Ukraine Invasion Plays: XOM, USO, LMT, RSX, CRWD, PANW, IRNT, etc

Research & Analysis
81

why not NTR?
Discussion here: All things Agriculture
Potassium - Wikipedia
Nutrien - Wikipedia
" Iowa state Attorney General Tom Miller said he is seeking explanations for higher prices from top fertilizer producers, including Mosaic Co (MOS), Nutrien Ltd (NTR), CF Industries Holdings (CF), Koch Industries and OCI N.V. (OCI).

Iowa is the top U.S. corn producing state, and U.S. farmers are expected to scale back corn plantings this year in favor of crops that require less fertilizer like soy.

Since January 2021, anhydrous ammonia prices have increased 315%, Miller said, citing USDA data. Urea prices have increased by 214%, while liquid nitrogen is up by 290% and potash by 213%."

82

Sanctions on the Central Bank of Russia would be devastating. Makes one wonder if Western governments will go for the nuclear option. Details laid out here by David Frum, who’s a decently smart person:

Central-bank sanctions are a weapon so devastating, in fact, that the only question is whether they might do more damage than Western governments might wish. They could potentially bankrupt the entire Russian banking system and push the ruble into worthlessness.

Countries cut off from SWIFT, as Iran was in 2012, are effectively cast back into the precomputer era—forced to rely on primitive barter transactions, or Breaking Bad–style pallets of physical cash, to fund their governments and their economies.

The dollars, euros, and pounds owned by the Russian central bank—Russia may own them, but Russia does not control them. Almost all those hundreds of billions of Russian-owned assets are controlled by foreign central banks. Russia’s reserves exist as notations in the records of central banks in the West, especially the European Central Bank and the Federal Reserve.

Every Russian person, individual, or state entity with any kind of obligation denominated in foreign currency would be shoved toward default.

The ruble would cease to be a convertible currency. It would revert to being the pseudo-currency of Soviet times: something used for record-keeping purposes inside Russia, but without the ability to buy goods or services on international markets. The Russian economy would close upon itself, collapsing into as much self-sufficiency as possible for a country that produces only basic commodities.

Is there any way to use the central-bank-sanctions weapon more incrementally? They could put the Russian central bank on an allowance, so many billions a month. That would keep Russia limping along, but under severe restraint—asphyxiation rather than sudden strangulation.

7 Likes
83

The one thing that was not sanctioned yet directly is still Oil and Gas. Even if they will not be sanctioned, there is a high likelyhood that Europe will make moves to become less reliable on Russia for these.

My thinking for this is short to mid term, this would likely increase the marine traffic in the ARA region (Antwerp/Rotterdam/Amsterdam). Having worked in this industry, what people may not realise is that the tankers and barges transporting oil spend a significant time idle, waiting in anchorages due to berth congestion. If marine traffic was to be increased in regions that are already often overloaded, the waiting times could increase significantly. This would take out vessels for a longer time, meaning less of the available for chartering, while more needed. This in itself could obviously increase freight costs, so shipping companies could potentially see another bump in revenue/ investment in new ships, and also increased outlook. Might be worth keeping in mind in the coming quarters.

Another aspect of the same thing, is the potential for growth in shipbuilding companies revenue as well.

Third, refineries / terminals in the region may be incentivized to expand their ports with additional berths/jettys as the higher waiting time due to increased traffic and the higher chartering costs together would likely increase demurrage costs significantly. This could result in an increase in revenue for companies specializing in building these.

And last, Oil companies in Europe may increase investments in their downstream business, as well as upstream investments could tick up in light of the hightened crude prices.

I’ll likely keep an eye on the trend on these aspects in the coming weeks/months, may write something up with actual data if it looks promising.

2 Likes
84

Like everyone else here, I’ve come across tons of articles talking about blocking SWIFT. One article said, “It means there is going to be a catastrophe on the Russian currency market on Monday,” said former Russian Central Bank Deputy Chairman Sergei Aleksashenko. “I think they will stop trading and then the exchange rate will be fixed at an artificial level just like in Soviet times.”

Putin was expecting to wrap this invasion up quickly, and it looks like that isn’t going to happen. The economic impact to the Russian population over a needless invasion is a ticking time bomb for Putin. Once the hardships start we might start to see massive protests and riots over there.

We also saw that uptick in uranium at the end of the day, I’m not sure if that was just algos or people starting to hedge with the idea that the oil/gas flow from Russia to Europe might stop (either voluntarily by Europe for sanctions, or by Russia in retaliation). We still have over a month of winter. We can only ship so much oil & lng to Europe as our prices are already getting out of hand. I posted tickers before, I’m going to be keeping a close eye on them this week (along with all energy companies). France gets like 75% of their energy from nuclear. The countries over there are a mix of pro & anti nuclear, but with this conflict I think they are all going to get cozy with nuclear real quick before they have a massive energy crisis.

Cyber security could also become a hot play this week if we get more news of attacks, and attacks on NATO countries. Remember what happened when that pipeline in the US was hit by ransomware?

