Headspin

Government risk is primary for both society and the markets now, as recently evidenced by the decline of US shares in response to the Omicron outbreak as well as to Powell’s tapering announcement, which should lift Treasury rates to levels more commensurate with private market rates. The unfolding geopolitical drama must be watched closely now: Russia has amassed 100,000+ troops at its Ukrainian border and Ukraine expects that it will be invaded in January. If China moves on Taiwan in early 2022, that would be a gobsmack to the computer and microelectronics hardware industry; one month is not much time for Samsung to get its new chip facility in Texas to the point where it could replenish existing production capacity. It could also throw a wrench into the plans my wife and I are holding onto to at some point visit our friends on their island off the north end of Palawan in the Philippines; one of the most beautiful places I have ever seen. Oh well.

It is possible that Biden could intervene with the US military, whose forces he just depleted by telling the ~45% who didn’t want to be compulsorily vaccinated that they will be discharged. But who knows what this White House will do ? It’s hard to imagine that Blinken has been talking sufficiently tough with Lavrov to cause Putin to second-guess his intentions here. War is generally negative for equities outside of defense and aerospace names, even in times with steady government leadership that investors have confidence in. Capital will move, but anticipating where now is nontrivial. Institutional investors should carefully monitor international capital flows, not only as an indicator of where to park money, but also of what the elite might know about upcoming events. The Chinese may be shrewd to maintain a paper yuan alongside their electronic version; it could provide a relatively-safe parking spot for international money for awhile. The Russian and Chinese governments are unconcerned about climate change and can already lockdown their people at-will. They must be very amused by the hubristic ineptitude of western governments now, and their collusive scheme to use the Covid and climate ruses to destroy (“build back”) their own economies.

It is likely that big governments’ moves from physical to electronic federal money will also be launched in 2022, along with Biden’s imposition of his new tax laws, as we are again bumping our heads against the debt ceiling. These are trying times for financial analysts and many other people, including those un-vaxxed who find themselves going into the holidays with no livelihood anymore. There will be many more in January since, despite the legal tangle Biden’s mandate to the larger corporations ran-into, many of them will still dismiss their unvaccinated employees. White House press secretary Jen Psaki indicated that extreme measures to punish unvaccinated citizens may be in-store. She said that travel bans are not off the table (“your papers please”), even though imposing one would be to directly controvert the 14th amendment to the US Constitution.

Its a bit surreal to watch this as border-crossers are allowed in and then given taxpayer-provided perks and bus/plane rides to embed them throughout the US without any Covid nor any other health testing or other restrictions. It is clear now that many vaccinated people can get Covid as well as transmit it, and that a number of people are experiencing negative effects whose reporting is being suppressed. And it has been revealed in the UK that much more information about you is contained in your Covid passport than just your vaccination status. Everything from your criminal record, education, to your financial status is in there. In Sweden, people have lined-up to get sub-dermal passport microchips implanted in their hands because it makes it so much more convenient for them to comply with all this pesty government tracking. The Covid enforcement in numerous other places like Germany, Austria, and Australia has ramped-up. As before, the successive lockdown-tightenings tend to occur roughly in synchrony across the countries.

It is interesting that Zuckerberg, Bezos, and Musk have all been selling huge holdings in their companies, and that the CEOs of many of the other biggest corporations (Groupon, Disney, Microsoft, IBM, Linked In, Uber Eats, T-Mobile, Salesforce, MGM, Twitter, Amazon, MasterCard, Victoria’s Secret, and others) will have stepped away from their boards and leadership positions this year. What do they know ?

Protecting your freedoms, savings, and property will be an ever-increasing challenge. Sovereign and macro risk management is now a concern of even the most ‘ordinary people’.