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Rubles, Rubble, Ruin

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Rubles, Rubble, Ruin

Matt Sterett
Mar 7, 2022
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Share this post

Rubles, Rubble, Ruin

www.reservereport.com

"So the universe is not quite as you thought it was. You'd better rearrange your beliefs, then. Because you certainly can't rearrange the universe" - Isaac Asimov


**If you enjoy this newsletter - do us a favor, forward it to your friends or colleagues**

Editor’s Note: Well, we’re back for the 3rd time in 2x weeks. We’re still not promising a regular schedule…


Following-up on Last Week's Note:

  • The equities we highlighted w/ Russian exposure were down an avg of 12%

  • Excluding IOC's, our list was off 17% on avg

  • At the same time, the S&P was ~flat

(1) Assumes you entered the position 30min into trading, last Monday (or Sunday night, depending on market)

Going forward, there's 2x major risks that - in our opinion - are not fully priced into the market:

  • The partial removal of Russian & Ukrainian commodities (e.g. coal, oil, gas, wheat, metals) from global markets in 2022

  • The impact on banks w/ exposure to these markets, and the cascade of counterparties that will have liquidity issues as a result of bank stresses

Expect wheat (and thereby corn & rice) prices to continue to rise - aside from price increases, this will cause geopolitical instability in emerging markets (e.g. the last time there was a spike in wheat prices, the Arab Spring happened).

And - unless the practice of “self-sanctioning” reverses - energy commodities should also continue their rise.

Regarding banks - there’s 2x concerns:

  • Direct Russian exposure

  • Exposure to Russia-linked collateral

The banks that we highlighted last week had relatively large businesses, physically in Russia.

The comparatively unknown issue of financings - with Russia-linked collateral - will play out by ~end of the month:

  • Loans (like RCFs) that financed Russian collateral will face defaults or deficiencies, needing the be restructured or refinanced

  • Both the banks & the borrowers will face stresses, causing counterparty issues to arise

  • The worst case scenario for non-Russian firms is a full collapse of the Russian Central Bank / Banking System


Other Notes & Thoughts:

  • No one seems to be preparing for a Firebird Round 2…

  • #OSINT is Twitter’s opensource intelligence community - we’ve added a few of its most active accounts to our Russia | Ukraine Twitter List; within that community, @Osinttechnical is noteworthy

  • An alleged letter from an FSB whistleblower (Russian version; English translation here); take it with a grain of salt, misinformation from both sides is high

  • Expect a mass-exodus of Chinese / Russian money from London & Switzerland to Singapore & Dubai (recent sanctions have spooked more people than were actually targeted by those sanctions)

  • Will & Robert - our friends who were in Mariupol a few days back - made it out in one piece… by the skin of their teeth -

That’s it for today - catch y’all next time -


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Rubles, Rubble, Ruin

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