Sunday, March 13, 2022

Too soon

Nathan Rothchild is credited with saying "Buy when the blood is running in the streets." It is one of sayings on the lips of everybody on Wall Street nowdays.

He is also credited with having his own intelligence system which moved information much faster than official information systems. That provided him with an incredible advantage in trading currency and shares of stock.

If you knew Outer Elbonia had ceased to exist before anybody else, you could sell Outer Elbonian bonds at any price and still make a profit. You could sell Outer Elbonian bonds you did not even have because you could knew you could pick them up for the price of scrap-paper once the fall of Outer Elbonia became general knowledge.

Investors looking at the Russian-Ukrainian situation must be thinking "Is it time to buy, yet?"

Blood is running in the streets.

The future of Ukraine is still in the balance. Sure, buy Ukrainian assets or bonds if you feel an emotional need to support them. But unless you have very deep information about the outcome don't fool yourself into thinking it is a wise investment.

If Russia prevails and reabsorbs Ukraine then assets denominated in Hryvnia will be worth very little or nothing.

One dollar could buy a lot of rubles if you could find a place to transact the swap
The price of assets in Russia are also depressed. The risk of purchasing Russian assets is that the government may force you to divest them. That would cause a glut on the market if everybody must divest at the same time.

Absent any markets where an orderly purchase of Russian or Ukrainian assets with dollars can be made, another play is to find another market that is depressed but still functioning. An example of this would be to purchase mutual funds that focus on Emerging Markets or Pacific Rim or some other group of investments that moves out-of-phase with US equities and the value of the US dollar.

This is the route I am contemplating.

I swapped nearly all of my International investments for US Equities and fixed-income in 2015. It was a lucky move. I am feeling a nudge to move back into International Equities primarily as a hedge against Inflation diminishing the value of the USD.

My gut tells me it is too soon to re-enter those markets but I am watching. There are still too many imponderables roaming just outside the light thrown by the campfire.

  • Did Zelenskyy refuse evacuation because he knew he would be Epsteined based on what he knew about bio-weapon labs and corruption? That information, if true, could topple multiple western governments.
  • Will Russia attack NATO convoys bringing weapons into Ukraine?
  • Will the fields of Ukraine be planted this spring?
  • Will Ukraine mount attacks inside of Mother Russia disabling infrastructure needed to keep the wheels of Europe moving?
  • Will Com-China attack Taiwan?
  • Will the mid-East sprout fireballs and mushroom clouds?

It is too soon.

Another saying on Wall Street is "Never try to catch a falling knife". The knife is still falling.

9 comments:

  1. ERJ, good perspective. This is something that I have been asking of my very small personal investing account (the one managed by the retirement guy seems fine, but he is about as conservative on risk as I am). It is way too early, even in my non-financial opinion, to be "re-entering" anything - good heavens, we have yet to see what the impact of increased fuel prices and some level of food disruption will do here.

    If anything, we are re-examining our spending and thinking about other ways to generate some income.

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  2. One of the elements missing in the Western view of this is that Russia wants to decouple from the Western world. The Post WWII era is over, NATO is pointless in the new era emerging. Russia is moving in the direction of themselves and all this Wall Street, economic sanctions etc, etc... are not going to effect that goal, it actually helps them achieve it. The West is still fighting the Cold War and that has been over for thirty years.

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  3. Interesting perspective, and I'm smart enough to know that I don't know enough to play in the market. That is why I have my investments 'Professionally' managed in a fund.

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  4. I personally know many, and am friends with several, stockbrokers. Having been self-employed since 1974 I have , with the assistance of several of those stock brokers, managed my retirement funds and my personal investing with good results. Better than average. I can say that I do not know any rich stock brokers and that they do not, in most cases, know any more than any of you about where the markets are going. Invest in areas where you have personal knowledge and can see trends and you will do better than trusting someone else's guesses. If that broker is all that smart he doesn't need your money to earn a commission.
    Warren Buffett trades his own money. He doesn't need yours.--ken

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  5. Most trading houses have disallowed trading in anything related to Russia.

    I would have taken some Mad Money and gambled had the Russian stocks (devalued to near 10% of what they were, sometimes even less) been available to purchase. Might be a good long term investment in a year or more.

    But JPMorganChase did buy some Russki stocks that the rest of us were locked out of. The Big Boys have an advantage us little guys don't.

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  6. For what it's worth- My Israelie stocks are doing just as bad as the American ones.

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  7. I agree that it isn't time to invest in Russia or Ukraine.
    If I were looking to invest now, I'd look for investments pulled down by the fighting but directly involved - for example, are any Polish or Czech stocks down? Are there industries pulled down by high oil prices that will rebound once oil drops?

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    Replies
    1. How cute! You really think they have any intention of letting oil prices drop? Go buy your EVs and shut up, peasants!

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    2. I don't know where you live, but around here gas prices have already started dropping.

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