One man’s poison is another man’s poison
The war in Ukraine will have no winners. Estimates from the internet: the EU could lose 1% of GDP or Euro 175 billion (this number is probably low because the cost of hosting/supporting 6-7 million of Ukrainian refuges can be as high as Euro 100billion in the first year of the war) , Russia stands to lose 10% of GDP or USD 150 billion, Ukraine 25% of GDP or USD 50 billion, and the US 0.1% of GDP or USD 20 billion, for a combined total loss of USD 395 billion, excluding the cost of rebuilding Ukrainian infrastructure. Not even the environment/environmentalists will benefit because fuels will be reallocated, the EU will burn more coal (not being able to procure enough LNG to replace piped natural gas from Russia) and volumes refused by the EU will get shipped to India and China. The result will be neutral overall: more pollution in the EU and less in Asia. The only group that could benefit from the war in Ukraine is European socialists. A prolonged recession accompanied by high unemployment, inflation and rationing of electricity/heat will make socialist ideas much more appealing to the impoverished population. We have seen how this works in Europe a few times before. By the way, my hat is off to Kissinger for advising our government not to antagonize China. If the US government keeps declaring their desire to cut off China as a supplier of computer chips and rare-earth metals, China may react just like Russia – restrict those very supplies to the US before an alternative source is found. I would not be surprised – Chinese leadership was following Russia’s footsteps for the better half of the last century.
Bear attacks – a case study.
Every year there are approximately 12 bear attacks (reported as “human-bear incidents”) in North America. I can think of two ways of addressing the problem. We can simply distribute bear spray to certain areas and provide training on request. A more comprehensive solution: a) cordon off all wooded areas which could contain bears, b) tag all bears, and monitor them closely, c) have teams of sharpshooters kill all scary looking bears annually, d) have those bears mounted and displayed at county fairs to send a message/offer a lesson to unruly bears. The locals will have to do without hiking, fishing, hunting and will stay without firewood for the winter, but that is a small price to pay for knowing that hungry beasts will not snatch your kids from their cribs. This approach may sound a bit expensive, however can be easily financed by introducing a “wood stove tax”. If given a choice many people would use the first option. The EU leaders would probably take the second one.
“Mega-trends” stocks
As a reminder, I am looking at stocks in the context of a L/S strategy, where undesirable exposers can be hedged out. When considering stocks that benefit from the trends for electrification and reshoring/automation, ABB (ABB NYSE) stands out as a global leader in electrification products, robotics, and automation. The stock may lag other industrial names in an economic recovery having approximately 1/2 of the business exposed to later cycle capex markets but should be a good performer longer-term.