What Is To Be Done? Buy The Russia v. Ukraine Dip?

The only reason why Ukraine and Russia are in this dispute is because President Biden gave up all leverage the US had on a global scale in terms of energy production, as I discussed here. Russia is the world's second-largest natural gas producer, the U.S. is number still number one, for now. But the idiotic policies the Biden administration has adopted like not renewing leases for drilling on federal lands for gas and oil will severely restrict what we can produce in the future.

In the meantime, other energy-producing countries follow these developments and use them to their advantage. OPEC and other oil-producing countries just keep on producing without regard for any consumer thus driving the price of oil up higher. The US is not able to set the price for oil on a global scale because we gave up that advantage. On the other side, you have our so-called allies like Germany making themselves dependent on Russian natural gas because they didn't want to deal with Trump. Germany, whose ex-President (Chancellor Gerhardt Shroeder) is on the board of the largest natural gas company in Russia, and apparently, that was enough for Germany to strike a deal to make the whole of western Europe dependent on Russian gas with the construction of the Nord Stream pipeline. This was obviously a stupid idea and now Germany has finessed itself and the rest of Europe into a full-blown energy crisis.

Let’s Break it Down

Ukraine is NOT a NATO member. There were opportunities to join but it never happened. In 2010 the country decided against joining NATO, effectively playing both sides (Western powers and Russia), clearly to the advantage of Russia which must have come at an advantage for Ukraine at the time.

Unlike NATO members, Ukraine does not pay a portion of their GDP to NATO in the support of global united defense and does not send troops in any conflict where NATO troops are engaged i.e. Afghanistan, Kuwait-Irag, Kosovo, Bosnia, etc.

Ukraine has been a country since the 1990s that has been plagued by troubles and corruption which has put it at odds with other European countries, it is not a member of the EU.

No foreign country has strategic military bases in Ukraine. Ukraine has been an ally to western powers because they literally sit between Russia and Western Europe. At times Ukraine was ruled by pro-Russian presidents, the last time coincidentally as Obama and Biden were in the White House. The Obama administration basically ousted the pro-Russian President and instated a more "independent"-minded president that will do the bidding of the western powers. This is all to the concern of many Ukrainians who see themselves as pawns of the western powers in a new version of the cold war.

Russia insists that they are protecting pro-Russian separatists in the Ukraine that are being attacked by the Ukrainian government with western help. There is a legitimate measurable number of the Ukrainian population that wants to be part of Russia.

What about those people?

Is the global community willing to pick sides in this civil war and just dismiss the concerns of these other Ukrainian citizens?

Russia aiding the pro-Russian separatists in Ukraine is not WW3. It is a civil/regional war that the U.S. helped to create by showing weakness on the world stage, why else did this not happen under Trump? Easy. Trump urged NATO members to ramp up defense spending so Russia would not feel emboldened to act in the way it does now, but instead, countries like Germany wanted to dismiss the need for a strong United Europe because it was “Trump's idea”. Instead, Germany hatched plans to make themselves dependent on Russian natural gas as a sign of defiance against Trump. Well, this backfired.

Now the Nordstrom pipeline, which sanctions were imposed by Trump and removed by Biden when he took office has been reinstated and now Germany is rushing to stop it being built, launching themselves in a world of hurt because their energy needs will be hard to meet now that the global natural gas production is shifting. Not a smart move.

Any interference of the US besides economic sanctions or humanitarian aid would be the absolute worst decision an American President could make, military intervention with U.S. troops would be more of a waste of life and resources than the botched Afghanistan withdrawal was.

Russia took its opportunity and struck, and the way was paved by ignorant Western European and American powers. Just like Crimea, Ukraine is now under Russian control and will now be either a vassal state for Russia or be fully absorbed into Russia and as much as it is spun by the global media to look like an unprecedented nefarious and authoritarian act of aggression by Putin (which it arguably is), we didn’t do much when the same thing happened in Crimea in 2014.

Does it really make sense to send all of NATOs combined forces into Ukraine and reduced it to rubble while we duke it out? No. Western Europe should open its doors to anti-Russian separatists refugees. For all that say that non-military action would embolden Putin to go even further, I say, it is already too late. The “West” has shown its weakness and now it is being taken advantage of. So what is to be done? Sanctions and treating Russia like Trump did with a strong hand should be the focus. If Nordstrom had never even Ok’d we might not have this problem now. But mistakes were made.

Now to the Markets

Overreaction is an understatement. Almost none of the latest American companies have much business in Russia or Ukraine. A war between Russia and Ukraine would affect global wheat, corn, and natural gas prices the most. Apple, Amazon, Salesforce, Nvidia, Disney, Pfizer, Deere, J&J, AbbVie, Tesla, you name it should literally see no effect on their day-to-day business by this. The market has been in a recent downturn because of supply shortages, inflation fears, a hawkish fed, rising labor costs but not because of fear of war. The financial media need some reason every day to explain why the market is down and Russia/Ukraine was a reason so they are going with it for now. Sure, ripples from any geopolitical inflict can reach far, but today’s investors are so easily spooked that it’s hard to believe they are the same people that experienced 9/11, the 2008 crash and several flash crashes since then. Not to speak of other global tensions like the aforementioned annexing of Crimea.

This is a buying opportunity and luckily you don’t have to search far. Everything with a recently good earnings report and a guide up for the year of the quarter is on the table. We are in deep correction territory and as I predicted here, this is a level I am comfortable with to say we are priced reasonably. Any further dip is a welcome opportunity. I will be buying o the way down as we don't know when exactly the bottom will present itself but we must be close.

Thanks for reading,

The Punkrock Capitalist