Blain’s Morning Porridge – 8 March 2022 – The risks of appeasing Russia versus the risks of not.
“An appeaser is one who feeds a crocodile, hoping it will eat him last.”
This morning: Markets are nervous and set to tumble – spooked by $140 oil, soaring commodities, rising populism on inflation, and stagflationary risks. Some ask: “perhaps this could all be avoided by settling with Putin?” Forget the past at your peril. Appeasement is not the answer. Intimidation stops when you fight back. Now is the time for the west to step up the pressure.
The headlines this morning are all about market carnage and worse to come.. Yawn.. Seen it before. Steady boys steady.
Father Ted attacked the Russian Embassy in Dublin Y’day. A lorry loaded with “Ecclesiastical Supplies” crashed through the gates to applause and bemused Garda. That would be an ecumenical matter then? The Russians have gone full scale sanctimonious fury: “The embassy strongly condemns this criminal act of insanity directed against peaceful diplomatic mission… We believe that no people of sound mind could support such senseless and barbaric actions.”
Barbaric actions indeed. Wait till the IRA drops a thermobaric bunker buster on Putin’s Dacha…. Then they will know…
Straight from Radio Moscow: talks continue between Peaceful Russia and the Warmongers from Ukraine. Russia is a peaceful country with everyone’s best interests at heart, kindly offering Ukraine the opportunity to avoid this unnecessary unpleasantness by immediately surrendering unconditionally, ceding swathes of disputed territory to Russia, and writing into its constitution that it will never play with anyone else except Russia.
Lots of Westerners want Ukraine to take this deal. The Spanish coalition may even split on it as Podemos says the problem can be solved through diplomacy. Really? Jeremy Corbyn (who??) is proposing much the same in the UK.
It’s called appeasement.
For all the talk about giving Putin an “Off-Ramp” – Motorway Exit as we prefer to call it here in Blighty (actually I’m still in Dubaiski) – the West has to wake up to the fact we are at War. We want to keep it an Economic war rather than it turn hot – but that means going all-in and taking considerable pain. There is no off-ramp. Maybe we offer the Kremlin a tow truck to drag what’s left of invading army off to the scrap yard – or so we hope. There is a serious risk the West is getting a bit Euphoric about how well Ukraine is resisting.
We are battering Russia with Sanction and Economic cluster bombs. They are responding with disinformation and fake news. Yesterday I got a call from a Russian Journalist who seriously wanted my thoughts on why Russian peoples should be punished by the West when it was Ukraine at fault. Whateva…
Disinformation works in mysterious ways. The Russians are very clever.. leavening lies with a few grains of truth.
For instance, I found myself a tad agitated read a statement by prominent Ukrainian Oligarch, Rinat Akhmetov, about how he is personally saving his nation during this “tragedy”. Lots of likes on Linked in. But, look up this “charming” chap for yourself – he ticks every box. He is a resident Ukrainian who did rather well in unclear circumstances from the Soviet breakup, owns a massive London pad, and is said to be leader of the largest pro-Russian party in Ukraine.
Unsurprisingly, his comment was long on what he was doing for Ukraine but omitted to actually mention it’s the Russians bombing his nation, or to criticise his chum Putin, and made zero comments of support for his own elected government. I guess it’s called hedging your bets. One trusts the UK government will be looking at his interests and property in the UK and inviting him to explain the sources of his $8 bln fortune.
Markets are nervous. NSS!
One US chum who knows lots of stuff told me he’d been drawing nuclear yield circles on his office wallmap to check how his upper East Side apartment will fare if the big one drops on New York. He thinks that unlikely – apparently ‘Merica and Russia already agreed no strikes on Washington or New York in return for leaving Moscow intact. But, London and Brussels are apparently fair game. Gulp… Someone tell our Trident captains..
The market consensus is not positive – rising commodities, rising inflation, and crashing sentiment. No Sh*t Sherlock for anyone thinking this is bad.
The indices down past correction levels, bear markets, bonds, commodity prices – they say it all. The numbers contain so many obvious bear signals – Oil, Vix, Yield Curves, and rates. It’s time to look for the ones we’re missing – like surging bank CDS – credit derivative spreads are rocketing wider, inferring rising concern. And I haven’t even mentioned China…
But there is clearly value out there. As Warren Buffets – back in the top 5 wealthiest list on the back of fundamental long-term investment – puts $5 bln into Occidental, it’s interesting yesterday’s biggest gainer was Oil services firm Schlumberger because of belated understanding that signing up to ESG principles did not negate our need for energy and lots of it.. Now.. It’s what we call a “Doh!” moment…
Relax. Breathe deep. Recite the key mantra – “Things are never as bad you fear, but seldom as good as you hope”.. Say it often and loud enough.. and how knows, it might actually be true..
But one thing does worry me.. Oil.
The Russians intend to win this economic war through intimidation. When we talk about further sanctions – they threaten to cut off oil and gas. Yes Please. Good luck selling it – Russian oil is trading at a $23 discount. The west must wake up to Russia really not having our best interests at heart..
Yet Oil at $130 is causing real economic pain – one estimate is $250 by summer. That will not only hurt – that runs the risk of massive de-stablisation across the West. Ironically enough the big risk is populism – since so many think Putin is smart. It may cost Macron his apparently unlosable election if the gillet-jaune blame him. It will be Donald Trump’s greatest recruitment tool if Middle ‘Merica screams foul at $10 gas!
Here in the UK? Time we got over Brexit and start talking to Europe. I’m not proposing we rejoin the project, but reengagement with Europe looks sensible. We all stand together, or surely we will hang separately…
Five Things to Read as Markets Unravel.
Out of time, and back to the day job..
Strategist – Shard Capital