Date: 4/4/2022
Author: Mr. X
In the cryptocurrency market, one “whale,” or major investor, can have a huge impact. He can start a massive bull run or lead to a market collapse. With one move, even an anonymous investor can transform a coin from worthless to invaluable.
We like to think that in the larger economy, the rules are a bit different. They are not. It’s not just about statistics and technical figures. There’s the irrational, human factor that must always be considered. One can never neglect the importance of personality.
And the personal is always political.
The clearest example is what’s happening in Ukraine right now. The “Great Man of History” still matters.
Russian President Vladimir Putin reportedly believed that his troops would be welcomed as liberators. This could be because he has set up a system in which top advisors are afraid to tell him the truth. This miscalculation has led Russia into an economically ruinous war. However, there’s no way out because President Putin can’t withdraw and politically survive. Even if he could, the national humiliation would undo anything he has ever achieved.
In 2014, pro-Russian separatists set up regimes that defied Kyiv. Russia backed them in Crimea (ultimately culminating in Russian annexation). However, Moscow largely backed off in other areas, with the exception of limited support to the Donetsk People’s Republic (DPR) and the Luhansk People’s Republic (LPR). One could imagine why President Putin, gripped by Russian imperialist nostalgia (some might say delusions) thought he could simply move back into certain territories and take it all back. Yet the world changed from 2014 to 2022 – and President Putin did not change with it. He miscalculated.
A Russian invasion was one of the New Year’s predictions I got right (along with the accompanying rise in silver prices). Many others thought he was bluffing. If you were looking at it purely logically, it would seem that he was bluffing. But logic has little to do with politics. It has its own strange rules.
Europeans miscalculated too. They have responded to the Russian invasion with massive sanctions. These sanctions are also going to have a major impact on European economies. While countries like Poland are championing even more direct intervention, we don’t know if Western European countries will remain committed as their own economies are dragged into recession.
There are already reportedly supply shortages in German food stores. In Hungary, many Western analysts tried to paint incumbent Prime Minister Viktor Orban as a Putin stooge who was politically doomed by the Russian invasion. Instead, the Russian invasion encouraged Hungarian voters to back their existing government because they feared the consequences of direct involvement. Orban’s victory was far greater than many people expected and he’s stronger than ever.
In the Kremlin, President Putin is probably estimating that Western resolve will break. There might be some wishful thinking in this.
At the same time, Ukraine is making accusations of war crimes against Russian forces, which makes it practically impossible for there to be any kind of diplomatic settlement in the short-run.
Again, no one wanted this at the start. The Ukrainian government was practically begging president Joe Biden to stop talking about the danger of a Russian invasion in the days just before it occurred.
It’s to integrate geopolitical risk into trading decisions that Dr. Kent Moors has developed his Crisis Impact Analyzer. This has allowed him to deliver repeated triple digit wins in the last few weeks. It’s probably the best single approach that could possibly exist for the current moment.
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Yet geopolitical decisions don’t just happen on the international stage. They also happen in corporate boardrooms.
It’s difficult to overstate the ways President Donald Trump changed the Republican Party, American government, and media culture since his 2016 election upset. It’s also difficult to overstate the importance Twitter (TWTR) played in his victory.
President Trump is almost certainly going to run again in 2024, barring health issues. Polls still show that the nomination is his to lose in the GOP. However, he doesn’t have access to Twitter and has lost his public megaphone.
Enter Elon Musk. Elon Musk’s fortune has come out of electric vehicles and was heavily dependent on the progressive push to cut carbon emissions. In recent months, Musk has tilted right. He’s poked at political correctness, lambasted cancel culture, and suggested Twitter was suffering from a lack of free speech. Everyone thought Musk was just talk… until he bought a 9.2% stake in the company.
That sent the moribund TWTR stock soaring yesterday. Speculation is now running wild about whether Musk will use his power (he owns four times as much Twitter stock as Jack Dorsey) to change free speech policies. Trump-backers are already lobbying him (quite openly) on the platform to bring ’45 back. That would create a media uproar – but probably more page views on Twitter.
Or would it? This kind of top-down driven change can be countered by bottom up campaigns in which activists leverage positive media coverage into dramatic victories.
Consider Amazon (AMZN). Amazon has long since opposed unionization efforts at their warehouses. They even tried to put up Chris Smalls as an unappealing figurehead for the union. It backfired massively. Smalls succeeded and is now a labor hero. The Amazon Labor Union is now a reality… and that raises massive questions about AMZN’s entire way of doing business. Amazon has been able to mostly keep the press on its side by championing trendy cultural/political issues. It will have far more trouble keeping positive PR if it’s wrestling in the dirt with angry workers trying to justify low pay, harsh conditions, and a perceived lack of benefits.
