Mid-Week Updates

Putin, markets, Canada's right and tight supply chains

Putin

In all my reports on the Ukraine War there are references to Russia’s hard right and that if Putin gets the sack he could easily be replaced by a cabal of hardliners. It is not always easy to attach names and a plausible scenario to this, but the name of Nikolai Patrushev is one that keeps popping up, among a group of other sinister characters. We know of them, we know what they think, but have no idea as to how they could initiate a coup to oust their old pal Vlad. When no one trusts anyone it is hard to build a team, make a plan and execute it.

The interesting thing about Russia’s clampdown on the media is that it has not included those that lament the turn of events and argue for a far more diligent execution of the war in Ukraine. The pro-war bloggers is a noted group and the reports of Russia’s setbacks got very detailed coverage from them over the weekend. This means that not only are Russians now more and more exposed to the military failures they are experiencing. It also means that a playbook for a different approach is written in real time for everyone in Russia and in particular in the Kremlin to see. With the agents of change on the move Putin’s job just got a little more harder.

Markets

We’ve had three consecutive days of strong gains across all stock markets, only to see our screens turn red yesterday in a terrible market rout. I was not making much of the advances we saw and the correction yesterday seemed natural, the markets just needed an excuse and the news was such that it took a pretty dramatic turn. What was that news? A higher than expected Consumer Price Index of 8.3% which means inflation is still with us and potent, in particular as prices in the services sector keep inching up (where food and energy prices have actually cooled a bit). We have been in this ‘range environment’ for a while now and likely will be for some time to come. No market collapse, but also no big uptrends any time soon. Trade in the range I would say and be careful.

Canada’s Resurgent Right

I wanted to update you on the Swedish elections of last Sunday and the resurgence of right-of-center parties there, but they are still counting votes as of today. Well, in Canada too there is movement on the right as its conservative party elected a new leader, Pierre Poilievre. The new leader is framed as a sort of Trumpist American-style populist who is about to upset the political game in a country that has always been insulated from wild political swings. On closer inspection however Poilievre displays a number of characteristics that bely this simple notion. He has a decent track record, understands and talks tech, is keen on immigrants getting much better access to jobs (his wife is from Venezuela) and most importantly is offering creative and forceful ways to resolve the housing crisis. On top of that his French-Canadian background will play well in the populous Quebec province where the conservatives have always had a hard time getting the vote. That may now change. And there is one more key reason the man is doing well: Prime Minister Trudeau is deeply unpopular, even members of his own party are now anonymously advocating a change of course in the wake of Poilievre’s win. Many people here - most of whom I would qualify as progressive - have come up to me expressing their excitement over Pierre. As surprising as that may sound, it really is not. He’s taking on all the issues that Canada’s governing Liberals have either dropped, fumbled or failed to address. Layer the incumbent’s terrible communications and the electorate’s not unusual seven-year itch and you have a recipe for change.

Note that Poilievre’s rhetoric helped him win the leadership election and he may well tack to a more pragmatic tone as he gets closer to the halls of power in Ottawa. This is much like Boris Johnson who co-opted Brexit into a conservative win in 2019 and then steered his enlarged party back to the centre. We will see what happens in Canada, but it is clear politics will heat up in the cold north.

Buying a Car

True, I may be living in a bubble and take all the alarming news on supply chains for granted. But this week it was time to get my younger daughter a car (responsibly I might add, we just don’t give our kids stuff without some participation). I enthusiastically budgeted out a price and make, and ran a few financing options in my head which as some of you know I consider to be fun brain exercises. Well, the empty dealer lots and the price tags relegated all my carefully crafted ideas to the bin. Car supply is deeply disrupted across the globe with a resulting dearth of new and second hand cars. As a result it is impossible to negotiate anything because why would a car sales rep do that if demand is there and you have only a few cars to sell? This gives you an idea of a late summer afternoon in the auto mall. It was interesting and still fun as we had some great discussions, my daughter learned a lot about economics and in the end got this for her. That is, it is still on a cargo ship mid-Pacific, but we’re told it will be here by month’s end. The supply chains are indeed disrupted. Your old car in the driveway is worth a fortune now, seriously.