PUTIN PLAYS THE MARKET

For the purposes of this article, there are two Vladimir Putins: Putin, the Leader of Russia and Putin, the Investor. Current international attention has focused on Putin, the Leader of Russia. The financial side of Putin has been largely ignored by the media. Yet, he is believed to be one of the richest people in the world with an estimated $200 billion net worth. His net worth has increased over the years while the Russian economy has fallen further and further behind other countries. An ever richer political incompetent? Maybe.

So, how does one square the balancing act between Putin, the Investor, and the geopolitical dictates of Western Europe? They remain very dependent on Russian natural gas. Yet, they have also engaged in ever greater brinksmanship with the expansion of NATO and working to pull Ukraine westward. A yet to be explained decision by Putin, the Leader of Russia, initiated the buildup in late 2021.

Oil and Natural Gas

The “coincidence” is that he built up his forces at the Ukrainian border while the bear market in America’s stock market developed over the same time frame. The real beginning of the climb of crude oil prices started in early December 2021 at $62/barrel and steadily grew to $95/barrel on the eve of the invasion in late February 2022. To borrow from Ernest Hemingway, the prices rose slowly, then suddenly. From late February to late March, crude oil went from $92 to $112. April has seen the oil prices stay roughly in this range.

There is a good chance Putin, the investor, made money on the oil market over the last several months. But that $200 billion would be well distributed in the global economy – including the American stock market. Putin, the Investor, needs to ask fundamental questions. For example, is there more money to be made by winning or losing in Ukraine? The Russian stock market is a lost cause. The American stock market is not.


The Russian Ruble

The financial sanctions by our faux-president have backfired and will keep on backfiring. Not only did the ruble rebound strongly from the first assault, it is now stronger than ever. No one expected Putin to put the ruble on the gold standard. What should disturb observers is that they can switch back to fiat currency when it pleases them. The main beneficiary? That’s right, Putin.

The contradictions abound. is the fear over impending economic collapse. Precursors to a recession are being seen by a number of economists. Others see worse. Cynicism demands it. Projecting out, there is a related fundamental question to answer. Will tactical nukes hurt or help Putin, the Investor? The military calculus provides its own answers. But at the end of the day, Putin, the Investor has to worry about his portfolio. In or out of political power, he still needs his money.

Does anyone remember the Panama Papers? A name that quickly floated to the top was one Vladimir Putin. Now, what would one of the world’s most powerful leaders be doing hiding money? Worse, he was found to be part of a Russian network hiding this money. That was in 2016. Who knows how long this activity has been going on? One would think that more than several layers of intermediaries and front organizations would hide the involvement of Putin, the Investor.


When Russia Becomes the Pawn

There is another way to put this. Nicolas Gage played an up and coming international arms dealer in a movie titled “The Lord of War”. Over dinner with a competitor he noted “One is not an international arms trader until you sell arms against the interestsof your own country.” International investing works the same way. The very idea that Putin, the Investor, would work against the interests of Putin, the leader of Russia would be hard to accept. However, the reader is reminded that the wealth of Putin, the Investor has grown, while the wealth of Russia has declined. So, let’s draw the obvious conclusion, Putin only looks out for Putin. 20 years, 30 years in power. It doesn’t matter. His time comes to an end somewhere, and he knows that.


The rumors that his end could be soon due to his apparent mismanagement of the Ukrainian conflict are growing and are still questionable. One recent report claimed that 20 Russian battalions have been disabled to date by the Ukrainians. There are conflicting reports about the Russians focusing on the Donbas region. If true, is it an act of victory or of defeat? No one knows for sure – except Putin. So, during April, the Russian army has repositioned for a stronger attack from the Donabas region. By late May they managed to finally take control of Mariupol, and make progress in the Donbas region. At one point the Ukrainian military was in danger of being encircled. Fortunately, they retreated in time. Another report put Ukrainian losses at around 50-60 soldiers per day.


The question needs to be asked again. Will Putin benefit more from victory or loss? Or will he benefit the most from dragging the conflict out? The ruble is stronger than ever around 60 rubles to the dollar. It used to be 8. Russia is developing new trade relations to compensate for any sanctions out of Europe. If anything, the West is making decisions which ultimately strengthen the Russian economy and Putin that much richer. But the one thing you can count on in this conflict is that Putin, the Investor, will continue to play the market.

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