8 March 2022

Wheat is up more than 100% since Feb, oil is up 37% commodity prices are soaring with no end in sight. I think many are making a mistake to think the inflation problem that we had before the war in Ukraine is not getting much worse.

I am finding it very hard to concentrate at the moment with my daily calls to our team in Ukraine making the war so much more real than watching the endless news snippets. It feels like I am part of their escape to the current safety of the west. Of course I am not in danger so I say these comments in solidarity for my brothers and sisters who are doing it tough beyond comprehension.

I think Putin has seriously under-estimated the resistance and patriotism his armoured forces have encountered. This is not the Crimea where he was welcomed and applauded by the locals. The extent and speed of the sanctions imposed on Russia are going to be a game changer, I just pray its not too late and more lives are senselessly lost. The Russian people have tasted the freedom of the west. Media is too pervasive to block the Russian people from seeing and hearing what the west thinks of its brutal behaviour. There is revolution in the air, this craziness will not last.

Many of the major economies were so quick to parade to the news hungry media that their exposure to Russia was minimal and that the effects would be hardly felt. In fact Powell was saying just this in his talk last week. I don’t believe it for a minute. We live in an interconnected world, a global village. The world economic stage was so precariously placed prior to the invasion with China encountering the spluttering sounds of many heavily indebted projects submerging. This war has ominous implications.

MarketWatch

I am sure Peter Schiff is apoplectic with delight as gold continues to act as a safe haven and Bitcoin doesn’t.

One of the most extreme markets is Natural Gas.

The sector that I am most involved with at Ditto is the CTA market (professional traders) you can see how they have paired back their exposure to equities. Maybe just maybe the hedge fund trading sector can demonstrate to their long only cousins a lesson in what trading skill is all about.

Money Complex

The Russian Central bank is doing everything it can to provide liquidity to its banking system. I don’t think it will be long before we hear of major bankruptcies in their business sector. The Ruble is also getting slaughtered.

My final comment is I have been watching the US yield curve and I am seeing something very eery play out. We are heading close to an inverted curve. The pace of this flattening/inversion is not to be taken lightly. I think a US recession is now almost assured what is quite noteworthy is that the smart bond money is not anticipating any lasting inflation. The curve is downward sloping when the long end (10yr) of the curve is lower than the short end (2yr). If there were inflation expectations the long end should be higher than the short end. Try figure that one out in the light of the commodity and resource inflation being flashed in every media form. Stagflation ??? probably.

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