Larry’s note: Welcome to Trading with Larry Benedict, the brand new free daily eletter, designed and written to help you make sense of today’s markets. I’m glad you can join us.
My name is Larry Benedict. I’ve been trading the markets for over 30 years. I got my start in 1984, working in the Chicago Board Options Exchange. From there, I moved on to manage my own $800 million hedge fund, where I had 20 profitable years in a row. And, I’m featured in the book Market Wizards, alongside investors like Paul Tudor Jones.
But these days, rather than just trading for billionaires, I spend a large part of my time helping regular investors make money from the markets. My goal with these essays is to give you insight on the most interesting areas of the market for traders right now. Let’s get right into it…
Unprecedented, unparalleled, uncommon, even unconventional…
These are some of the words outlined in headlines describing recent events in Ukraine.
And they’re all accurate. I can’t remember a time quite like it…
So today, let’s take a look at the various impacts on both Russia and the stock market…
In the past week alone, we’ve seen the foreign assets of Russia’s Central Banks frozen.
Most of Russia’s biggest banks are cut off from making any international transfers via the inter-bank payments system, SWIFT.
Russian flights are blocked from entering airspace all the way from the United Kingdom and most of Europe through to Canada and the U.S. Even Switzerland has imposed a ban…
Domestic flights within Russia will soon start to dry up too. Boeing recently announced that it was suspending all technical support to Russian airlines.
Of course, it’s not just Russian institutions and agencies in the crosshairs…
The financial noose is tightening around the Russian oligarchs too.
Recently, we’ve seen pictures of seized superyachts – some are the length of a football field.
In addition, luxury cars and even jets are being seized to prevent any oligarchs from extending resources to President Putin.
The goal of shutting out Russia from the international community – in particular cutting off its money supply – is already taking severe effect.
In this past week, the ruble has completely tanked.
And the only reason why we didn’t see more carnage on the Moscow Stock Exchange earlier this week was because it was closed.
That was because Russia’s National Wealth Fund (NFW) was scrambling to find enough funds to prop up stock prices upon its reopening.
However, even the markets where Russian stocks trade were absolutely smashed…
In London, shares in Russia’s largest banking and financial institution Sberbank collapsed by 93% this week.
And two of Russia’s largest oil and gas companies, Gazprom and Lukoil, fell even further (97% and 98%, respectively).
In our own markets, the largest Russian exchange-traded fund (ETF) – the VanEck Russia ETF (RSX) – temporarily suspended issuing new shares. Existing shares had begun falling even prior to the invasion. RSX shares are now down over 70% since February 17, a week before the invasion.
With Russian companies (particularly oil and gas) strictly on the forbidden list – and with reciprocal bans from Russia – there are clearly implications for our markets.
I wrote last week that an invasion of Ukraine could see oil spike to $120 a barrel. Well, we’re only a week into this conflict and it’s already passed $110 a barrel.
This wreaks havoc for a Federal Reserve desperately trying to rein in inflation.
They have to raise rates now if there’s any hope of getting back on top of inflation. That’s regardless of what happens in Ukraine.
Up until the invasion, I was positive they’d have to raise rates by 0.5% at their next meeting (March 15–16). However, even if they go with 0.25%, there will be plenty of rate increases behind that.
Either way, I’m still seeing a Federal Funds rate of at least 1.5% by the end of the year.
Now, let’s see the effect these sanctions could have on our markets…
After all, sanctions never affect just one side of the equation…
For example, Apple (AAPL) suspended the sale of its products in Russia. And Disney (DIS) halted distribution of its latest films in Russia.
These will eventually flow back to company earnings.
Despite a rebound in stocks after a tough couple of months, I still believe the major indices will finish the year in the red. The war in Ukraine has only added more uncertainty to a struggling market.
In the meantime, investors will need to be vigilant when it comes to the markets. And as always, be nimble and ready to act.
Editor, Trading With Larry Benedict
P.S. We’re seeing some of the wildest market swings since 2008. And that was before the events in Ukraine. Millions of investors could see their portfolios wiped out this year.
But don’t panic. There’s a guaranteed event a couple of weeks away that could give nimble investors the chance to get ahead of big losses… for even bigger profits.
It has to do with a unique strategy I used at my hedge fund for two decades to make millions for my clients. Since sharing it with my readers, I’ve been perfect – seven for seven.
To learn more about this little-known strategy, be sure to click here. I’m sharing all the details you need on March 9 at 8 p.m. ET.
Have you spotted any opportunities in this volatile market?
We’re excited to hear what you think of your new eletter, Trading With Larry Benedict. Let us know at [email protected].