Spekulatius

It will take a long time to get a true picture of what really happened and is happening during the war. I think about one generation. Historians works best when everyone involved in an event is already dead. Getting access to US assessments, the Ukrainian side and most importantly material from the Russian side will require a long time. We probably get to see some movies with very subjective views first. Maybe Rambo comes out of retirement and does another tour there.

Looks to me like the GBP and the UK economy is melting down. I follow GHH (Gooch and Housego) simply because I dealt with them in the past with my job and a new some folks working there and the stock has lost half it's value this year and then there are the GBP losses on top. The stock looked quite overvalued and I can't make a valuation case even now, but that performance is really something to behold.

No question that war only makes sense with a valid objective. otherwise you can win all the battles and lose the war, just like what happened in Vietnam. I think in the end some wars are worth fighting and getting involved in and others are not, WW1 and WW2 was worthwhile for the US to get involved in, Korea as well, Vietnam was not, Irak (imo was not) and Afghanistan highly questionable. I think Ukraine is worth getting involved in because it affects security in a very broad sense for Allies and the US eventually and there is a ruthless dictator on the prowl. Furthermore, we do not have to put boots on the ground, we just have to supplies the means to do so to a very capable and hard fighting nation (the Ukraine), which also makes the situation unlike Vietnam. Now there are other wars like Birma / Myanmar (military junta), Armenia vs Azerbaijan, Syria, Houthi , Kashmir and what not. in each of these cases, it is not clear to me that the US or Nato could help and what the objective should be. So in my opinion saying - look there are many wars going on why do we something here and not there - is a strawmans argument that doesn't hold water. By the way, this perfectly holds true for Taiwan. US should absolutely support Taiwan's independence, because there is a clear objective, it is doable, there is a will from the population to stay independent and fight for it and it also serves our interest, as well as it seems the right thing to do from a western moral POV. Some may not agree here, but that's how I see it.

Luckily, we can have either inflation or deflation, but we can't have both at the same time. One thing that people don't realize that as far as economic growth was concerned in the US and Europe, the 70's were actually better than the last decade. the issue was that the growth was extremely uneven and short burst of growth were followed by sharp recessions. just look at the economic indicators during 1978-1981 if you want to have some fun. You literally had 180deg turns in the economy several times back to back during this short time period, basically a wild roller coaster ride.

@Castanza, I predict that the Russian conscripts are getting massacred if they indeed hit the front line. They Motivation and equipment is abysmal. If they indeed get used on the front line, I think we are seeing 30% casualty rates if not higher. We do not know how many have been drafted burnside clear that it’s way more than 300k, probably between 500k and 1M, so you can do the math here how many dead and severely wounded we will see. The Russian army has already been constraint by logistics before, so now with many mor soldiers , they will be even slower moving. So, I think the Ukraine could be able to take huge amounts of prisoners here if they can most an offensive and encircle some of those static troop concentrations. If Russia were smart, they would use these troops just to improve logistics and as a backup but then again, it wouldn’t make all that much of a different. My bet is they are trying to do a Volkssturm here and that will end up with a disaster. Another interesting fact - apparently some conscripts have already reached the Ukraine. You can do the math here, these guys can’t have 2 weeks of training yet, possible nothing. Also, somewhat independent of this, the Russian economy will take a huge hit from this mobilization. Expect double digit declines in economic activity just from that, then add sanctions, lower energy prices, no money from NG exports to Europe, lower weapon exports. The list goes on and on.

Since we keep digging into this BNB rabbit hole, it is interesting to note that BNB was a very boring dividend stock for most of its history dating back decades. They paid a slowly growing dividend until 2008. In 2008 the GFC happened and BNB on behalf of the government (I presume) let their balance sheet mushroom, I guess that was sort of a QE. I am not really sure why they did that as the European central bank does monetary policy, but ma be these smaller satellite banks did thismon top of the ECB for local needs, although they had a a lot of USD assets at some point. Initially this was great and interest income mushroomed (the BNB dividend gets paid a share of the fixed income form their bond portfolio ) and so disintegrated dividend in 2009/10. However then , the income started to drop (lower interest rates) over the year and the stock price reflects that. Nw we got huge MTM losses in fixed income apparently that prevents BNB from paying out dividend but I think eventually, the higher interest rate (should they persist ) should lead to higher interest income and hence dividends eventually. That assumes that the left tail (BNB goes broke or more likely gets taken under) does not happen. So with a longer perspective and knowledge of the local idiosyncrasies (which I don’t have) this could be an interesting Investment eventually. I also think it’s possible that these thinly traded shares gets washed out totally before that in some sort of liquidity event. So, it’s an interesting one to watch.

