In today’s issue of the Market Slice, we ask difficult questions in response to the heartache and violence happening in the world right now and delve into what the conflict in Ukraine could mean for your trading.
Politicians are not generally known for exercising foresight.
One problem when you are motivated by short-term considerations like sound bites and poll numbers is that you can miss the big picture.
Two politicians – Vladamir Putin and Joe Biden – are at conflict as they pursue their respective agendas.
But there are consequences, then there’s consequences. While anyone can see the “first order” outcomes of war and sanctions (and violence and suffering), it takes a deeper look into the second- and third-level impacts of today’s decision on tomorrow’s world to really understand the impact of decisions to wage war.
Putin initiated the military aggression and Biden responded to the Russian invasion by rolling out a series of economic sanctions, aiming to cripple the Russian economy.
They might just do that… and at the same time, take out Russia’s trading partners!
After all, every trade has two parties. And when Russia’s ability to make and receive payments through the global exchange system are cut off, other nations – including European allies – can be hurt in the process.
For example, Russia is the largest provider of natural gas and petroleum oils to the European Union.
As you can see, Germany, Italy, and France all get a significant portion of their gas from Russia. Kind of dislocation might we expect in the European energy markets if those nations are prevented from obtaining Russian product?
What will this mean for U.S. markets? There is serious potential blowback to the U.S. economy.
From loss of access to Russian commodities required for high tech production to the threat of a liquidity squeeze due to Russia being ejected from the global SWIFT banking system, the unanticipated consequences for America could be far greater than anyone in a position of power has considered.
FFR Trading’s Strategy Team is here to help provide you with the resources to think through the consequences of war in eastern Europe. Whether events settle down and a truce is negotiated, or tensions escalate further, your trading and investing plans are going to be disrupted by these developments. Give us a call at (800) 883-0524 for a no-risk strategy consultation… we are here to help you figure out your next moves!
Commodity Bull Cycle Continues
Six months ago, we forecast the opening of a commodities super cycle that would continue regardless of developments in the stock market.
Since then, stocks have traded flat. This chart shows the S&P 500 since September.
And this is the Bloomberg Commodities Futures Index.
Which chart would you rather be long on?
And now, with the Ukraine war threatening to disrupt global energy supplies and other supply chain factors, look what’s happening to oil:
All charts in this article courtesy of TradingView.com
Just last week, with light crude around $93 a barrel, we suggested that oil was heading north of $100. Did we expect it to get there this quickly? Not really… but tensions with Russia definitely weighed in favor of continuing tightness in oil (and gas) supply… meaning a strong likelihood of higher prices.
When you add in the continuing impact of inflationary pressures and the impact of supply chain constraints, the upward momentum in commodity prices is very likely to continue.
Take a look at this current statement of one FFR client who is trading Turtles Commodities. Notice the position on Lumber, up $6,710…Crude Oil, up $7,180… RBOB Gas, $13,734 profit… and Mini Gold $4,115. All these gains were booked on long positions as price drove higher.
Watch the Dollar
In the wake of Biden’s sanctions, the Russian ruble has absolutely tanked… it’s down about 15% this week, after plunging by more than 30% on Monday.
As Russia’s oligarchs scramble to find a safe haven for their crumbling wealth, the dollar stands as an attractive option… if they can work around the sanctions!
Forex markets have been quiet for a long time, forcing traders to shorten their time frames and look for scalping opportunities as day traders. Now the turbulent geopolitical situation, with the implications of a liquidity crunch, is offering opportunities for savvy macro traders, as well.
Pay no attention to that man behind the curtain
In 1928, Edward Bernays wrote the classic text on controlling public perception, entitled Propaganda. In recent weeks we have been talking about how to trade the news cycle… and how not to get fooled by mainstream “talking head” pundits. (If you missed Ian Cooper’s News Event Trading workshop last week, you can catch the replay here.)
Bernays’ methods have been embedded in the dissemination of news and analysis ever since, and the “propaganda industry” is now a massive, multi-billion dollar annual business.
Traders should never forget that every “original” idea and reported fact we see or hear is filtered through an opinion-shaping machine designed to get us to spend, vote, or think a certain way. When we talk about trading the news cycle, we don’t mean acting on the recommendations of paid shills, the political views of careerist hucksters and hacks, or the latest spin cycle talking head blabberjab. Real news cycle trading requires developing independent sources that equip you to anticipate the news before it hits Fox Business, CNBC, or Bloomberg.
When you respond to the same news everyone is seeing with the same reaction as everyone else, you are going to get caught with everyone else in the massive wealth transfer engineered by the ‘big boys” who manipulate markets for a living.
The “man behind the curtain” is a scam artist, a confirmed con man and the enemy of your wealth-building dreams. He is an accomplished propagandist, and a master thief. If you are going to play in the same arena as him, you must understand his game, and be prepared to defeat it, not playing by his rules, but by writing your own.
That’s why smart traders partner with professional traders to gain an edge in the markets. Trying to figure it all out by yourself is a fool’s errand, and the losses you accrue in the “school of hard knocks” will set your account balance back for years. Far better to invest wisely to trade with someone who has been at it for twenty years or longer, and who has no interest other than seeing you win.
FFR Trading is a due diligence firm that specializes in identifying real, proven traders with verifiable long-term track records. Give us a call at (800) 883-0524 for a no-risk strategy assessment. We look forward to helping you find the right trading strategies to meet your financial goals.
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