#13

Friday, February 25, 2022

Oil prices are on the rise, going above $100 yesterday to only fall back down later in the day. Regardless of the relatively small movements happening every hour, is it safe to assume oil will go much higher? Yes, very safe assumption. But what does that mean for the consumer and for the Fed when it comes to inflation rates? Those are interesting questions to ponder….

• For the consumer, you can/should expect gasoline prices to increase
• I’ve see calls for averages above $4/gallon which, again, not hard to believe.
• But how does the Fed combat further rise in this inflation? Good news for the Fed (if there is any good news here) given there’s so many factors at play, the Fed doesn’t feel the pressure to move so aggressively on their rate hikes. What was assumed to be a 50 basis points move (…..why TF can’t we just say 0.5%??) may now be a lower rate hike than originally planned.

With Russia aggressively on the attack invading Ukraine, there are lots of comments referencing WW3. But I also heard someone refer to it as WW-E (no, not the WWE of Macho Man Randy Savage or the place where Mankind would pull out a sock, called Mr. Socko, from his underwear and proceed to suffocate his opponents with…..no not that WWE) alluding to the idea that world wars may look different than the past. Wars where there are Economic pressures as the main vessel of pain. And this current situation may be no different. In addition, we’re starting to see the beginning of Russian cyberattacks to play out…. targeting banks, individuals and strategic corporate entities which further aligns to the idea of economic pain. Yesterday we heard the POTUS speak about the significant sanctions being used against Russia. Will this economic strongarming work? Hopefully the first 24 hours are not a good indicator. But as we always say…..time will tell.

The importance of energy independence is playing out in front of us. The world watches as NATO delicately makes moves given the situation at hand. And what’s that situation you may wonder? How dependent Europe is on Russian energy. Specifically, Russia supplies Europe with about 40% of its gas and about 30% of its oil. Yes, you should re-read the prior sentence again. Here’s a real-life situation that proves that dependence to be no bueno (#bilingual). Now Europe is diversifying, albeit slowly, away from Russian energy with more and more LNG (….Liquified Natural Gas. Pretty straight forward but CLICK HERE for more info.) playing a part. This can be a positive for several countries, including the US.

Here's why that’s important:

• Given the shale revolution that has occurred, currently, the US is a major natural gas and LNG exporter. In fact, the US provides about half of the LNG imports Europe receives.
• The Biden administration will be forced to support a ramp up in activity here at home to help fill the energy gap that our European Allies will feel from any disruptions in supply they could face.
• A prior mention on Boneless Wings #5 (story #1) also speaks to this.
• This may not be something you would expect to see from a Democrat administration…..but it’s something you should expect to see!
• If Europe wasn’t so dependent on Russian energy, we likely would have seen Russian access to the SWIFT system cut off.
• If Europe wasn’t so dependent on Russian energy, we likely would have seen sanctions targeted at Russian energy supplies.

Even though it may not be a popular opinion…..energy security is national security, which trickles down to global security. This ain't checkers people, it's chess!!

Yesterday, a formal declaration of Martial Law was made by Ukrainian President Zelenskyy, which temporarily (timeline TBD) substitutes military authority for civilian rule (military upholds the rule of law, not civilian or police leaders). It’s also understood that Ukrainian men aged 18-60 are required to stay and fight as part of martial law being implemented. This includes both heavyweight boxing HOF’ers Vitali Klitschko and his brother Wladimir Klitschko. Vitali has been the mayor of Ukraine’s capital of Kyiv since 2014 and has made clear he is ready to fight for his country and fellow countrymen.

Wladimir Klitschko took to social media stating “The Ukrainian people are strong. And it will remain true to itself in this terrible ordeal. A people longing for sovereignty and peace. A people who consider the Russian people their brothers. It knows that they basically do not want this war. The Ukrainian people have chosen democracy. But: Democracy is a fragile regime. Democracy cannot defend itself; it needs the will of the citizens, the commitment of everyone. Basically, there is no democracy without democrats.”

I can’t help but feel sad for this country and these people. A war they did not desire, and certainly did not chose. Men suddenly forced to say goodbye to their families without knowing when, or if, they’ll see them again. And all this happening in 2022. Crazy.

Will Putin be done after checking this country off his list? Will his re-written history books be satisfied? Or should Europe, and the rest of the free world, be prepared for his next chapter? Unfortunately, the latter most be chosen. But to what extent should we be prepared?

……time will tell.

Deuces. ✌️