Biden Should Tune Into Kazakhstan This Weekend To Get His Wind Up To Destroy Putin: The Geopolitical — Stock Market Connection

As the holiday season distracts nearly everyone from the world’s formidable set of existential problems President Biden is coming up to a key test of Presidency in dealing with Putin’s monstrous invasion of Ukraine. With the economy heading into recession and the bulls rapidly losing momentum on Wall Street, now is the time to go for the kill against a beleaguered Russian military and Putin’s political circle. Should Biden rally his European cohorts in giving Ukraine all it needs to retake all its previous territory the world would be faced with the risks of a Russian WMD attack or chaotic regime change, and both are worth taking now. Such a move likely wins for the West in the long run but in the near-term turns the markets dramatically lower and thus cuts short this long grinding bear market. But such strong action is anathema to Biden, and more likely the markets continue consolidating as uncertainty rises on all fronts. Consequently the volatility risk premium points to a higher market over the next few days, while my technical reading of key stocks in the S&P 500 is bearish. Yesterday's cross-asset action brought one positive factor for US stocks. Inflation expectations are stabilizing based on measures of Treasuries and TIPS. But there were also several negative factors across global asset classes. Oil is pointing to declining global GDP expectations. The US yield curve is rising and in the current context that is bearish. Expect the S&P 500 to be range-bound over the next few days before coming down after Thanksgiving.

Putin is unlikely to use nukes since his own military is so hollowed out that dissension is growing among its leaders and in the ranks. Modi and Xi have both sent messages that implicitly warn Putin not to use WMDs, so he’s at risk of being ostracized by his like-minded allies and losing whatever regional power he holds. Kazakhstan is a clear lesson in this regard. In what seems like another era just prior to the invasion, Putin had sent troops into Kazakhstan to back up strongman ally President Tokayev. But gratitude soon evaporated as Tokayev defied the odds and bluntly rejected Putin’s attempt to get recognition for Russian held territories in Ukraine. Now Tokayev is facing an easy election this weekend as he overtly supports the West and his own interests by attenuating dependence on Russian pipelines and building alternative trans-Caspian pipelines and tanker ports to reach the Caucasus and Europe.

Reuters notes “Russia and Kazakhstan share the world's longest continuous land border, prompting concern among some Kazakhs about the security of a country with the second-biggest ethnic Russian population among ex-Soviet republics after Ukraine…Amid popular demand for sweeping change, he has recently accelerated plans to increase the amount of Kazakh oil exported west across the Caspian Sea, avoiding Russia to the north. Kazakhstan currently relies heavily on the Caspian Pipeline Consortium (CPC), one of the world's largest pipelines that crosses Russia to the Black Sea port of Novorossiisk. Out of total exports of 68 million tonnes a year, 53 million tonnes of Kazakh oil move through it. While there is nothing to replace that volume, a push announced last week to increase trans-Caspian shipments tenfold in the coming years, to 20 million tonnes, was the clearest sign yet of a move by Tokayev's government to limit economic reliance on Russia.”

Tokayev’s moves are critical to the West’s long-term prospect of solving the seemingly intractable geopolitical-ecological dilemma of fossil fuel usage. The West can plausibly become the fount of renewable technology and remove itself entirely from anti-ecological energy generation through a combination of shrewd geopolitics and the natural forces of markets. Western governments can prioritize the importation of Central Asian oil and gas at the expense of Russia’s exports. The American-led ESG movement can gird itself to this valiant objective by forsaking mummery regarding diversity and equity and focusing on Western ecology, thereby allowing the EM/Developing World to take on the supply of fossil fuels. This straightjackets Putin and by extension his key pathological ally Kim Jong Un, and makes plausible the evolution of a liberal world order based less and less on statism and more and more on individual responsibility and dynamism.

For Biden to play his part in that evolution he must devote himself to routing Putin in Ukraine and expelling progressives from the Democratic Parties, thereby building common ground among the large centrist block of American politics that believes in liberal social values, free trade and enterprise. Such a turn would not only cheer investors who share that worldview, but ensure a return to the January 4 highs in the S&P while reducing the volatility expected in that eventual climb-back.

Yesterday I sold my most recent position in the inverse levered ETF SPXU, thereby increasing my cash position and paring my short position. Consequently my current positions include a larger cash position, Goldman Sachs (GS), 3M (MMM), Pfizer (PFE), Starbucks (SBUX), and the ETF SPXU, all of which nets out to a large short position in equities.