Ukraine invasion and the markets

Investment Analysis Clubs Macro Economic Trends and Risks
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A map of the Russian forces surrounding Ukraine makes their intentions clear.

https://www.dailymail.co.uk/news/article-10229427/Russia-pre…

In addition to the troops and armaments, Russia has been bringing medical supplies which are useful when wounded people are expected but not for exercises.

There is a narrow window for invasion since the ground needs to be frozen to avoid miring tanks in mud. The United States has picked up intelligence that Russia is discussing next Wednesday as the target date for the start of military action.

The United States and countries including Israel, Britain, Denmark, Germany, Japan, Latvia and the Netherlands have issued increasingly urgent calls for their citizens to leave Ukraine. 1

Jewish diaspora charities from the UK and US are working with Israeli security teams on plans to evacuate Ukrainian Jews from the country in the event of war with Russia.

https://www.nytimes.com/live/2022/02/12/world/russia-ukraine…

https://www.jewishnews.co.uk/operation-exodus-for-ukraines-j…

Here is a good article about the situation.
https://www.wsj.com/articles/russia-ukraine-putin-nato-11643…

How would a Russian invasion of Ukraine affect the U.S. financial markets?

If the Nordstream 2 pipeline is closed off, Germany would need alternative natgas supplies which might impact the energy market in the U.S. Germany gets half its natgas from Russia. I don’t think that the impact would be enough to cause a recession in the U.S. the way the 1973 OPEC actions did.

The markets might be volatile for a few days. But neither Ukraine nor Russia is a significant trading partner with the U.S.

Hopefully, the U.S. military-industrial complex will be kept under control and we will not get involved with a hot war with Russia over Ukraine. Hopefully, Putin will not be encouraged to invade any NATO countries (like the Baltic states) because that could lead to World War 3.

The Russians have done such a horrible job in Donetsk since 2014 that even the Russian-speakers are now pro-Ukrainian. It makes no sense at all for Russia to destroy human, infrastructure and productive resources but they don’t seem to care. Russian history is all about waste and suffering.

I think that it makes most sense for the Russians to install a puppet government in Kiev under threat of an old-fashioned invasion. Black helicopters and special forces. Less killing that way. (Though Putin doesn’t care.)

While the world’s attention is riveted on the Ukraine invasion, I bet that China will make a play for Taiwan. They can’t afford a “bull in a China shop” invasion for fear of damaging the extremely delicate crown jewel – TSMC. If I was China, I would bring in a few thousand special forces under the guise of tourists to Taipei. Then I would surround and take over the seat of government. Surgical.

Wendy

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If I was China, I would bring in a few thousand special forces under the guise of tourists to Taipei. Then I would surround and take over the seat of government. Surgical.

Wendy

Special forces guys don’t look anything like tourists. They would stand out like sore thumbs. Notably so if they were told to open their suitcases with weapons and ammo setting off alarms.

I recall showing up with a pair of pilots for a flight at Halifax airport to fly up to Montreal and ferry an aircraft back to Shearwater from heavy mods at P&W. Someone noticed our rescue flares in our Mae Wests and the security guys went into a loud confab. We left the flares behind with the security guys (the flight was mostly over land) and carried on with our task.

Anymouse

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WendyBG
The markets might be volatile for a few days. But neither Ukraine nor Russia is a significant trading partner with the U.S.

Wendy, Wendy, WENDY!

I am jaw-dropping amazed at your statement.

“Significant trading partner with the US” or no:

Given the interconnectedness of the entirety of world commerce, and the fungibility of the all important supply of energy, at focus in the discussion, a major eruption at the Putin/Ukraine interface cannot help but have a very deep impact on all markets, not just the US.

I honestly don’t think you meant exactly what you posted. At least I don’t think you did.

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<I honestly don’t think you meant exactly what you posted. At least I don’t think you did.>

Well, I don’t know what will happen. I’m just speculating.

After all, the markets weren’t significantly impacted by the wars in Iraq and Afghanistan, or by the U.S. withdrawal from Afghanistan with horrifying scenes of chaos on the news. The markets weren’t impacted by the war in Syria, despite Russian involvement. The markets weren’t impacted by Russia annexing Crimea or “little green men” (Russians in unmarked green uniforms) taking over the Donbas region of Ukraine. Or by Russia taking over Georgia or Moldova.

Do you think that the current stock market bubble will burst if Russia invades Ukraine? Do you think that stocks will plunge in value in a lasting way that will not recover in (say) six months?

Are you selling all your stocks tomorrow to avoid durable losses if Russia were to invade Ukraine next week?

Wendy

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If I were China, I would bring in a few thousand special forces under the guise of tourists to Taipei. Then I would surround and take over the seat of government. Surgical.

Wendy

From what I know, in my outsider’s view, of the Taiwan folks, the ‘tourists’ from the CCP would be quickly detected and set upon like the scenes of invader ants in an enemies’ nest. Quick and brutal. Lots of casualties, invaders and friendlies alike.

