Facing Truth in Europe about the Ukraine War

 Finally seeing articles clarifying truths about war in Europe this weekend. The Guardian and FT had opinion pieces bringing clarity to the situation in Europe. Rolling Stone had a tremendous article by an in-country reporter. 

Putin is not at war only for Ukraine. The goal is to conquer Europe to take back most USSR territory and own the Black Sea. “He has weaponised food, energy and refugees.” The only option is to defeat him militarily per The Guardian. 

Belgium and eastern EU have a fantasy they can negotiate peace for land. Putin thinks he is winning. Looking at maps where Russia controls an eighth of Ukraine, would agree. Why else would he terrorize randomly shelling residential areas. Wants to scare people to surrender.

Putin warned on July 7 that “we haven’t even yet started anything in earnest” in Ukraine. Russia is not on war footing yet. In the Rolling Stone article Edward Lucas, of the Center for European Policy Analysis, “I think Putin’s aim is 1) to render Ukraine non-viable — crippled, uninvestable, in political social and economic torment, and 2) to show that the West doesn’t have the willpower to resist him.” 

FT points out the concentration of spending has been on expensive weapon systems and Europe’s confidence no one would attack NATO led to minimal stockpiles of artillery and other ground force weapons and little manufacturing to produce replacement quickly. Know from working on M-16 and M-203 production lines, the army paid to maintain production capability. We may have lost that knowledge. How quick can we ramp up production in Europe and USA? 

We have many issues to solve beyond providing weapons, and more are needed to stop the war. Feeding the world without Ukraine and Russian production. Europe may have low-income and pensioners freeze to death if we can’t get more natural gas there and find ways to generate more electricity this winter. 

Likely we will be in this war after Putin passes away. He set this up as his legacy. We also need to watch other dictators who want their legacy.

Coming in 2016

Know it is not New Year’s Day when predictions typically come. Truthfully have been looking for trends and indicators before making up my mind during a volatile December and January. Here are keys for 2016 and possible gray swans that could be missed.

1. Global Economy will continue to slow down gradually. Predictions of end of the world will surround us, but main drivers are a slower growing China economy and governments will need to reign in spending. Do not expect China to have a hard landing, and expect several governments will cut spending slowly over the year as tax receipts are reduced by their economies. Middle East and Asian countries most affected.

2. US Economy will have a mild recession. The long slow growth is due for a pullback, but do not foresee a collapse. The US economy will stabilize the world economy. Stock markets may fall further than the economy over weaker earnings and short term jolts to expansion plans. We may already have over 50% of the stock price pullback. Typical recessions stock losses are 15% to 30%.

3. Commodity prices will stay weak until the global recession passes. Expect industrial metals like copper & iron stay weak for a couple years. However most of the price drop has already occurred. Will hurt Australia, Canada, Russia, and South American countries dependent on mining.

4. Silver is forming a bottom around $14. Moderate chance could step down a bit more, but likely price will increase by end of year as mining slows down and supplies get tighter. Gold is trying to form a bottom, but is more of an emotional investment driven by fear. Could take one more step down or start another bull market. Consider accumulating both gold and silver in 2016.

5. Oil should stay weak for now, but expect prices to turn up a bit in summer to end of year. Expect prices to rebound to $40 to $55 per barrel by mid-2017 at the latest. Think the cartel will pull together sometime in the next year. (gray swan)

6. Unemployment will likely stabilize as job growth slows. Truth is the easy productivity games are ending. Robotization is a time-consuming investment more likely during growth cycles where payback is guaranteed. Having participated in both successful and unsuccessful automation projects, it takes time to develop robots and computer programs.  However it is a good investment for your business during a mild recession to prepare for the next growth spurt.

7. Gray Swans:

            ISIS/Daesh - will weaken in Syria / Iraq under direct pressure. Will grow stronger in Libya and Africa where non-functioning governments cannot handle the crime.

            Europe - Economy is recovering, but slowed by less demand in Asia. Will struggle with more immigrants coming and increased nationalistic parties gaining power. Will see Eastern Europe struggle most, but watch Italy, Belgium, France and Spain for risk.  

European Union - Not likely, but countries leaving the union would be considered a serious warning for the end of the Euro.

Terrorism - Expect more attacks on soft targets like malls, restaurants and hotels.

Computer Hacking will increase in 2016 and become more of international issue.

2016 is setting up as mild year with increasing risks. Also see there will be pleasant surprises with new technologies, medical treatments, disruptive companies and areas of growth to offset some of the worries. Stay positive and looking for opportunities.