Fraught with risk

Delivered on By Justin Pyvis

Good morning! A seventh Russian general was reportedly killed in Ukraine, which must be some kind of record for a modern war, as poor communication methods and low troop morale force Russian officers to take more risks:

“Russian forces are believed to be relying in part on open communication systems, for example mobile phones and analogue radios, which are easy to intercept and could give away the locations of high-ranking officers.”

Perhaps that’s why the Russian government is now hedging its bets on a victory condition. According to Sergei Rudskoi, head of the Russian General Staff’s Main Operational Directorate:

“The main tasks of the first stage of the operation have been completed… allowing us, I emphasise again, to focus the main efforts on achieving the main goal - the liberation of Donbas”.

It’s easy to hit your goals when you’re constantly shifting them in your favour!

Reading the tea leaves

Daily % change







AU Bond



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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

The US S&P500 ended Friday up 0.51% after a volatile day which saw the index swing between losses and gains several times. The energy sector was up 2.3% after the oil price reversed its recent losses following news that Yemeni rebels had attacked an oil facility in Saudi Arabia, a blast that was visible from Jeddah’s Formula One track.

Locally, the ASX200 edged up 0.26% to a 20-day high, having briefly reached its highest level in two months earlier in the session. Seven of the index’s eleven sectors advanced, led by materials (+1.3%) which benefited from stronger iron ore prices.

Food for thought

Video re-enactment of White House staff after Biden's latest gaffe.
Video re-enactment of White House staff after Biden's latest gaffe. Source

There must have been problems with his teleprompter because over the weekend US President Joe Biden went rogue, declaring that: “For God’s sake, this man [Russia’s President Vladimir Putin] cannot remain in power.”

Biden’s comment was almost immediately countered by a White House statement asserting that Biden was “not discussing Putin’s power in Russia or regime change”.

Sounds suss to us! A more likely story is that the gaff-prone Biden may have accidentally revealed the US government’s plan for regime change in Russia, one which historian Niall Ferguson last week warned was fraught with risk:

“Prolonging the war runs the risk not just of leaving tens of thousands of Ukrainians dead and millions homeless, but also of handing Putin something that he can plausibly present at home as victory. Betting on a Russian revolution is betting on an exceedingly rare event, even if the war continues to go badly for Putin; if the war turns in his favour, there will be no palace coup.

Every step of this strategy is based on dubious history. Ukraine is not Afghanistan in the 1980s, and even if it were, this war isn’t going to last 10 years — more like 10 weeks. Allowing Ukraine to be bombed to rubble by Putin is not smart; it creates the chance for him to achieve his goal of rendering Ukrainian independence unviable. Putin, like most Russian leaders in history, will most likely die of natural causes.”

Putin now has the ammunition he needs to tell the Russian people that he was right all along; that the US, as it has done in many other countries, was conspiring to overthrow him.

But Biden’s gaffe wasn’t the first move by western governments that lends credence to this alternative narrative. Just last week several countries, including the UK, New Zealand and after this week’s budget, Australia, temporarily reduced their fuel excise taxes or handed out cash in an effort to soften the blow of elevated oil prices on people’s finances.

Unfortunately despite sounding well-meaning, such moves work only to increase the price of oil further – higher prices signal scarcity and, all else equal, will reduce demand. Dulling that signal keeps demand elevated, forcing oil prices even higher, with the benefits mostly accruing not to consumers but to major oil exporters such as Putin’s Russia.

It’s a similar story with sanctions, where the only governments to truly hit Russia where it hurts – energy exports – were those that didn’t really buy much to begin with. Ferguson concludes:

“Yet, so long as European Union countries refuse to impose an energy embargo on Russia, Putin’s regime continues to receive around $1.1 billion a day from the EU in oil and gas receipts. I remain sceptical that the sanctions as presently constituted can either halt the Russian war machine or topple Putin. Why has the ruble not fallen further and even rallied against the euro last week?”

The Russian economy and its people will suffer enormously from the existing sanctions. But western governments have stopped short of imposing sanctions designed to end the war in Ukraine as soon as possible, suggesting – as Biden did on the weekend – that a quick peace was never really their goal to begin with.

Chewing the fat

Bits and bytes

🧪 From 17 April travellers to Australia will no longer need to undertake pre-flight COVID-19 testing.

👩‍🔬 ScoMo was back in Perth on Sunday where he committed $375 million – half the capital cost of construction – towards a new “WA Comprehensive Cancer Centre” at the Harry Perkins Institute of Medical Research.

📈 The market “is pricing in the huge costs of [the] RBA delaying the start of rate hiking cycle & how those central banks, hiking early, will have to do less as they will control inflation more effectively”.

❌ ScoMo declined to meet China’s new ambassador to Australia, defending his decision by saying doing so would have been a “demonstration of weakness”.

🦗 Australia defeated Pakistan by 115 runs in the third and final test match between the two nations, picking up a 1-0 series victory, its first in Asia since 2011.

✋ The Australian government announced sanctions on the Belarusian president, Alexander Lukashenko, along with “22 more Russian propagandists”.

🚆 Commuters in Sydney will get free (on the taxpayer’s dime) public transport for 12 consecutive days during the Easter holidays to make up for a 24-hour shutdown of the train network last month.

📣 Elon Musk is giving “serious thought” to “building a new social media platform… that would consist [of] an open source algorithm”.

😢 Yet another subscription service? Please no: “Apple could soon turn the iPhone into a recurring subscription service.”

⚔️ It’s a just a military drill, doesn’t mean anything, right? “The Russian military said Friday it has started a military exercise involving more than 3,000 troops on a chain of islands including those disputed with Japan.”

💡 Researchers discovered a new, safe type of UV light that quickly eliminates indoor airborne microbes and “could be a highly effective passive technology for reducing person-to-person transmission of airborne-mediated diseases such as COVID and influenza indoors”.

🎸 The Foo Fighters' Taylor Hawkins, who died on Friday night in Colombia, “had 10 different substances in his system at the time of his death”, although an exact cause of death has yet to be determined.

🔐 China’s government will lock down all of Shanghai, starting with those in the eastern half, so that it can test the entire 25 million population for COVID-19 over the next eight days.