When it comes to those kinds of ‘confrontations’, there are no Marquess of Queensbury Rules. It would be succinct and brutal, to put it another way.

(The crown jewel, TSM? You’re correct. It IS the crown jewel of Taiwan. Holding it as a key part of the portfolio here, I am biased, of course.)

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If I were the Taiwan government, I would put the world on notice as to how badly they need a free Taiwan. And its ability to impact that at the current time.

I would take a page from plans to destroy Middle East oil fields in the past to deter a USSR invasion. This occurred in the Eisenhower years and lasted until the Kennedy years.

I would mine all the high tech chip factories. Then I would tell the world that if China invaded, we would blow up the factories - thus impacting directly all world economies as part of the pain. We all would suffer, including China.

We’ve seen how the pandemic has impacted auto, military, and other end uses due to a chip shortage. Imagine what if they were gone for the years it would take to rebuild.

I suspect this would put enormous pressure on China to not invade any time in the immediate future.

I also suspect this would speed up the drive for countries to rebuild their own chip capabilities and buy Taiwan some years of protection until this threat had lost its deterrence impact. Then I’d take out the mines and still have the factories to compete in world markets.

Sometimes it takes a 2X4 to get everyone’s attention that they are also involved.

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One thing I am sure of, in the event of an invasion, the “JCs” will jump on the opportunity to promote panic hoarding, and gouge customers like they have never been gouged before.

The news showed Zelensky, again, discounting the threat and calling for calm.

How quickly people forget, Zelensky was one of the first to start barking about Russian ambitions toward Ukraine.

26 November 2021

Ukraine-Russia conflict: Zelensky alleges coup plan involving Russians

Ukraine’s President Volodymyr Zelensky says Russian “representatives” are planning to overthrow his government next week, as a Russian troop build-up sparks fears of an invasion.

Mr Zelensky denounced a “very dangerous rhetoric” coming out of Russia…“It is a signal… that there could be escalation,” he said. “There is a threat today that there will be war tomorrow. We are entirely prepared for an escalation.”

https://www.bbc.com/news/world-europe-59428712

Surveys show most USians couldn’t care less, and would be fine with throwing Ukraine under the bus.

Steve…car was just below half tank today, so topped up, just to avoid the hysteria

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Surveys show most USians couldn’t care less, and would be fine with throwing Ukraine under the bus.

Steve,

Where did you get that?

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After all, the markets weren’t significantly impacted by the wars in Iraq and Afghanistan, or by the U.S. withdrawal from Afghanistan with horrifying scenes of chaos on the news. The markets weren’t impacted by the war in Syria, despite Russian involvement. The markets weren’t impacted by Russia annexing Crimea or “little green men” (Russians in unmarked green uniforms) taking over the Donbas region of Ukraine. Or by Russia taking over Georgia or Moldova.

Wendy

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Russia invading Ukraine is at least 100 times more significant to peace in the world than the wars in Iraq, Afghanistan, Donetsk, Luhansk or Crimea ever were.

Why? Because the European nations support Ukraine passionately. They believe that if Russia gets away with invading/capturing Ukraine, then they will be next. Thus the only recourse for Eastern European nations will be war with Russia, which means NATO must come to their protection.

Such a war in Europe will sink the stock markets around the world.

Jaak

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<Because the European nations support Ukraine passionately. They believe that if Russia gets away with invading/capturing Ukraine, then they will be next.>

Germany doesn’t seem to support Ukraine passionately. They aren’t even willing to give up the Nordstrom 2 pipeline.

The U.S. is sending (rather token) extra forces to eastern NATO countries (e.g. Poland) to reinforce the message that they won’t be next – the alliance holds.
Wendy

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Germany doesn’t seem to support Ukraine passionately. They aren’t even willing to give up the Nordstrom 2 pipeline.

Wendy

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Those are only your perspectives. Germany is the heart of European unity. Germany will give up Nordstrom 1 and 2 if Russia invades Ukraine. In fact all the European countries (not just Germany) will be cutoff from Russian oil and gas, and Russia will be cutoff from their import/export trade with European countries.

We will see the Europeans crank up their coal production/imports, oil/gas production/imports, raw materials production/imports. Europeans will suffer, but Russians will suffer even more.

Jaak

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After all, the markets weren’t significantly impacted by the wars in Iraq and Afghanistan, or by the U.S. withdrawal from Afghanistan with horrifying scenes of chaos on the news.

It does depend upon the perceived impact/importance. In September 1939, when Germany and the Soviet Union invaded and carved up Poland, Wall Street hardly reacted. It was quite a different matter in the spring of 1940 when France fell.

DB2

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Do you think that the current stock market bubble will burst if Russia invades Ukraine? Do you think that stocks will plunge in value in a lasting way that will not recover in (say) six months?

