March 2022 Newsletter: Russian Invasion of Ukraine
At this point, we all know about the Russian invasion of Ukraine and the war taking place. I want to start this letter by addressing the most important topic, the horrible humanitarian situation that’s unfolding. I’ve always believed that helping others is important. I’ve never publicized this, but our company gives away approximately 10% of our revenues each year to charitable causes.
Because of the scale of the humanitarian disaster in Ukraine – after two weeks almost 2 million people have fled the country– I am announcing:
I will match donations you make to any charitable organization that you designate to helping Ukraine up to $10,000 total. Anyone can participate. It doesn’t matter if you are a client or not. We will match your donation. Simply let me know your donation amount for Ukraine, and we will make a matching charitable contribution. We will be splitting our matching donations equally among: Nova Ukraine, Red Cross, Save the Children, and Doctors Without Borders.
You, however, may donate to any organization working to help Ukraine that you wish. Just let me know about your gift.
If you are unsure where to give, below is a list of charities or organizations that are helping Ukraine. These groups have been listed in multiple mainstream media publications, and on Candid’s GuideStar nonprofit research website as reputable, or recommended by Ukrainians themselves.
Humanitarian – Ukraine based Organizations
Nova Ukraine: https://novaukraine.org/
Razom Ukraine: https://razomforukraine.org/
Sunflowers of Peace: https://www.facebook.com/sunflowerofpeace/
Humanitarian – Global Organizations
International Committee of the Red Cross: https://www.icrc.org/en/where-we-work/europe-central-asia/ukraine
Doctors Without Borders: https://www.doctorswithoutborders.org/what-we-do/countries/ukraine
Save the Children: https://www.savethechildren.org/us/where-we-work/ukraine
Military
Ukraine Ministry of Defense: https://bank.gov.ua/en/news/all/natsionalniy-bank-vidkriv-spetsrahunok-dlya-zboru-koshtiv-na-potrebi-armiyi
Come Back Alive: https://www.comebackalive.in.ua/
As this is an investment letter, we also must discuss the implications of the conflict. I want to stress how the investment impact pales in comparison to the humanitarian implications.
In the grand scale of things. for a diversified investment portfolio, the war is not economically significant outside of a few areas with Russia making up slightly over 3% of global GDP and Ukraine under .2%. Certainly, we are seeing big shifts in individual investment themes. Defense contractors and energy stocks are rallying while things like airline stocks and banks stocks are falling.
The biggest issues we are likely to see involve energy and wheat prices and to a lesser extent some other commodities. Russia is one of the largest energy exporters in the world. Perhaps less well known is that Ukraine is a substantial wheat exporter. For Americans, the impacts are likely to be a bit less than for Europeans. Europe is the primary consumer of Russian energy exports. Ukrainian wheat is sold mostly in developing markets and not in the US. Additionally, the US is a net agricultural exporter, so we are unlikely to see any major supply issues outside perhaps higher prices. Energy prices are a bit trickier as increased supply from OPEC nations could help offset some issues with Russian supply. In the short term though, higher food and energy prices are likely the biggest effects we will see.
If history is any guide, a 10% to 20% stock market drop usually occurs any time a war or large military conflict takes place. In the case of conflicts involving economically smaller entities (e.g., the first and second Gulf Wars, Afghanistan, Vietnam, etc.) market losses are usually quickly reversed. In fact, even though it is still down for the year, the market is at the time of this writing just slightly higher than just before the Russian invasion of Ukraine actually started.