Random Observation/Comment #752: Wars happen over the span of months and years and not days. Constantly reading the next reaction can take a toll on your mental health. Take care.
Why this List?
We’re on the brink of World War 3 with mainly Russia, China, North Korea, Pakistan, and some other small dictator-led countries Versus Ukraine, countries in the EU and NATO, US, Canada, and Japan. The invasion of Ukraine itself was somewhat expected, but the thing I’ve been paying attention to are each countries’ reactions and stances. The media has done a surprisingly good job covering the war from multiple angles.
While writing this list, I considered the macro economic, cyber, physical, accounting, political, and trade impacts. None of these are predictions, but I just let my mind loose a bit.
- Russia’s ruble is going through hyper Inflation – The ruble is about to be worth a lot less in the global markets (especially the USD pair). This will hurt the citizens more than the government. I don’t think innocent Russian citizens should suffer because of their leader’s actions.
- Targeting Oligarchs’ money – Swiss Bank accounts are doing partial freezing of big Russian billionaire funds and assets until further notice. It can lead to some positive lobbying between the rich and the military branch inside Russia.
- Shutdown of SWIFT for Russian banks – Russia may be completely ousted from any overseas transactions/messaging and therefore prevent any transfer of funds out of Russia or overseas purchasing of securities at exchanges.
- Russia’s stock market crash – It’s already down 40%. The latest play is for Russia to block outside firms from buying the dip. It’s likely going to be a long and hard month as the squeeze continues.
- Central bank freeze – Russia’s Central Bank has been printing money to prop the upcoming demand for cash and lack of liquid markets to participate in. The freeze would paralyze their collateral assets that might be held overseas (cough, China).
- Ukraine and other at-risk countries join European Union – This is not an easy move, but countries need allies and protection. I wouldn’t be surprised if Ukraine applies along with other adjacent countries.
- Gold rush – Russian Central Banks would try to buy more gold in order to keep their ruble value at a respectable backed price to prevent further inflation. There’s not much they can do about it.
- Digital gold rush – If gold doesn’t work, they’ll definitely lean further into Bitcoin and other cryptocurrencies. Fortunately, everything is trackable on the UTXO blockchain ledger of bitcoin, so it’s something the crypto community is monitoring heavily. I would assume that if things get really bad, the Bitcoin markets may also be volatile as the Russian wallets start to sell to prop up their financial markets.
- Digital Yuan play – If the SWIFT system is no longer an option for some Russian banks, I’m sure China would love to swoop in and share their software and wallets as an alternative way of trading and sending funds. If this is a bigger digital yuan play, then all of the nations mentioned on one side of the war may try to topple the dollar dominance and also react with their own sanctions.
- Broken citizen trust in government and banking – At the beginning of the pandemic, Russian people withdrew large cash balances to store under their mattresses. This is happening again to at least protect against a bank run. I never thought the streets of Russia were safe, but this is only going to grow in unrest.
- Shutdown of SaaS businesses with Russia – If you have a Russian client, then you probably don’t have one anymore. Any consulting businesses or software sold to Russia may also be shut down.
- Commodities trade threat – Wheat and oil are the big producers coming from Ukraine and Russia. These have a long list of goods associated with the supply chain around the world. The US has not put through any sanctions on the oil markets coming from Russia (yet), but I suspect the price of gas at the pumps will definitely increase quickly.
- Semiconductors threat – If China invades Taiwan and takes over the 92% semiconductor manufacturing there (and then imposes sanctions on all global companies that rely on these exports), then we’ll all be in trouble. Semiconductors are used for everything and can easily cascade into the retail market across all electronics industries.
- Threat of Nuclear war – This is definitely a major concern after seeing North Korean missile activity. I wouldn’t cross this out as a strategy after withdrawing or finding temporary peace.
- Delays in supply chain – With higher tensions across borders, we’ll see fewer flights and freights transporting goods across the world. The last mile will likely increase in price given an increase in oil prices.
- Refugee / Immigration – As the attack continues to spread, I imagine adjacent countries are worried and looking for shelter with friends and families in EU protected countries. Our company has helped families with teams in the impacted areas to relocate quickly.
- USD Inflation over 10% – Inflation wasn’t going great before this war started and I can see it getting impacted across all goods and services. Oil impacts asphalt, product delivery, plastics, and a lot of third order effects.
- Market rebalancing – There will likely be a big hit to any large companies that relies on semiconductors, air travel, China (since there’s uneasiness on long term exposure to these foreign markets), and pharma (since COVID has less of a view). There will be a boost towards alternative energy, alcohol, and common retail stores like Costco.
- Propaganda – The clips I’ve seen leaked on Twitter around Russian news reports is pretty jarring. We all live in a bubble (cough, Fox news instigating war). I would be more careful about what we read and how we do our knee jerk reaction to media.
- Local social unrest – It seems that the Russian people and politicians are not fully backing Putin’s aggression. The citizens will be the ones to suffer through economic hardship.
- Cyber social media attacks – I wouldn’t be surprised if the Russian sleeper bots are already activated and trying to build some divides between multiple countries and allies.
- Tightened Cyber warfare – This is important for everyone to be more and more careful about the emails they open and how they interact with their identities. Any sleeper trojans on computers or inside intranet logins can be deployed to coordinate attacks.
- Military aid with weapons and air force defense – I read that the Ukrainian government is just handing out firearms and weapons so Guerilla warfare can take to the streets. Nations have provided arms as it’s easier to immediately ship out than people. Shipping out weapons is also less of a commitment and political backlash than endangering lives of soldiers.
- Military aid with troops – The US has deployed troops in case the invasion of Ukraine is just the beginning of a broader attack towards Poland.
- Musk’s Star Link support – Richest man in the world is able to deploy internet access across Ukraine hot spots within a few days. This is pretty damn incredible and how rich people should use their money. I’d like to see more businesses think about the ways they can help the war efforts.
- Increased investments into military – This is more of an accounting allocation justification, but I imagine the numbers for investing into these areas will only increase in the next 5 years.
- US becoming more Republican/Conservative – The Democrats likely to lose the temporary power they’ve gained.
- Strategic moves away from Oil dependency – It makes a lot of sense the alternative energy sector is hot right now because the infrastructure funds can go towards implementing more solar and nuclear plants. This is just a small piece of the energy puzzle as oil is embedded in a lot of common goods and used for transportation. I would love to see the infrastructure bill cover more solar deployments.
- Refocus of public attention – I guess COVID is officially over and what a great transition it is to now looking at foreign impacts.
- Crypto efforts to fundraise donations – See https://www.ukrainedao.love/ and http://uanft.org/ – This is how our industry is hoping to help raise funds and directly support efforts.
~See Lemons Make Peace, Not War