I think the markets are poised to go down further and the situation in Belarus and Ukraine just provides a cover story.

It is interesting to me that over the last several years there has been increasing holdings of gold and talk of gold-backed crypto yuan and ruble…so what happened to gold on the news? It moved up sharply…coincidental? I don’t have answers…just observations and questions.

If Putin and Xi are multiple year and multiple chess level players then perhaps one might be well served to look for not-so-obvious strategic motives in addition to the glaringly obvious story line.

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I would take a page from plans to destroy Middle East oil fields in the past to deter a USSR invasion. This occurred in the Eisenhower years and lasted until the Kennedy years.

I don’t know how it’s a deterrence when the existence of such contingency plans was Top Secret at the time. The plans weren’t made known for fear of angering the nations (and populations) where the oil was actually located.
https://nsarchive.gwu.edu/briefing-book/iran-nuclear-vault/2…

If I were the Taiwan government, I would put the world on notice as to how badly they need a free Taiwan. And its ability to impact that at the current time.
I would mine all the high tech chip factories. Then I would tell the world that if China invaded, we would blow up the factories - thus impacting directly all world economies as part of the pain. We all would suffer, including China.

That same idea didn’t work out so well in 1941 when FDR cut off the oil supply to Japan, which imported 90% of this even more crucial commodity from us. Within a few months: Pearl Harbor (although arguably the Japanese had been preparing for it for years.)

I think most people don’t know that we had a thriving 2-way trade relationship with Japan all through the 20’s and 30’s, growing every year. Threats didn’t stop them from their military adventurism as they took over Manchuria, parts of China, even Russia and Korea. This seems a remarkable parallel with us today with China (and to a lesser extent Russia), because when boys wanna fight, boys gonna fight.

I’m not sure there’s much we can do in this situation except 1) arm the combatants too raise the price for aggression or 2) get personally involved ourselves, which isn’t going to happen. Don’t get me wrong, if threats is all you have threats is what you use, but they’re weak and ineffective, usually, when confronting megalomaniacs.

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Goofy,

The threat was known to the USSR. They wanted oil and the CIA & friends knew the threat had to be communicated to USSR. Just not to the public and countries involved. They weren’t trying to bring other countries into opposing the USSR. So keep it secret.

As for Taiwan, the threat is to the rest of the developed countries if their supply of super chips disappears. In turn, they put the pressure on China. I don’t think China plans to invade because of just wanting the chips.

The parallel in both cases is to create a deterrence to invading. One in secret, one in public - both based around a critical material.

Most folks seemed to understand that.

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Germany doesn’t seem to support Ukraine passionately. They aren’t even willing to give up the Nordstrom 2 pipeline.

Wendy

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Here is a continuation of my previous response to your statement above.

Germany is increasing its contingent of combat troops in Eastern Europe. Defense Minister Christine Lambrecht announced that Parliament had been informed that we will strengthen the German led “Battlegroup” in Lithuania. The already existing “Battlegroups” in the Baltic States and Poland were set up in 2017 and are armed to the teeth.

In Rukla, the German-led Battlegroup commands the Lithuanian “Iron Wolf” Brigade, which has a right-wing extremist history. Originally, the Iron Wolf (Geležinis vilkas) was a fascist combat league founded in 1927 under the dictator Antanas Smetona.

The core of the “Battlegroup” consists of mechanized and infantry forces that can be reinforced by additional units such as special engineers or artillery according to the German Army Operations Command. The “Battlegroup” is equipped with a significant number of large vehicles, including several dozen tanks (battle tanks, armored recovery vehicles, tank-dozers, bridge-laying tanks, and armored personnel carriers).

On 2/9/2022, the new commander of the German troops in Rukla, Lithuania, Lieutenant Colonel Daniel Andrä, officially took over the leadership of the “Battlegroup” with Bundeswehr Inspector General Eberhard Zorn and Army Inspector Alfons Mais present at the handover. Together with other German generals, including Jörg Vollmer, commander of the NATO Joint Force Command Brunssum, and the Lithuanian Defense Minister, they celebrated the fifth anniversary of the Battlegroup.

Amid tensions around the security of the borders of Ukraine and in the wider region bordering Russia, Germany’s Defence Minister Christine Lambrecht has emphasized her government’s continuing military commitment on NATO’s eastern flank.

Germany is already making a very important contribution in Lithuania, where we are the only country in the European Union to have a complete “Battlegroup” Lambrecht noted. As a matter of principle, additional troops are available as reinforcement, and we are in talks with Lithuanians at the moment to find out what exactly would make sense in this regard … Everyone in NATO can rely on Germany.

https://bnn-news.com/lithuania-to-host-additional-german-tro…

Jaak

P.S. - Russia and Belarus are very very afraid of the German military and their battle tanks. The German “Battlegroup” stationed in Lithuania is closer to Moskva and Minsk than any other NATO “Battlegroup”.