traffic_analyzer/iStock via Getty Images
Co-produced with Treading Softly
Hello friends. I was strolling through my acreage the other day when word that the world was experiencing a new land war in Europe reached me. It’s big news when the world’s second-largest nation attacks Europe’s largest nation.
My heart goes out to all whose lives will be lost or ruined during this conflict. War in Europe is something that many thought we wouldn’t see in our lifetimes. Many will see their lives permanently altered by events that are entirely outside their control.
Yet for many of us, our corners of the world haven’t changed so much. We go about our day, doing more or less the same things we did the day before. Today, I’m going to talk about the economic opportunity brought on by the conflict. This is a website about investments, and the reality is that the world will keep spinning and revolving around the sun. Our bills still need to be paid, our retirement isn’t going to pay for itself, and stopping isn’t going to help anyone.
So let’s look at the economics and who the economic winners and losers will be.
Unrealized Gains/(Losses)
This situation reinforced my view that investing for income is superior to investing for capital gains. I don’t have to visit the flea market to sell my goods to unlock value. Those who invested in Russian-based companies were forced to watch the value of their holdings evaporate:
Data by YCharts
When investing in any country’s companies, geopolitical risks abound. Those who viewed Russian companies as undervalued got a lesson on what happens when the country you invested in breaks with international norms, but this risk expands out further. Oil Majors like BP (BP) and Shell (SHEL) both are taking large losses to divest from Russian assets.
So who wins from this conflict and why has it driven me back to the flea market of the market to buy up “on-sale” securities?
I’ll give you the TL:DR answer: US-based and US-focused companies and funds will be the ultimate winners.
Let’s dig deeper into why.
Trade Between Russia and US/EU Will Reduce to Nearly Zero
Russia is a large exporter of basic materials – oil, coal, precious metals, and natural gas. The U.S. traded only $34.9 billion in 2019, a drop in the bucket compared to the U.S.’s trade with China (topping $500 billion).
This reduction of trade – largely driven by Russia’s new pariah status internationally and sanctions making it difficult to move money in and out of …….
Source: https://seekingalpha.com/article/4492766-who-wins-from-the-russo-ukrainian-conflict