Ukraine continues to weigh heavily on the minds of investors. With one question “What will happen with Russia being completely shut off from the rest of the world financially?”
It shows in the Stock Market returns for the week:
REMEMBER, we do not make extreme decisions because of the gyrations of the stock market. We make decisions based on our investing goals. If you do not know what your goals are, then take some time and set them.
Tale of the Tape
ECONOMY
Businesses Go to War
In the 7 Days After Russia invaded Ukraine, businesses decided to put on sanctions of their own on Russia:
Boeing suspended major operations in Moscow, as well as maintenance and technical support for Russian airlines.
Shell will sever ties with Russian gas giant Gazprom and end its roughly $1 billion financing of the Nord Stream 2 gas pipeline.
Exxon Mobil says it will exit Russia's oil and gas operations valued at more than $4 billion and cease new investment.
GM, which sells only about 3,000 cars a year in Russia, says it will suspend exporting vehicles.
Ford suspended operations in Russia.
BMW stopped shipments and will stop production in Russia
VW paused delivery of Audis already in Russia so it can adjust car prices to reflect the decline in value of the ruble.
Harley-Davidson suspended shipments to Russia.
Adidas suspended its partnership with the Russian Football Union
Nike ceased online sales because it can’t guarantee delivery.
FedEx and UPS suspended shipments.
Yoox Net-A-Porter Group and Farfetch, luxury e-commerce platforms, are suspending deliveries in Russia.
Apple paused product sales and limited services (including Apple Pay), on top of ceasing exports to Russia and restricting features in Apple Maps in Ukraine to safeguard civilian safety.
Dell stopped selling products.
Walt Disney is pausing film debuts in Russia. Warner Bros., Sony, Paramount, and Universal say they won't release films in the country.
Everything Inflation
I know we are all feeling the pain right now. With oil prices reaching levels not seen since 2008. Mostly driven by Russia rather than Putin's invasion of Ukraine. Before Putin lost his mind, oil was $92 a barrel just over the last week oil has rocketed to $117 a barrel, a 27% increase. Combine that with the supply chain pressures we have been having due to the pandemic. You get crazy inflation.
The globe is really suffering from our dependence on oil. To alleviate some of the pain brought on by the oil crunch, the International Energy Agency said they would release 60 million barrels of oil from their reserves. The US also said it would release 30 million barrels from its reserves.
The problem is the world uses those amounts over weeks not years.
So that will do nothing to stop the price surge. OPEC+ met on Wednesday but they chose to continue gradually increasing output rather than flooding the market with more oil to make up for Russia’s issues.
The current situation is beginning to be compared to the Arab Oil Embargo of the 1970s. This is not a good thing because, in 1970, OPEC cut off oil exports to the US for helping Israel in the Arab-Israeli war which lead to stagflation. Most people fear inflation but STAGFLATION is much worse. This is where inflation is raging but there is no economic growth to help anyone's pockets.
It is not only oil prices that are on the rise. Wheat prices hit their highest level in 14 years.
Ukraine and Russia are two of the largest wheat exporters in the world, combining for 29% of the World's wheat production. Wheat is used in everything from cereal and baked goods to animal feed. Prior to the invasion, Ukraine was on track to record its highest year of wheat exports.
But there are other things that will cause our world to get more expensive. Russia is a key mineral reservoir for the world:
Palladium is used in a car’s catalytic converter. Prices are up 40% on the year. Russia is the largest producer in the world at 40%
Nickel is up 30%. It is used in basically anything that needs to be charged. Russia is the 3rd largest producers
Aluminum is up more than 30%. It is used in basically everything. Russia has one of the largest producers within its borders
Cobalt is another major ingredient for batteries. It is up 7% this year. Russia is the number 2 producer.
Be mindful of your budgets as we continue on this year. I truly thought inflation would come down towards the end of the year but seems I was completely WRONG!
Papa Powell say Rates Are GOING UP
I think for the first time ever when listening to Jerome Powell. He actually spoke very directly about what the Federal Reserve is doing. He did not mix words at all.
During his testimony to Congress on Wednesday and Thursday, Powell said the Fed will increase Fed Funds rates (learn about the Fed Funds rate here) by 0.25% in two weeks. (Currently, rates are sitting at 0.25%.)
There were rumors that the Fed would go faster with their monetary tightening raising rates by 0.50%. But Papa Powell destroyed all those rumors when he spoke. He also mentioned the importance of being cautious, especially in the face of the war in Europe. He said
BEST ECONOMIC NEWS OF THE WEEK
We are not in a Stagflationary period. For the month of February, the US added 678,000 jobs significantly above economist estimates of 400,000. Unemployment went down to 3.8% from 4.0%. The recovery is still very strong but it is getting hampered.
EARNINGS
Kroger announced record revenues and profit for the 4th Quarter of 2021. I could say more about how Kroger going digital has helped the business increase its sales over the last two years.
But let’s be honest, you and I don’t care about a business as boring as a grocery store. Even though the stock has returned nearly 70% over the last year.
The same thing with Costco, which also recorded record profits and continued growth in its membership. But these are boring businesses, why would you want to own boring businesses with pricing power to pass costs on to customers? (Not investment advice. Disclosure: I am a COSTCO shareholder)
Looking Ahead
ECONOMY
Next week, we get more economic data. For nerds like me to read about and tell all my friends, who definitely don’t care, about.
The week kicks off on Wednesday with the release of the JOLTS (Job Openings and Labor Turnover Survey). This report measures job vacancies and worker quit rates. The last few months have seen quit rates at historically high numbers. It will be interesting to see if people are returning back to work because inflation is starting to kick all our butts. With the jobs report coming in much higher than expected, I expect the JOLTS report to show quits rates declining.
Then on Thursday, we get the Consumer Price Index aka Inflation number. For January it was a 40 year high of 7.5%. With everything happening in Ukraine, I expect the number to be closer to 8% for February. Energy is a BIG component of the inflation calculation because it basically affects EVERYTHING!
Then Friday we get a preliminary look at how everyone is feeling about the economy. I can tell you exactly how we all feel without the report.
EARNINGS
Totally Unnecessary Man U Update
This one is not about Man U but about Chelsea being up for sale. Roman Abramovich owner of Chelsea FC since 2003 is looking to sell the club due to mounting pressure from sanctions placed by Western governments. Abramovich is a Russian oligarch and like all oligarchs right now, they are being forced to part ways with their most priced assets.
Oligarchs tend to have political influence in Russia so the goal is that mounting pressure on them might help sway Putin to stop the war (I highly doubt it but worth a try). Abramovich is looking to sell Chelsea for $2.5 billion where he says the sale will go to “benefit all victims of the war in Ukraine.”
As far as Man U is concerned, we went up against Man City and well
I have nothing to say
Thank you for reading
I hope you all have A WONDERFUL WEEK. I will see you back here maybe on Wednesday for another post. In the meantime, Go subscribe to Rambling Mind Podcast for mid-week stock market updates. You can also catch me on TikTok, Instagram, and YouTube every day.
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
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