Invade soon or go home

Delivered on By Justin Pyvis

Good morning! While announcing $A86 million to subsidise Tassie’s forestry industry yesterday, ScoMo said:

“If you can’t have control of your budget, if you manage your finances carefully, that puts pressure on inflation, drives inflation up, meaning you’ll see interest rates rise as well.”

True enough, provided that the central bank doesn’t immediately offset the budget profligacy, which Australia’s RBA has yet to do – in fact, it has been doing the opposite.

But we do wonder what “control of your budget” means to ScoMo, given that in his four years as PM he has managed to increase Australia’s net debt by 85%, and based on his government’s own forecasts, expects to run a negative underlying cash balance of over 2% of GDP until at least 2029-30…

If that’s being in control, what would a loss of control look like? 😲

Reading the tea leaves

Daily % change







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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 S&P500 is a snapshot 30 minutes before close.

Despite being down -0.85% at one stage in early trade, theΒ ASX200 bounced back to finish up +0.16% after Presidents Biden and Putin agreed to “the principle” of a summit to “discuss security and strategic stability in Europe”, helping to propel the local market into the black.

A notable mover was energy giant AGL (+10.6%), which hit a 7-month high after it rejected a takeover offer from software billionaire Mike Cannon-Brookes and Brookfield, stating that it “does not offer an adequate premium for a change of control”.

TheΒ US S&P500Β was closed for the Presidents Day public holiday.

Food for thought

The median Metaculus community prediction that Russia invades some part of Ukraine this year has shot up to 86%.
The median Metaculus community prediction that Russia invades some part of Ukraine this year has shot up to 86%. Source

Will Russia invade Ukraine? According to online forecasting platform and aggregation engine Metaculus, the answer is more likely yes (86%) than no.

Over the weekend Russia extended “military drills” in Belarus that were due to end on Sunday, a move that led US Secretary of State Antony Blinken to say “Everything we are seeing suggests that this is dead serious.”

Just hours ago Russia’s President Vladimir Putin further escalated the situation by moving “to immediately recognise the independence and sovereignty of the Donetsk People’s Republic and the Luhansk People’s Republic”, two Russian-backed breakaway republics in eastern Ukraine. Russia also denied that plans had been agreed for a a new summit between Putin and US President Joe Biden, “contradicting claims by the ElysΓ©e Palace and the White House”.

The news caused the MOEX, Russia’s benchmark stock index, to plunge -10.5%, its biggest loss since Russia’s invasion of Crimea in 2014.

UK Prime Minister Boris Johnson said Putin’s latest move “is plainly in breach of international law, it’s a flagrant violation of the sovereignty and integrity of Ukraine… I think it’s a very ill omen and a very dark sign [and] it’s yet another indication that things are moving in the wrong direction in Ukraine”.

Biden thinks Putin has already “made the decision” to invade “in the coming days”, and Australia’s own Defence Minister Peter Dutton seemed to agree that an invasion will happen:

“Troops continue to build up, the presence of the ships in the Black Sea, the cyber attacks, the false flag activity, it’s all pointing in one direction sadly.”

But if Russia is going to invade, when will it happen? Indications on the ground suggest that it will have to be “soon or go home”, before the predominantly young, bored and poorly paid Russian soldiers “who aren’t incapacitated with COVID drink themselves to death after robbing his [Putin’s] army blind leaving it unable to fight and stuck in a country they’ve trashed”.

That’s at least according to a Belarusian article published last week, which claimed Russian “soldiers complain about the quality of food… [and] there have already been cases when soldiers asked the local population to ‘give them something to eat’ or pets simply disappear”.

There’s also a thriving black market, where “even a Kalashnikov assault rifle can be bought, you just need to know how and to whom to approach. And the fact that they sell rations, diesel fuel, uniforms is no longer news”.

Russia can’t keep this volume of troops – around half its entire army – stationed at the border forever. Morale will continue to fall and changing weather conditions in the spring will increase the difficulty of a land invasion due to “the thaw [which] turns ravines into creeks, and creeks into rivers”.

If Russia’s going to invade Ukraine, it has to be soon.

Chewing the fat

Bits and bytes

☒️ According to journalist Paul Kelly, the AUKUS agreement – which is what allowed Australia to dump its French submarine deal in favour of US/UK nuclear subs – remains unsigned.

πŸš† Sydney’s train services resumed today but in a limited capacity as the industrial dispute continues, with “reduced services… across all lines on the Sydney rail network from 5am”.

πŸ’Έ Clive Palmer is on track “to run the most expensive election campaign in the nation’s history”, having already spent 100x more than the Liberal/Labor parties on advertising.

🏈 Has no one told them about the rule requiring a single owner to hold at least 30% equity? A group of crypto enthusiasts are seeking to buy the ~$US4 billion Denver Broncos via a decentralised autonomous organisation (DAO).

πŸ™Š Former US President Donald Trump’s new social media app, Truth Social, launched in Apple’s App Store yesterday.

πŸ’³ The Victorian government will spend $A200 million on a stimulus package, half of which will be “rebates for travel, entertainment and dining”.

πŸ₯ New Zealand’s government will lift its vaccine pass and mandate system once it was “sure that we are beyond the peak and that the pressure on the health system was manageable”.

πŸ’ˆ Perth’s Cottesloe Beach Hotel barred entry to men with mullets over the weekend before quickly backtracking by saying it was “an error in judgement and should not have been produced or displayed”.

πŸ”₯ German producer prices – what producers charge wholesalers – increased 25% in January, the fastest rate of growth in 73 years. Even excluding energy prices were up 12%, suggesting broad-based pressure and upside risks for consumer prices.

πŸ“ˆ JPMorgan said it expects the US Fed to raise interest rates by 25 basis points at nine consecutive meetings through to March 2023.

🏠 “In the 50 largest US metro areas, median rent rose an astounding 19.3% from December 2020 to December 2021.”

⚰️ “The Italian ambassador to Australia has died after plunging from a balcony in her home town [in Foligno, north of Rome].”

🧰 Then why do it? ScoMo defended his unsafe attempt at welding (seen in yesterday’s Wrap) by saying “People want to have a chip at [me] because I’m not a good welder or a good hairdresser, well, that’s not my day job.”

🍻 The state government’s 2009 alcohol ban on Mornington Island, a remote Queensland community, was lifted after residents resorted to drinking deadly home brew and sourced booze on a black market at “11 times its legal value”.

🍎 Retail employees at several Apple Stores in the US are working to unionise in secret “using encrypted chats and even Android phones… To avoid eavesdropping by store managers and ensure they remain anonymous”.

🍁 A single mum in BC, Canada “gave $50 to the convoy when it was 100% legal. She hasn’t participated in any other way. Her bank account has now been frozen”.

πŸ—Ύ The Jibun Bank Japan Manufacturing PMI fell to a seasonally adjusted 52.9, the slowest rate of expansion since May 2020. A reading above 50 indicates expansion from the previous month.

πŸ•ŠοΈ UK Prime Minister Boris Johnson will release a “living with Covid plan”, which will “scrap all remaining Covid legal restrictions in England, including the requirement to isolate”.