Starbucks (SBUX) is facing similar issues. Howard Schultz is the company’s CEO for the third time. Like Donald Trump, Schultz flirted with running for president several times. Like Donald Trump, Schultz cultivated certain political supporters by talking about controversial political issues, especially race relations in Mr. Schultz’s case. Unlike Donald Trump, Schultz never fully committed to a political career. Now he’s back at Starbucks, but the situation is far different than what he faced before.
Like with Amazon, Starbucks (traditionally seen as a left-leaning company) has not been fond of unions. As of this writing, there are ten Starbucks locations where workers have organized unions. As many as 170 more may be considering it.
In a tight labor market, workers have real power over corporate leadership. With inflation surging, they also have real grievances when it comes to the need for big wage increases just to stay on the treadmill and maintain an existing standard of living. Schultz won’t be able to simply pawn off workers with socially liberal talk. He faces a far more difficult choice – either crush unionization efforts and risk negative PR and strikes, or give workers more money and benefits and potentially lose profits.
Other companies seem to show that the CEO may not even be the one in charge. Disney (DIS) is, by almost any standard, the most powerful entertainment company in the world. It owns not only Walt Disney’s legendary characters but now has the Star Wars and Marvel Cinematic Universe. Yet Disney is facing division at the top, with CEO Bob Chapek supposedly not getting along with former CEO Bob Iger. Chapek supposedly wanted the company to remain as apolitical as possible when it came to socially conservative legislation in Florida. Media outlets have christened this the “Don’t Say Gay” bill.
There is little to be gained in challenging a state government run by Republicans and headed by a governor who probably could give Donald Trump a real challenge in the 2024 primaries. However, Disney workers took charge. With walkouts and threats of worse, they forced the company to publicly side against the bill.
Now, Florida Governor Ron DeSantis is musing about stripping some of Disney’s legal advantages that it enjoys in the Sunshine State – including the right to build its own nuclear plant. The governor has everything to gain from a political showdown, as polls show he has public backing and he desperately needs a “culture war” victory to win grassroots conservatives away from “Make America Great Again – Again.” No one in this situation – Disney leadership, usually corporate-friendly Republican politicians, Disney workers upset the company was perceived as not having their back – wanted it to go this far. However, now that it has, no one can back down.
We can look all we want at financial reports, projections of what economic sectors will grow or shrink in the years ahead, or announcements from the Federal Reserve. Yet trading can’t just be about numbers. It’s about personality, political beliefs, ideologies, fantasies, and wishes. It’s about game theory. It’s about the way people have to behave when they are in a conflict they never wanted – and why politically you sometimes must throw good money after bad and fight a battle you never wanted to a ruinous end.
In all the above situations, only Musk seems to be moving forward with something like a plan. Like Trump though, Musk’s Twitter habits have occasionally gotten him in trouble, not least with the SEC. It’s not hard to imagine ways that Musk’s own campaign could backfire. What if Musk uses his power to push through new free speech policies – and employees begin quitting in protest and waging a Disney-style campaign against him? His stock holdings may not be enough to quell a staff revolt.
Investors need to have a political viewpoint of current events, not just a financial one. Politics is intense, irrational, and occasionally insane. In business, the financial reports tell the tale. In politics, image is everything. You can’t lie on your accounting and expect to get away with it for long. In politics, lying is the coin of the realm. Narratives, the polite word for lies, are bought and sold through media outlets in a way that is not fundamentally different than merchants buying and selling sacks of flour.
Having spent some time in the Swamp, my job is to give you the political view of business decisions. That means trying to unpack the Lovecraftian madness that seems to lay behind some of these culture wars and political calculations.
To be a trader, you need to put your own self-interest first. You need to have a system and rules that you stick to. But you also need the courage to look into the abyss – and understand that it has its own inner logic and its own strange rules. My job is to help light the way in this bizarre darkness. And the good news is that unlike a politician’s honesty, my effectiveness can be objectively measured in the companies, trades, and events I tell you to expect.
I, and all my colleagues, take your trust very seriously. We want you to win, and to think of us as indispensable members of your trading support team. In an atmosphere this chaotic, you’ll want people with diverse backgrounds, histories, and skillsets to carry you to victory. And among those skillsets is the ability to account for the irrational, the political, the personal.
If you can get those factors right most of the time, the profits will follow.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing.
