Mid-Week Updates, No 6

Ukraine, Truss, Markets

Ukraine

One of the first things I do after hearing news of deadly terror attacks is looking at who the victims were. It does not offer hope, it even compounds the grief, but I think this search for humanity behind the ghastly headlines is a way to let the gravity of what is going on impress us. It may also provide the motivation to support, hope and envision a better future. This is Viktoria Zamchenko, she was a sommelier at a wine store in Kyiv. She was six months pregnant and killed during a drone attack together with her partner Bohdan and their cat only two days ago.

This is the new phase of the war where a losing Russia is resorting to destroying as much of civilian infrastructure in Ukraine as possible. As a result about one third of the embattled country’s power plants is now in ruins while at the same time many civilians, like Viktoria, have died violently. It is not hard to picture what the winter for Ukrainians will look like with a possibly failing power supply to the larger urban centres where at the same time it is no longer safe to walk the streets.

Remember what I mentioned last week: the drones are sourced from Iran, and the full range of destructive capabilities that Moscow and Tehran honed in Syria are now being unleashed on Ukraine. It is both incredibly gruesome and random, and it points to a number of things that the West now needs to do for Ukraine: (1) deliver air defence systems, and (2) provide direct help to those most affected by the wanton destruction. At the same more pressure on Iran - to the extent that is even possible - to further weaken the ayatollah regime will have a direct bearing on how Russia conducts its war of devastation.

It is great that we have the Ukrainian Ministry of Defence predicting victory by next summer - most military experts would actually agree - but there is a long winter to work through. An ever more despondent Putin and his dark partners in Iran (and also Belarus) will ramp up the spiral of death and destruction with whatever they have at their disposal. Look at Viktoria and reflect on what Ukraine is up against in the weeks and months ahead.

Trussonomics, Trussia or Trussing ?

It is rare to see a politician of a leading nation go down so fast. When Liz Truss and Rishi Sunak were left as contenders for the Conservative leadership and British premiership, the vote went to the members of their party. Somehow Truss convinced them that she was a modern day re-incarnation of Thatcher and it proved to be a winning strategy, at that point. Once in office the mini-budget plan she and her chancellor Kwasi Kwarteng presented went down in flames as the markets reacted violently to the deep fiscal recklessness on which it was built. Last Friday she fired Kwarteng and appointed Jeremy Hunt as her new finance wizard who would reverse the course on all of her initiatives. In the ensuing cringey press conference she was unwilling to address - much like Trudeau - any of the key questions journalists asked and kept reiterating that she was going ‘to deliver’.

With Hunt reversing all of her promises it is clear he is now acting as a ‘de facto’ prime minister while Truss blabbers on about delivering low-tax growth scenarios. It was all so bad that even Uncle Joe breached all diplomatic tradition and waded right into the domestic affairs of another country. Also quite cringey by the way. The countdown for her early exit is now well underway.

Here is what is strikes me: in character Truss is no Thatcher, the iron lady actually had a firm plan on which she delivered. But more than that Thatcher had a medicine for her time and however great that worked then, it is a useless recipe today. The political chaos Truss unleashed is entertaining to watch, but it is a sad spectacle if you realize how power games within the prime minister’s party have delivered something that is of no help to the ordinary Brits who are also facing a rough winter.

Markets

Yup, this was yesterday, coming on the heels of an equally green Monday:

For some time now the markets appear to have been oversold and a bounce back was in the cards. Some better than expected factory data (whatever that means) and the upcoming earnings season prompted a two-day rally. And yes, after the market closed the first real glimmer of hope in the dark times presented itself: Netflix destroyed Wall Street expectations with better than expected subscriber and earnings numbers. Its stock was up 14% after-market. A sign of things to come or an outlier? Hard to say, but it proves that companies are adapting rapidly to new market conditions with revamped strategies and updated pricing models. Netflix’ earnings yesterday is strong evidence that the winners can stay ahead of the misery. Here’s hope.