The USD is quite something and is quite a deflationary force, if you live in the US (or have assets denominated in USD) going forward. look for example at the Price of VISA stock, one time quoted in Euro (German stock exchange) and one time quoted in the US (in USD - blue line). Looks like a nothingburger in Euros and a disaster in USD. Visa does ~50% of their revenues in non-US currencies for reference. Same with some manufacturing. The company I work for has companies and assets in Europe (mostly Germany) and the US (where I work) and there some overlap to what we are doing. Well their cost structure just went down almost 20% by means of the exchange rate. Now it is true that energy costs went up, but this is light manufacturing , so energy is maybe a few percent of the BOM. They still are way cheaper now than they were 12 month ago. I think some people that talk about near- shoring are forgetting that it does not work from cost POV with the exchange rate. maybe it works for some energy intensive goods like basic chemicals, but light manufacturing has just gotten one hell of competitive boost in Europe, if they work in export business in the dollar space. Besides that, we don’t have the labor pool anyways in the US. I think the exchange rate angle is underestimated, because the average person in the US doesn’t tend to deal much with them. I think however that soon, a few EM‘s start to blow a gasket (Turkey, Pakistan etc) and that will lead to demand destruction for commodities (which are quoted in USD). I also think that there is a strong possibility that China needs to drop the USD- Yuan peg and let the Yuan slide because they might have trouble keeping their currency tied to the USD, because their economy is weak and they export anlogt into other EM‘s or Europe with weaker currencies. For this reason, I don’t think interest rates in the US may not rise that much. They may have to rise more in Europe but that will only happen after the winter. GBP looks screwed, they are getting hit from multiples angles and @SharperDingaan house in London has lost and will lose a lot of value in USD (trigger alert).

@Viking thx for the color. I hold just a bit of PBR and a tiny slice of SU (so far) Holding them all in IRA's and would prefer dividends. CNQ might be a good bet here. They have been doing much better than CVS or SU over time. CVE had some ill timing and SU operational issues. I do know SU best as I followed it for years. I held Petro Canada and Canadian Oil sands back in the day and they both ended up there.

No surprise here. Russian gas to Europe is done for the foreseeable time. Everyone who thought differently hasn't paid attention. A new Iron curtain is what we have in Europe. Gladly it was pushed towards the East, compared to the cold war 1.0.

Energy securities are for trading not owning. I do agree they are starting to look cheap here.

The Russian mothers are not doing their job like they used to that's for sure. As far as Vietnam is concerned, I am guessing a lot of people here haven't really studied this and rely on generalities. the fact is that US soldiers did quite well in Vietnam when you just look at the stats - 58K US soldiers killed vs 500k-1M Vietkong). That's 10-20x kill rate which i consider quite good. Also, the US military never lost a significant battle in Vietnam and all the offensive of the Vietkong failed (Thet offensive being one that caused huge losses for the Vietkong). During the time that the US has surged ~500k soldiers at the peak, the Vietkong really couldn't accomplish much. the problem of course was that nobody in the US wanted to keep that many soldiers in Vietnam indefinitely, so the US pulled out in the early 70's and the South Vietnams couldn't withstand the pressure from the more determined Vietkong. So a total different situation than Ukraine where the US has no boots on the ground and just supplies weapons to Ukraine who happens to much more determined and fights smarter than the Orc hordes from Russia. Anyways, I think most people nowadays think that Vietnam was a military defeat and it wasn't, imo. It was a political defeat and a case where a limited engagement turned out in an open ended one, that the US didn't want to fight any more.

@Cigarbutt There is no particular reason I stuck this BNB drama in this thread other than it fits loosely the narrative here and I found the situation mildly interesting and entertaining. You could absolutely play the stock here with the expectations that the dividend comes back in a few years and the stock recovers. I do think that there may be risk that the Belgium state takes advantage of the situation and either buys out the public shares cheaply or recapitalizes it's central bank and zeros the shares that way. I would guess however that this is probably unlikely and perhaps not even possible by law (but I have no idea). So not investment from me but I keep watching the stock as perhaps a situation arises that makes me put a little money in. I think there is a broader applicability for regular banks stocks that have large bond portfolios (EXSR, I am looking at you!) that are market to market in GAAP but apparently those unrealized losses don't affect statutory capital Feels a bit like Coyote going over the cliff but keep defying gravity unless he decides to look down....

I saw this trailer on YouTube as well. Look pretty good. The old 1930 black and white one is still the gold standard. The 1979 remake couldn’t touch it, but this one looks promising. Sadly, the material seems now as current just like when it was written or filmed in 1930.

@changegonnacome I think your are wrong that the West would do nothing after Russia dropped a Nuke on Ukraine. Biden mentioned "catastrophic consequences" and I don't think he was talking about an UN speech here. Sort of funny that people who have been wrong all along keep making predictions that likely turn out to be wrong as well.

