A Look At Some Investment Considerations Amid Russian Invasion

Russia Invades Ukraine 

A couple of weeks ago, we shared Russian journalist Anatoly Karlin's prediction of a Russian invasion of Ukraine, and suggested readers hedge in light of it tracking ETFs such as the SPDR S&P 500 Trust SPY or the Invesco QQQ ETF QQQ. 

Hopefully, some of you took that opportunity to hedge. As we write this, the invasion is happening, and as Anatoly Karlin predicted, Russia has decided to go big. Since Germany had already canceled the Nord Stream 2 pipeline system, which is majority owned by Russian energy company Gazprom OGZPY, and Russia was going to be subjected to sanctions for its Ukraine incursion anyway, it had little to lose. 

As of early morning Ukraine time, airports across the country had been struck. 

The tweeter above, Julia Skripka-Serry, is a Ukrainian pharmaceutical securities analyst and investor we've corresponded with for years. Footage of the airport pictured above being struck by a Russian cruise missile is in the tweet below. 

Russia struck Ukrainian seaports too. 

As Mark Ames noted, Russia hit every port and airfield mentioned in Putin's speech Monday as having been refurbished for NATO use. 

At least one Ukrainian Air Force plane hightailed it for Romania rather than facing the Russians. 

Apparently, that Ukrainian pilot wasn't the only one trying to get out of dodge. 

Russian troops from Belarus invaded Ukraine from the north. 

This is consistent with Putin's argument last year that Belarussians, Ukrainians, and Russians ought to be essentially one nation, as Anatoly Karlin wrote in the piece of his we shared here recently: 

The capstone to the Nationalist Turn was laid by Putin in his seminal July 2021 article “On the Historical Unity of Russians and Ukrainians“, in which affirmed that the Ukrainians are a colorful and distinct, but nonetheless inseparable, part of the All-Russian nation, drew a straight line between Ukraine as a de facto colony of Germany following Russia’s exit from World War I and its relation to the West today, repeated his long-standing view that the Bolsheviks laid a time bomb by including the right of secession in the 1924 USSR Constitution, and noted the coercive nature of “Ukrainization” as an ideological project aimed against “so-called” Great Russian chauvinism, thus securing at the state level “three separate Slavic Peoples” – the Russians, Ukrainians, and Belorussians – as opposed to the “large Russian nation, a triune people comprising Great Russians, Malorossiyans, and Belorussians.”

The Fog Of War

As always in war, early information sometimes proves to have been false, so we've tried to be judicious with what we've shared here. There's still much we don't know. For example, what's the current status of the so-called "Babushka Battalion"? 

What has happened to the "lethal aid" sent to Ukraine by the U.S. in recent weeks remains a mystery as well. 

The best we can hope for at this point is that this war ends quickly, with minimal casualties, and none of the weapons we sent there end up in terrorists' or criminals' hands. 

Investment Considerations

As we wrote last week, the likely implications of a Russian invasion were stocks heading down, with the possible exception of some commodity names. 

From that post:

The likely market reaction to an all-out invasion of Ukraine by Russia would be probably be to the downside. For that reason, as we suggested yesterday, you might want to consider hedging by purchasing optimal put options on a broad based index ETF such as the SPDR S&P 500 Trust (SPY) or the Invesco QQQ ETF (QQQ).

One sector that may rally in the event of an invasion is oil. Our current top oil name is the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares ETF GUSH.

We'll see how GUSH does on Thursday. There will likely be some bargains in other sectors in the wake of the current war in Ukraine. We'll discuss that in a subsequent post.