almost goes without saying that this is not a financial advice post and I am not an expert. For wargame speculation purposes only.  I am by and large a buy and hold Vanguard 500 long term guy.  I also pray nearly daily for peace throughout the region and for its people.  That being said:

We have heard reports out of Ukraine basically the last year or so that there has been a troop build up of unusual significance on their borders.  We saw toward end of last summer and into the fall strange excuses out of Russia on why they were not supplying the usual gas capacities to Europe as per the usual supply build going into the winter months.  Thus leaving Europe in the lurch gas wise.  We see today the announcement that Fridays bigwig powwow is pretty much the last chance to blow out the fuse on this time bomb.  Do markets on Monday look like crap?  Who knows.

I will put out my wildest speculations here and hope they are completely wrong for everyones sake:  Russia rolls in from the north and south in a pincer type move encountering little resistance effectively splitting the country in two 65% west 35% east.  Claims to be a liberator from foreign threats and upcoming aggression.  Forces a referendum at gunpoint.  Try voting anti Russia with a tank pointed at you.  Phony referendum lends the whiff of "validity" to the whole exercise.  This destabilizes the entire surrounding zone of countries including the balkans.  Places like Bosnia already mildly destabilized by populist resurgence of an independent Republica Srpska again.  Said entity rejoins with Serbia and aligns with the east.  Other former satellites run by populist strongmen enter the throng in support of the east.  Kyiv is spared an invasion as it would be a military quagmire.  Like mentioned eastern 35% lives under occupation and military digs in for the long haul.   

Western response will be more muted than anticipated due to several factors.  SWIFT is a Belgium entity not a US one (cut off not a foregone conclusion).  US is loathe to enter another no mans land war, but, will do punishing sanctions.  However, Russians are experts at suffering.  German conservatives argue Nord 1&2 are economic concerns not war levers (who doesn't love cheap gas). This will cause a rift in the unified EU front that will ultimately get resolved.  China will be happy to buy Russian gas and maybe while not technically joining that side bilateral trade will keep Russian economy from completely tanking from the sanctions that will come (thanks belt and road).  It seems Russia's foreign outstanding debts are down to about half a trillion allowing for a defensive economic position (kinda like someone who only buys with cash and has little debt ,but, no credit).  The whole bear who sits quietly and eats honey thing. 

Turkey eventually aligns with the east (if not militarily at least economically) due to Erdogan desiring to stay in power and he most likely will.  This bizarre economic experiment he is doing blows up in his face and will require a shotgun marriage to an economically stronger country (China, Russia, both) to backstop major economic losses and depleted forex reserves. 

Questions:

1. What do you think the economic fallout is for investing Americans and/or Western countries?

2. How long does this last?

3. What are the outliers (second derivatives) both extreme and less consequential?

4. Is this thread a major overreaction to reading too much into this?

5. Any insight in general?

Moves I have made since the summer:

Like always long the S&P 500 through Vanguard products for the most of our stuff.

1.  Long nat gas

2. Short Russian equities through leap put buying of the RSX

3. Long oil

4. Long quite a lot of USD with position hedged by diversifying with some FXF (CHF ETF)

5. Short TKC through leap puts in July 2022

There it is.  The musings of a first world American.  Any investing thoughts?

My guess is the invasion(s) will not happen until after the Chinese Olympic games.  The question I have is does China use the same time frame to go into Taiwan? 

If one or both of these happen, I would think we could see $100+ oil for a while.

ArnoldK

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Re: Russian invasion this weekend? What it means for markets.
« Reply #16 on: Today at 08:57:36 AM »

My guess is the invasion(s) will not happen until after the Chinese Olympic games.  The question I have is does China use the same time frame to go into Taiwan? 

If one or both of these happen, I would think we could see $100+ oil for a while.

This is a fair guess. It could be that Putting is colluding with Xi. Xi could ask him to wait. A possibility. Putting understands that olympics are precious for regimes ie Sochi.