Jan. 26, 2022

Investor Alert: What If Ukraine Goes Live?

On Monday the Biden Administration Issue a Stern Warning to investors, that Ukraine was about to go live.

Well, as anyone who listens to the news well knows, that's not true. Most emphatically, the Biden Administration did not issue a warning to investors or anyone else. Because as we all know now, that's not how governments work.

Instead, the Biden Administration did remove all diplomatic personnel from Ukraine. And I believe that's what caused the slide in equities on Monday, and continued on Tuesday.

It's not what they say after all that counts, it's what they do. And to remove all of America's diplomatic corps makes quite a statement.

So that raises the question, what should investors expect, if war breaks out in Europe.

And I think unequivocally, we should expect to see just what we saw during the first half of Monday's trading session. Not the afternoon rally, but the morning steep decline.

War would not do any of us, any good.

Analysts at the major brokerage firms are already projecting that the price of oil, for instance, remember Russia is a major oil exporter. The price of oil would skyrocket should war develop.

This would add gas, pun intended, to the already flaming inflation we have here in America.

But the war would be a calamity to worldwide trade. Exacerbating the current troubles in the global supply chain.

Virtually everything that's going wrong in the worldwide economy would get worse. As nations close their doors and retreat behind their borders.

Now there are some basic lessons that investors can look to when a major bear breaks out. A study, by Investors Business Daily, that I recall from several years ago, indicated that in a bear market something like 85% of all stocks declines.

Now certainly, at the margin, there will be some companies which will profit handsomely from the war. I would guess these would principally be defense companies, and any manufacturer of the weapons and strategic goods needed to fight the conflict.

But in terms of an asset class, equities would be under pressure.

However, there are a few asset classes, which generally perform well in bad economic times. I would think that precious metals, gold silver platinum would do relatively well.

Generally, a nation's sovereign debt, assuming that it's a winner in the war, nation's sovereign debt does well. Historically the US Treasury Bonds have been at the top of the list of safe-haven assets.

One of the most interesting new asset classes is Crypto Currencies. In theory, Cryptos, such as Etherium and Bitcoin, should be expected to do well, as they would likely sail above the conflict. After all, they don't need a physical bank or location.

For months, I wonder just how Cryptos would perform if the internet went down in a big way? This conflict, if it does occur might answer that question.

Finally, a group of stocks to look at are the so-called “sin” companies. If history is any guide, these stocks may not do well during the first part of any bear market. Like most stocks, they also decline initially.

However, once the bottom is reached, they are usually early to recover. Because if there's something you need when times are bad, it's a stiff drink and a cigarette.

We all hope and pray that war does not come to Ukraine. But I thought we should look at some of the ramifications.

After all, it was a pretty strong message that the President and his administration were delivering. Something that Wall Street certainly has taken to heart.