Another thing I learned when listening to a long form documentary about the energy crisis. it is astonishing to which extend Russia had impact on the the European energy infrastructure and part of the info is new to me. I knew that Russia owned pipelines to Europe, refineries but I didn't know they even owned the strategic gas storage facilities. There actually were experts sounding alarms in Europe that Russia was sending less NG to Europe as early as spring 2021. What this meant is that the NG storage was relatively low in 2021 and of course in early 2022 when the invasion got started. The likely conclusion is that Russia laid the groundwork for the offensive probably as early as 2020/21 and started to reduce the European gas storage via lower flows while European politicians were asleep at the wheel. That was obviously done to put the screws on Europe once the military actions was getting started to counter sanctions. On another note, the offensive in the East doesn't seem to be done yet. It looks like the Ukraine has achieved another breakthrough east of Izium. That one could end up as an encirclement of sizable amount of Russian troops in Lyman. It's slower moving than the Blitz from Kharkiv 2 weeks ago, but seems to gaining traction, especially if Ukraine can gain ground from the Southern direction near Swerdonesk as well.

Putin stated on several occasions that he regards Ukraine as part of Russia. He claims it is an artificial construct created by the Bolshewiks. https://www.nytimes.com/2022/02/21/world/europe/putin-ukraine.html No reason to overthink this. It's good old fashioned imperialism. All his talk about NATO threat is just a pretense and is all BS. He clearly want to make Ukraine part of Russia again. Why should the west or Ukraine accept narratives and red lines that Putin draws up nilly willy as he sees fit? I know about Russian history but that does not mean I accept his narratives. As far as I know, the Allied did not accept Hitler's narrative too. He saw himself in the line of Barbarossa (chosen as the campaign name for the attack against Russia) Karl the Great ,Friedrich the Great and what not. Every Dictator tries to a justify his acts based on history and lineage. they do this to justify what they are doing. Nothing special and profound about this and doesn't make it right either.

When it's all said and done, I think almost any sector benefiting from COVID-19 will get whacked and mean revert. List so far: online retail, Tech, Lumber, Energy, building/construction, Cable, PC's, semis, consumer credit, retail List just gets longer and longer...

With the more of less full mobilization and Russia switching to war economy, I can not see that this ends up in anything but an economic train wreck for them. I think they are likely to see a double digit decline in their economy. headwinds are: 1) Sanctions 2) No NG exports to Europe (their own choice) 3) Mobilization & switch to war economy and war expenses 4) lower oil prices and having to sell oil at deep discounts

I wouldn’t count on the 70’s to return. I do agree on NG likely being a better bet than crude, but it’s hard to invest in. The producers have short lived reserves and that spells trouble dying any short term downturns. I have been looking into SHEL which could be a long term beneficiary due to their large integrated gas business but they have been so terrible in terms of capital allocation that I would need a larger discount to fair value to invest and even then, I would need to hold my nose.

Unfortunately we cannot count on Putins removal. We have no insight on what’s going on, the autocratic regimes are brittle - they seem hard and impenetrable from the outside, but they are likely all rotten on the inside. Anything could happen or nothing. This guy has a decent podcast and shows how the mobilization is going. Unbelievable…

@Xerxes I have no idea who Sauron is. I suspect we haven’t seen him yet and that he turns out to be a fallen Elf. I found the Episode 5 of Rings of power very enjoyable, I love the little sidelines adding color to the world like the wonderful “Wandering Song”. A waste of time one could say for the storyline, but those details, poems or side storylines were also prevalent in Tolkiens work and make it so special. So, I hope to see more of it: The Hartfoot hobbits are growing on me. I guess that man fallen from the Sky is going to be Gandalf.

One thing that’s clear already from the news is that this is not a partial mobilization it is more or less a full mobilization. It’s much more than 300k for sure, maybe 2-3x that. You can find picks where they are loading up men that are around 18 year old in buses. No military experience required. They probably go straight to the front after one week of training. Some get rusty AK-47 (you can find the videos on Reddit/Tiktok. Those weapons will never shoot. So this is now Special operation V3.0: V1.0 - Kyiv bum rush. Lost, had to retreat. V2.0 - Donbas creeping artillery barrage - stopped by HIMARS and Ukrainian counteroffensive into soft spot. V3.0 - Volksturm, Hold the line? Human wave attack? Plug holes in frontline? Not sure what the plan is. Likely result is hundred thousands of Russian dead. War is going to take for a while until these “reserves” are chewed up. Then we wait for Putin‘s next move.

Everything can happen. WLK hit book value today, so if you believe that WLK can earn more than its cost of capital over a cycle, then WLK is cheap. I think the US based chemical industry should win market shareholder European ones and maybe even Chinese ones due to lower input costs (NG). That should create some floor to margins even in a recession.

Agreed. To be honest, I am not even sure that the "superspikes" are causing the recession or if they are an indication of imbalances that area leading to it (more of a symptom than the disease). For example, we had a "superspike" in crude and even NG prices in mid 2008 when the economy was already on the ropes so to speak and after bear Stearns already was sold off to JPM. This was later followed by a GFC which was caused by leverage in the financial system not energy. Coincidence? I do think that the fact that prices got that high was tell for issues yet to come. As for the current situation, i am more interest in old economy spread based business like $WRK (which i added to today) and maybe $WLK (chemical with a pretty good management, don't own it yet) but I did buy a little $SU in my IRA just to keep me interested. SU has the potential to become a good dividend stock, imo.