What was Putin thinking?
Abraham George Market Musings
Oil is trading well above $100. Given the current geopolitical events, it shouldn’t surprise anyone. The last time oil traded above $100 was in 2014. But there was a big difference.
In 2014, there was a large increase in oil production supported by a strong and growing US shale industry. Today, global demand has been outstripping supply for six straight quarters. On top of that, supply has been shrinking due to global anti-oil policy. Since its meteoric rise from the lows of $27, I was thinking oil may find a bit of resistance around the $100 level for a pullback to the $60 handle but now I sense that may not be coming. With all the new developments, you may not get that pull back and oil could continue to rise.
The biggest concern investors have is not slower global growth or diminished corporate profits. Higher inflation due to supply chain irregularities and the spike in energy prices should give much bigger headaches for all leading central banks.
Jay Powell is testifying before Congress today and tomorrow. The market is already pricing in a quarter-point rate hike. Powell should set the table for this outcome at the FOMC meeting by the middle of the month. The Fed rarely surprises the market but will there be any change in plan. We should be able to read something more into it by tomorrow.
The State of the Union speech by President Biden to the House of Representatives just got concluded. Matters on Ukraine and Russia were very well received by representatives from both sides of the aisle. Biden gave a very timely speech to uphold democracy and stand by Ukraine. This should surely shore up his sinking ratings as the 9/11 events did for President George W Bush.
Did Putin make some serious miscalculations?
The US, Europe and Japan have responded with the severest economic sanctions ever put on a G-20 country. Export controls should cut off more than half of Russia’s high-tech imports. The Nord Stream 2 pipeline linking Russia to Germany has been halted. have banned Russian planes have been banned from entering US, EU and Canadian airspace.
The Russian stock market has crashed. Key Russian banks have been barred from the SWIFT, further isolating Russia from the global financial system. The Ruble is worth less than an American penny. Interest rates have been more than doubled to 20% to an economy-wrecking level.
Russian financial assets including those of Putin and the oligarchs are being identified, seized and frozen. Institutions worldwide are divesting out of Russian assets and cancelling contracts with Russian businesses.
Is invading and annexing Ukraine worth sacrificing all the above? The problem with Putin is that he probably has no advisors to tell him the truth. All his cronies are scared (and rightfully so) that they might disappear should they speak truth to power.
If you received value from this post, and you’d like to send some back, or if you’d like to signal to me to continue spending time on these types of explorations, feel free to buy me coffees (thank you!):
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate it if you could take a second and tell a friend. Honestly. It makes such a big difference.
Forward this email. Recommend the newsletter. Share on Twitter, WhatsApp, Telegram, LinkedIn, Slack, wherever!
Join Breezy Briefings’ Official Telegram Channel: https://t.me/BreezyBriefings
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is a co-founder of a new hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.