This is a longer email, but mostly as I get distracted when I write before finishing! In this unofficial ‘newsletter’, I cover: last minute tax items, comments on markets/geopolitics/ and invitation to tennis.
Last minute tax callout: If you have any IRA, 529, or SEP contributions you have not yet made for 2021, please contact us as soon as possible as time is running out!
As you would suspect, we have been reading volumes of information on both the historic and market implications of Putin’s invasion of Ukraine, including talking/listening to people living in or near region. If curious, good resources have been what I call ‘aggregators’ of information, or collections of smart people sharing comments: (of course) Raymond James research, WSJ/Barron’s, Real Vision, Epsilon Theory, ZeroHedge, BBC and John Mauldin. If surviving 2008 and COVID have taught me anything, always assume news has an axe to grind and be sure to read multiple sources to take a more measured view of what is happening. I thought I would share some of my personal observations and opinions from this reading with every effort towards maintaining investment objectivity:
-It has been illuminating to read coverage of war from different countries (find a VPN and surf away). While the methods are almost universally condemned, some in the region have sympathy for Putin’s desire to prevent NATO from abutting his borders and there is an active debate on the purpose of NATO pre and post invasion. It is impossible to predict the geopolitical fallout and there is no consensus. Though with the Russian army currently halted and things not going according to plans, future dictators may think twice about similar unilateral actions more in favor of diplomacy. Don’t mess with Ukraine.
-As has become clear, this is Putin’s evil invasion, not that of the Russian people. I understand growing anti-Russian sentiment, but I’m hopeful Putin’s war doesn’t translate into a broader culture war, which seems is part of his strategy. Tomorrow is an interesting test: Mark Vander Hei, who now holds US record for longest consecutive days in space, will be returning home from the ISS on a Russian spacecraft with two other Russian scientists. I pray all goes well. I also pray we maintain cultural relations with the proud Russian people. I’m still playing and loving Rachmaninov. I also saw a touching video of Arnold Schwarzenegger talking about his Russian body building hero, if you have a moment.
-Putin does not have history of backing down, but my unverifiable opinion is that he’s acting crazy with scary threats as negotiating tactic to keep US at bay. I don’t believe he will stop until he gets what he wants (Crimea, Donbass, NATO assurances) militarily or through diplomacy. This means more likely than not, in my honest opinion, it is a longer war but not as likely (not impossible) that it spreads as it seems the goals are contained and seemingly within the realm of negotiating possibilities. I say this while acknowledging the historical context of tariffs/isolation, rise of nationalist leaders, formal alliances, and unilateral military action makes what is happening worth watching extremely closely. I hope we have learned and global economies, despite recent actions, still are far more interconnected than at any time in previous centuries. By shooting an enemy, you’re still going to hit your own foot.
-On a positive note, have you been to a restaurant lately? Americans are out and about & spending! Representing 70% of our economy, this is a powerful force counter to a recession and personal balance sheets remain flush. There are loosened “animal spirits” now that the Omicron wave is behind us and (for now) other emerging variants do not seem as dangerous.
-Globalization, which on balance has been a massive success to global growth, could be over for now. Nearly every country is moving inward and trying to become less reliant on global supply chains. This will have massive economic and geopolitical implications difficult to predict. I don’t think much of it will be good as it will also be an inflationary force while likely heightening geopolitical tensions. As is usually the case, the poor in developing countries are most likely to suffer, just as they were the ones who most benefitted from globalization. However, the US is better positioned for this type of shift than most other countries—for instance, we’re both nearly energy and food independent.
-I’d love to reiterate the humanitarian appeal from last message. This is especially important as Ukraine was considered USSR’s “breadbasket” and supplies a huge percent of the world’s grains. If they cannot plant and food doesn’t restart flowing through Black Sea ports (Russia also produces a large amount of food through the Black Sea), many parts of the world will see food shortages. If you have ability, World Food Programme, International Rescue Committee, and others are working to alleviate these crises.
-On a personal note, we in the Lowcountry are accustomed to preparing for hurricanes every year even though large ones hitting are a rarity. I would treat the situation as a hurricane in the Caribbean and prepare personally accordingly—except the boarding windows part. Probably won’t hit us, but best to be ready. Follow your checklist as a cyber-attack to our electricity grid, which would probably shut power for a period of time like a hurricane, remains a real possibility. If you have a business, make sure you are paying attention to cyber threats. Change your passwords. Don’t open suspicious email. Use two factor authentication.
On a lighter note! With our move to DI, now we’re walking distance to the newly renovated Capital One stadium! We bought a few tickets to all sessions and are starting to reach out. If you’d like to attend, let us know! https://www.creditonecharlestonopen.com/single-sessions/ Similarly, I still hold season tickets to Charleston Jazz Orchestra and am delighted to share them! www.charlestonjazz.com.
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