In our recent live training session I looked closely at the current, horrendous situation in Ukraine and how it impacts currencies, stocks and especially commodities.

Everyone is aware of rocketing fuel prices, but commodities such as wheat, coal & grains are also sky high. So which countries will benefit and which will lose out in this new scenario?

It sounds mercenary given the current situation but eventually, this situation will be resolved and markets will return to some kind of normality (presuming that Putin does not go down the nuclear path).

Traders are looking for opportunities to buy or sell and investors are looking for bargains and hoping to catch a reversal back up at or near the bottom. That of course is the million dollar question.

Here is a good article from Reuters outlining 6 charts to pay attention to in financial markets:

https://www.reuters.com/markets/europe/europe-war-six-charts-know-financial-markets-2022-02-26/

Trading Around a War

I show in my video, further down the page how some of the biggest stocks on the planet are down 40% or more and potential areas that investors will consider buying. I also explained that buying smaller amounts in stages is the only way I would get involved in stocks. On this occasion Forex is easier!

Commodity countries such as Australia and Canada should benefit.

The USA as the $USD is strengthening.

It is also a major wheat producer.

Conversely, the Eurozone countries are suffering on a number of fronts: the need to keep buying energy from Russia being the main one.

Also, the fact that Europe is much nearer to Ukraine is a concern in case the war spills over and NATO needs to act. Even worse if Putin attacks another nuclear installation and there is a leak then Europe’s proximity is a big negative.

HOWEVER that does not mean that everything is guaranteed to play out the way we expect on any given day. One of the Aud trades I took yesterday is getting near to its stop and I have another order lower down (see the video). However, I believe that in this new world order (countries need to look elsewhere to reduce their exposure to Russia (and China) in the future- that the commodities will be a very important factor in the midterm for currency valuations.

The issue at the moment is that 40% of Europe’s natural gas comes from Russia. European countries and the UK do not have enough storage. Germany is especially dependent upon Russian gas had made the ridiculous decision under Merkel to close all their nuclear power stations before building a replacement. Therefore Germany has been in a very difficult situation re the sanctions, because they will find it almost impossible to replace the supplies in the short term. They can not afford to stop and Putin knows it.

The Americans are under pressure to ban Russian oil, but that could lead to oil at $200+ a barrel AND it will add further fuel to inflation AND cause Germany massive problems. Its very easy for the press or opposition politicians to slag off their respective governments, but in truth its not that simple

As this article in the Wall Street Journal explains it’s not an option for Germany right now: Germany says it won’t stop buying Russian Energy

Trading Around a War

Preppers

I spoke with a guy last year who is a very experienced authority on gold mining stocks. It was a fascinating discussion but he threw me a bit at the end of the conversation when he let slip that he is a “prepper” He said most of his friends think he is a little wacky (one of them calls him a “nutjob”

However, one thing we have learned in the last 6 weeks is that relying on money in the bank in a crisis is not a great idea. The Canadian government recently announced it would freeze the bank accounts of “Freedom Convoy Truckers & suspend their traffic insurance if they did not stop protesting. There was also talk of freezing the accounts of supporters without hard evidence. Now in Russia, as Apple have suspended “Apple Pay” and there have been huge queues of people trying to get cash out of the bank. The stock market has been shut for a week and Russian banks have been removed from Swift, there will be a lot of Russian folks struggling. Especially the mega-rich who, one presumes, do not run around with suitcases full of cash to keep their lifestyles.

Stockpiling food and buying guns may not be your “thing” but making sure you have access to physical money and metals is not such a bad idea after all!

How this current war was predicted and could have been avoided

This was a lecture delivered in 2015 by Professor John J. Mearsheimer, the R. Wendell Harrison Distinguished Service Professor in Political Science and Co-director of the Program on International Security Policy at the University of Chicago. He assessed the causes of the present (2015) Ukraine crisis, the best way to end it, and its consequences for all of the main actors. A key assumption is that in order to come up with the optimum plan for ending the crisis, it is essential to know what caused the crisis. Regarding the all-important question of causes, the key issue is whether Russia or the West bears primary responsibility.

Virtually everything the Professor spoke about is what is happening now and clearly, the current situation could have been averted if our political masters paid any attention to what’s outside their own shores. That is not to say that in any way I condone Putin’s actions, clearly, he is insane and yet the west still needs to trade with Russia for gas & oil as I explain in the live session today.

Why is Ukraine the West’s Fault from 2015:

https://www.youtube.com/watch?v=JrMiSQAGOS4&t=124s

This is a shorter video on the same theme by Mike Maloney from 2016 The Map that Shows Why Russia Feels Surrounded:

https://youtu.be/L6hIlfHWaGU

Yesterday a Kremlin spokesman validated what Mearsheimer said “KREMLIN SPOKESMAN SAYS UKRAINE MUST AMEND CONSTITUTION AND REJECT CLAIMS TO ENTER ANY BLOC  (sic NATO or EU) they now want more as a result of their attack ” UKRAINE MUST RECOGNISE CRIMEA AS RUSSIAN, AND DONETSK AND LUGANSK AS INDEPENDENT STATES IF THESE CONDITIONS ARE MET, THEN RUSSIAN MILITARY ACTION WILL ‘STOP IN A MOMENT’ – SPOKESMAN11:48 AM · Mar 7, 2022

There you have it. Covid and the Ukrainian situation must bring home to you the importance of having at least a basic understanding of how financial markets are affected and particularly in this case, forex.