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March 15, 2022
Listen to the podcast below to hear Jill talk about
With so much going on in the world today, it was difficult determining what to focus on. I decided to look at Russia and China from a higher level since the ebb and flow of news is already available daily.
I listened to a discussion with Dr. Bobo Lo, a Chinese Australian who served as a diplomat for Australia in Moscow and China. Currently, he is a consultant with several think tanks in Australia, France and the U.S.
Dr. Lo was outlining differences between Russia and China. He said while both countries are authoritarian, they conduct themselves on the world stage entirely differently. While China prefers to play within the rules of the international community, Russia operates as a disrupter. They feel the rules don’t apply to them. I thought that was an interesting insight but explains why Russia, with its small economic footprint, can take center stage.
Asked how he thought China was viewing the invasion of the Ukraine, Dr. Lo thought China felt Russia miscalculated. China and Russia both viewed the West as on the decline and weakening. Both are surprised at the solidarity of NATO and the U.S. issuing sanctions.
Listening to a different broadcast by BlackRock, Tom Donilon, chairman of the BlackRock Investment Institute, who also served as a National Security Advisor under Pres. Obama. said make no mistake, the only decision-maker in Russia is Putin. Donilon felt Putin was isolated before the pandemic and has become more so with COVID.
Donilon’s wife, Catherine Russell, is executive director at UNICEF. At the time of this recording, 2 million refugees left Ukraine. Russell said 1 million are children.
As with any sanction, there are always intended and unintended consequences. One of the surprises is the number of businesses withdrawing from Russia. They cover almost every industry and the companies leaving are from around the world, not just the U.S.
Another unintended consequence – Russia’s invasion of Ukraine galvanized NATO to consolidate and is giving the organization new purpose. Military strength is being sent to countries surrounding Ukraine. Even Germany has broken their longstanding position of not investing the required 2% of economic activity on defense required by NATO. In fact, they will spend more than 2% to “protect our freedom and democracy” said Chancellor Scholz.
Two weeks ago, businesses thought globally. Witold Henisz of Wharton School said “the world has changed and the C-Suite, (an abbreviation for corporations), really started taking seriously the parts of the world we don’t want to go to. In 48 hours, companies were pulling out and rethinking the post-war world. This has not happened since 1940.”
You will probably see the phrase de-globalization cropping up more frequently. This fits with the supply chain problems created by COVID but now magnified by this incursion. How do you keep your supply chain from being impacted by world events?
And what about the Russian people? Russia seems to becoming more like North Korea. Propaganda is high. The truth isn’t getting reported. However, the people have to know something is wrong when Starbucks and McDonald’s are no longer open; Visa and Mastercard don’t work; inflation I s high; the ruble is devalued; athletes are blocked from competing globally; soldiers are coming home in body bags. Sadly, this is an echo of the iron curtain from decades ago.
In testimony before Congress on March 8th, Under Secretary of State for Political Affairs – Victoria Nuland said: “As Putin tries to reduce Ukraine to rubble, he is also turning Russia into a prison.”
One of the lessons learned seems to be that isolation going forward is not the way to go. Alliances of likeminded countries to fight authoritarian regimes is necessary.
Inflation maybe high over the next few years as new supply chains are designed and built. We anticipate a lot of disruption of companies as they adjust to this new world view.
From a portfolio design standpoint, we combine passive, index like holdings with active management looking for new investment opportunities in the current environment.
If you’d like to discuss your portfolio allocation, please contact us.
Now for some badly needed good news.
Scientists created a bacterium that consumes carbon dioxide converting it to acetone and isopropanol. If either of these chemicals sound familiar, these products are used in hand sanitizers and light bulbs.
In California, a pilot project is underway to see if covering the state’s irrigation canals with solar panels could reduce the impact of a drought. The panels prevent evaporation.
Lastly, I wanted to share my experience with back-up power. Originally, we had a Generac generator installed to deal with the PG&E electrical shutdowns. But that is what is called dirty energy. It uses natural gas.
We recently had Tesla Power Batteries installed. I thought it stored solar power from my panels so if we lost electricity, they would generate power. I was incorrect. The way it works is the solar panels absorb power and it first supplies the needs of the house. Any leftover goes to the batteries. At night, when there is no sun, the batteries supply the house. The result, I am not needing to use any PG&E electricity from the grid – at least not so far. And, the energy is clean. Pretty cool
We hope your life is getting back to normal. Until next time.
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