To The Moon

Yesterday, Russia raided Ukraine. Previously, the market consensus believed that Russia was just bluffing to protect the interests of pro-Russian forces in Ukraine. However, the United States has continued to inform the world of the military situation, warning that Russia will launch an all-out attack on Ukraine in the short term. Russia continues to deny it on various occasions, but secretly deploys a large number of military forces. Satellite images show that the main railway line is busy transporting Russian armored forces. Really relentless. However, to a certain extent, the briefing of US military intelligence made the Russian attack lose its chance. Overnight, S&P futures opened down more than 2% to a six-month low before reversing in a V-shape to close the session up more than 1%. In the 40-year history of S&P futures, this has only happened three times: July 24, 2002, September 16, 2008, and February 24, 2021 (last night). Looking closely, the first two times this happened, the U.S. stock market was already in a deep bear market, and the U.S. economy was in a deep recession. At that time in 2002, the U.S. stock market reversed after two times in October 2002 and 2003 to the same depth and the U.S. economy came out of recession. In 2008, when Lehman collapsed, US stocks rebounded for a day, and then continued to fall by 50% before they stopped falling until the first quantitative easing by the Federal Reserve was launched. Therefore, although the historic reversal of U.S. stocks last night occurred once in decades, it was more like a bear market rebound. After all, the Nasdaq large-cap index had plummeted 20% and entered a bear market before the rebound. I've suggested in my previous report that we're going to "constantly see statistically significant, epic draws" during this time. At the moment, anyone looking at the closing price and not the process would be foolish. So, what created the historic rebound in US stocks last night? As the market opened last night, the Nasdaq once plummeted by nearly 3.5%, while the Dow fell by nearly 900 points. The United States announced the details of sanctions against Russia: sanctions on two major Russian financial institutions with assets of about $1 trillion; individual sanctions on several Russian oligarchs. However, the two Russian financial institutions were already on the restricted list, and the individual sanctions against the oligarchs did not include Putin. More importantly, the US did not kick Russia out of the SWIFT system. The market saw that these were just some innocuous sanctions that could not curb the momentum of Russia's offensive at all, and they were overjoyed with the bear market rebound. Biden immediately pointed out, "Look, the Russian stock market has fallen by half. They are experiencing an unprecedented economic crisis!" Indeed, yesterday's plunge in the Russian stock market was also historic, the fifth-largest one-day plunge in history. It is worth mentioning that the one-day plunge comparable to that of Russia in history was the drop of Hong Kong's Hang Seng Index on "Black Monday" in 1987. The biggest slump in history was when Argentina fought hyperinflation in 1990. Other slumps were also war-related. However, Russia must have anticipated the impact of the war on the stock market before sending troops. If the stock market crash is economic sanctions against Russia, what is the U.S. stock market crash? It is an exaggeration to say that the already frothy U.S. stock market is one of the biggest weaknesses of the United States in this geopolitical conflict. Now for the Russian chess master, the bigger the better. After all, the two pro-Russian regions have always followed Putin's way. Capturing them doesn't change Putin's strategic map, and it doesn't make any sense for future negotiations. Putin said the goal of the military operation was to resist the eastward movement of NATO and to "completely demilitarize" and "denazify" Ukraine. Now Russia's actions show that Putin is indeed advancing in accordance with this goal. After taking full control of Ukraine, Russia does not need to pass through Poland or Lithuania to reach its important Baltic military base in Kaliningrad, thereby threatening allies to the east of NATO. At this time, Putin's bargaining chips with the West are important: at that time, Europe and the United States will have to stop sanctions, and even have to make concessions to Russia's reasonable demands. In the game, when this kind of preemptive strike and all-out betting on its own set goals, Russia's actions will also limit the opponent's choices, and even put the opponent in a dilemma. After the announcement, the world discovered that there are no actual sanctions in Europe and the United States, and even SWIFT dared not move. After all, a large part of Europe's energy supply comes from Russia, and this pattern cannot be changed in the short term. In a CNBC TV interview the day before yesterday, I discussed why the US won't use SWIFT sanctions. If SWIFT is moved, it will be the beginning of the collapse of the dollar hegemony. In fact, many people do not know that the SWIFT system is European. In yesterday's series of sanctions, Germany announced the suspension of Nord Stream 2. It appeared to be the most sincere sanction, and Dutch natural gas futures jumped 80% in fear. Now Germany must feel that the United States has fallen off the chain. They agreed to jump down together, but it turned out that only the United States had brought a parachute. This conflict will redraw the strategic map of the European continent and will be the most significant since World War II. Once, Kennan's "Moscow Long Telegram" alarmed the United States. Later, the Cold War, Nixon's visit to China, and Reagan's "Star Wars" plan dragged down the economy of the former Soviet Union. However, the global landscape today is also very different from what it was then. "There are only permanent interests, no permanent allies." After the Ukrainian war, China announced that the entire territory would be allowed to import Russian wheat. The $纳斯达克(.IXIC)$ Nasdaq 100 has fallen into a bear market with the Ukrainian military mobilization. The Fed has not yet started raising interest rates and shrinking its balance sheet, and the three major U.S. stock indexes have fallen below their 200-day moving averages across the board. In history, there has never been a US stock market correction of more than 10 points, and the US economic slowdown has not followed. The biggest risk in the world now is that the Federal Reserve has to tighten monetary policy when the US economic cycle is down. The conflict between Russia and Ukraine has added a lot of uncertainty to the current situation. At this moment, an era came to an end.