Geopolitical Developments: Latent Power In The Russian Church Is The Critical Lever To Taking Putin Out And Ending The Worldwide Equity Rout

The gullibility of the Russian people is about to be tested as hyper sanctions do their damage to ordinary lives. Key to leveraging this incipient discontent is the Russian Orthodox Church and its ability to reframe the war as a verdict on Putin’s credibility. Signs are mounting this will happen, but not soon enough to stop the bloodletting in Ukraine or the downturn in global equities. The volatility risk premium points to a higher market over the next few days, but my technical reading of key stocks in the S&P 500 is bearish. There are several negative factors across global asset classes. The action in currencies signifies $US strength. 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 falling steeply to new lows in the 4000 region..

As opposition to Putin arises sporadically across the Russian sprawl the focus will turn to the pusillanimity of the Russian Orthodox, specifically the firebrand Patriarch Kirill. In The New Yorker writer Paul Elie frames the religious question as one of pure politics tinged with bizarre religious tones, as Kirill is said to see metaphysical consequences in the war which in Elie’s view amounts to little more than anti-liberalism, specifically sexual liberalism. This has resonance for Russians but pales in comparison to the costs of the war, which are now hitting Russians in their daily lives. Since 79% of Russians identify as Christian, it will take a large break in the Church’s ranks to ignite a wave of protests that gives cover to Putin’s inner circle to take him out. There are scant signs this is happening but momentum is building.

Reuters notes “Russian Patriarch Kirill's full-throated blessing for Moscow's invasion of Ukraine has splintered the worldwide Orthodox Church and unleashed an internal rebellion that experts say is unprecedented…In Russia, nearly 300 Orthodox members of a group called Russian Priests for Peace signed a letter condemning the "murderous orders" carried out in Ukraine.”

Courageous action won’t amount to much unless there is volume to support it, and the language of the rebel Priests is not strong enough to bring about the intense wave of discontent needed. What is needed is for the Church to imply Putin is delusional and malevolent, but the words chosen imply Putin has some rationale for his war. They write "The people of Ukraine should make their choice on their own, not at gunpoint, without pressure from the West or the East…”

The Church is a worldwide organization so it’s more likely the push for intense rebellion will come from outside. Reuters further notes “In Amsterdam, the war convinced priests at St. Nicholas Orthodox parish to stop commemorating Kirill in services.” And the other Orthodox Churches have already broken with him. “Kirill, who claims Ukraine as an indivisible part of his spiritual jurisdiction, had already severed ties with Bartholomew, the Istanbul-based Ecumenical Patriarch who acts as a first among equals in the Orthodox world and backs the autonomy of Ukraine's Orthodox Church.”

There are signs Putin is getting desperate, such as asking the Chinese for aid and calling for foreign fighters despite the overwhelming advantage the Russian army already enjoys. I thought the war would be ended soon but it will clearly take some time for discontent to reach a boiling point where Putin is taken out by his own. When that happens expect the S&P 500 to begin its bottoming process, providing global investors an opportunity to recoup the losses that began with the New Year.

My current positions include a large cash position, Goldman Sachs (GS), 3M (MMM), Pfizer (PFE), Starbucks (SBUX), Titan Machinery (TITN) and the levered ETF UPRO.