Putin isn't losing

Delivered on By Justin Pyvis

Good morning! The Kiwi central bank hiked its cash rate by 50 basis points yesterday, its biggest hike in 22 years to bring it to 1.50% – a full 15x higher than Australia’s lowly 0.1%:

“The Committee agreed that their policy ‘path of least regret’ is to increase the OCR by more now, rather than later, to head off rising inflation expectations and minimise any unnecessary volatility in output, interest rates, and the exchange rate in the future.”

The Reserve Bank of Australia (RBA) should have started tightening several months ago. By waiting too long, the RBA risks not only pushing the economy onto an unstainable path that will have to be painfully unwound in the future, but will also not have what the Kiwis called “policy flexibility ahead in light of the highly uncertain global economic environment”.

In other words, having used all of its stimulus ammunition during the boom, the RBA may not have much left when the bust arrives.

It’s not like the warning lights haven’t been flashing bright red for some time, either. According to NAB, Australia retail prices rose at a rate of 3.7% in the March quarter, which if sustained for the whole year corresponds to a 15.6% increase in prices.

The Melbourne Institute’s monthly Inflation Gauge jumped 0.8% in March, corresponding to a 10.0% annualised increase in consumer goods prices (it uses a similar methodology to the official index).

The RBA has all the data it needs; it just chooses to look elsewhere. At this late stage it would be a purely political decision not to increase rates before the election!

Have a great Easter break.

Reading the tea leaves

Daily % change







AU Bond



US Bond









Brent (bbl)



Gold (oz)



Iron ore (t)









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

The US S&P500 added 1.12% with nine of the eleven sectors gaining ground led by consumer discretionary (+2.7%) and tech (+1.9%) stocks after the bond market selloff took a breather, reducing yields.

Locally, the ASX200 rose 0.34% led by energy (0.98%) and materials (0.64%) following the large spike in prices the night before, especially for oil which surged back above $US100 per barrel due to a breakdown in Russia/Ukraine peace talks and the threat of additional sanctions.

Food for thought

The tried and true strategy for a leader down in the polls: start a war.
The tried and true strategy for a leader down in the polls: start a war. Source

Dave Lawler from Axios cited some interesting anecdotes and stats showing that in terms of the information war within Russia, President Putin isn’t losing.

The information war:

  • The more horrific the allegations against Russia — such as the apparent massacre of civilians in Bucha— the stronger the impulse to reject them as lies.
  • Russians believe implicitly that it’s impossible to change Putin’s behavior. And so while perhaps half of the population supports Putin unconditionally, many others do so out of self-preservation.
  • Anything or anyone that doesn’t support the Kremlin line is being suppressed.

The impact of sanctions:

  • “The sanctions just reassured people that the West is evil.”
  • Sanctions have only amplified the sentiment among most Russians that western aggression caused this conflict in the first place.
  • Russians will complain that their lives are getting harder, while at the same time praising Putin for standing up to the US.

It’s not without cost:

  • Most Russians want the conflict to end, despite an 81% approval rating that’s distorted by the fact that opposition to the war has been criminalised.
  • Many educated Russians are fleeing the country.
  • The future of Ukraine, Russia’s closest neighbour, has been “destroyed”.

Lawler concludes that: “Discontent in Russia stemming from this war could eventually become dangerous for Putin. But for now, most Russians appear to be standing behind him.”

In other words, if the US was hoping for regime change through a protracted war in Ukraine – President Biden admitted as much with his Putin “cannot remain in power” gaffe a couple of weeks ago – it’s unlikely to get it anytime soon.

If anything, recent comments from President Biden that Putin “is brutal”, a “war criminal” and is committing “genocide” might serve to reinforce the propaganda Russians have been force-fed from day one: that the US is the one telling lies in an effort to overthrow the regime.

Chewing the fat

Bits and bytes

🏪 Inflation in the UK hit 7.0% in March, the highest since March 1992. Prices rose by 1.1% from the month before, i.e. at an annualised rate equivalent to 14.0%.

🍁 The Bank of Canada raised its cash rate by 50 basis points to 1.0%, the biggest increase in more than two decades.

📈 US producer prices – what manufacturers charge wholesalers – rose 11.2% in March from a year ago, the most on record (the series began in 2010). The monthly increase of 1.4% was also a record. Even core prices, which strip out energy and food, rose at 0.9% monthly (nearly double the estimate) and 7.0% from a year ago.

🚚 We were promised flying cars… “Amazon is still struggling to make drone deliveries work.”

⚖️ Singapore’s High Court ruled that “cryptocurrencies satisfied the definition of a property right in the classic definition… giving rise to proprietary rights which could be protected by a proprietary injunction”

⚔️ The US government will send another $US750m “in additional weapons to Ukraine”.

✈️ The airport chaos continues with “queues were already long at Sydney” at 6am yesterday morning, as “senior managers have been pressed into service at check-in desks and luggage lines”.

🔐 Recession risk: Brokerage firm Nomura estimates that “as many as 45 cities in China are now implementing either full or partial lockdowns, making up 26.4% of the country’s population and 40.3% of its GDP”.

👉 US Treasury secretary Janet Yellen warned China that “The world’s attitude towards China and its willingness to embrace further economic integration may well be affected by China’s reaction to our call for resolute action on Russia.”

👩‍⚖️ A Twitter shareholder is suing Elon Musk, alleging that the late disclosure of his stake in Twitter cost shareholders money and saved Musk around $US143 million.

🏃‍♂️ Usain Bolt said competing on Mario Kart and and Mortal Kombat “helped me become Olympic champion”.

🦟 We all hate the buggers but… really? “A Texas man is facing aggravated assault charges after allegedly beating his roommate over an argument about… what mosquitoes look like.”

🛂 Western Australia’s government lifted its 500 patron cap for pubs, removed all limits on private outdoor and home gatherings and will move to the national definition of close contacts.

🏀 A match between the Minnesota Timberwolves and Los Angeles Clippers was briefly suspended “after a woman tried to glue herself on the court with superglue”.

👎 Sri Lanka’s sovereign debt was reduced to deeper into junk territory by ratings agency S&P, reflecting “looming default on some affected obligations”.