Don’t underestimate the “staples” and “value” stocks this week. i.e. WMT, AMZN, PG, KO, PEP, COST, TGT, PM, MLDZ, MO, CL, BRK.B, TSN, HRL, etc…

Even if Putin pulls out tomorrow, I feel that economic sanctions are going to continue against Russia. The whole time he was claiming this was just an exercise and obviously it was not. Europe (and the rest of the world) can’t simply go back to the previous status-quo. At the very least they will likely demand massive (and I mean MASSIVE) demilitarization of Russia in exchange to remove sanctions. Which we all know Russia isn’t going to go for that unless Putin ousted and a much more progressive leader is elected.

4 Likes
85

Bloomberg: Russians Rush for Dollars as Sanctions Threaten Ruble Collapse

800x-1
800x-1800×533 85.4 KB

Russians lined up at cash machines around the country to withdraw foreign currency as new sanctions to punish the Kremlin for its invasion of Ukraine sparked fear the ruble could collapse.

The rush for foreign currency came despite some lenders selling dollars at more than a third higher than the market’s close on Friday, and well past the psychologically important level of 100 rubles per dollar that many economists said would trigger an interest-rate hike by the Bank of Russia. The shock came as Russians were still digesting news that Europe was closing its airspace to them and popular payment systems like ApplePay would stop working.

“I’ve stood in lines for an hour, but foreign currency is gone everywhere, just rubles,” said Vladimir, a 28-year-old programmer who declined to give his last name, while waiting in a long line at an ATM in a Moscow shopping mall. “I got a late start because I didn’t think this was possible. I’m in shock.”

There are indications that the ruble could fall sharply when trading opens on Monday. Exchange rates being offered by lenders are already varying widely on Sunday, from 98.08 rubles per dollar at Alfa Bank to 99.49 at Sberbank PJSC, 105 at VTB Group and 115 at Otkritie Bank at 3:30 p.m. in Moscow. The spot ruble price on the Moscow Exchange closed at 83 per dollar on Friday.

“I can’t see a scenario where it doesn’t get hammered,” said Paul McNamara, a fund manager at GAM Investments. “I don’t expect effective intervention in terms of pricing, but in terms of reducing legal grounds to sell rubles.”

1 Like
86

I mentioned this in the discord but wanted to add this here. Backwardation on oil is spiking. This is a scenario where spot prices trade higher than futures contracts and is indicative of demand outstripping supply with an expectation that will continue into the future. Backwardation is typically teased down by shorting spot and purchasing futures as an arbitrage until the prices converge.

image
image1106×825 82.6 KB

3 Likes
87

Wheat exports by country:

Russian and Ukraine account for 25% of world wheat exports…

1 Like
88

Screenshot_20220227-112001~2
Screenshot_20220227-112001~2601×714 31.6 KB

Oil has been touch and go throughtout this, but what is our collective thought of this particular news for BP ticker tomorrow?

1 Like
89

Bearish somewhat depending on how much that stake was worth. They’ll likely be selling at a massive loss.

90

That makes sense, especially considering the size of that move.

Do you think this sentiment alone is enough to overcome general oil fomo right now and ride a couple puts? They are cheap.

I know this would be largely dependent on premarket action overa tomorrow as well

1 Like
91

https://twitter.com/DeItaone/status/1497995878501601285

92

Just looked into the Norwegian Fund’s holdings in Russia. It currently only holds about $3B USD worth in the country, but I’d imagine that amount may be significant in Russia investments during this time. All of that will be pulled out soon. Its holdings include, but are not limited to:

  1. Gazprom
  2. Banks of Russia
  3. Ozon Holdings

Link: Investments | Norges Bank Investment Management

93

Saw this in a reuters article:

Russia produces 10% of global oil and supplies 40% of Europe’s gas. It is the world’s largest grains and fertilisers exporter, top palladium and nickel producer, third-largest exporter of coal and steel, and fifth-largest wood exporter.

Some of this has already been discussed. One thing I didn’t see mention was coal & steel. I’m not sure if it was coincidence just because the market was going up Friday but the US steel companies were doing very well. ArcelorMittal (MT) (a Dutch company IIRC, with global operations) was really moving, they are the second largest steel producer in the world (#1 being a Chinese group).

I’m not too versed on coal companies, I’m sure they will move but probably not be as in-demand as other energy sources we’ve been discussing (though I could be wrong).

Just some more things to keep an eye on Monday morning. Who knows what the markets are going do.

3 Likes
94

I am wondering if there will be any push towards renewables or green energy over the next several months. The current thought process is OIL and GAS will stay elevated, and that the West should look for new sources, IE opening up more drilling, or opening keystone etc etc. The current admininistration wants greener energy, and while that could change with current world events I’m curious about plays surrounding the following

  1. Uranium and Nuclear Fission plants, Ive seen plans for smaller plants ( I think burry posted an article a year ago). Perhaps the world starts to push towards Nuclear again, while we have made Fusion work, its no where near in development to be useable at the moment, but new smaller Nuclear plants could be backed by government spending? My concern is Chernobyl, and other nuclear news, along with fear of Nuclear war makes people nervous around nuclear and it could be a non starter for a while

  2. Wind/Solar/Ocean - Other sources of renewable energy. Im wondering if western governments knowing full well that Gas and Oil is a problem and potentially opening up new avenues in sourcing some wouldn’t be considering 2+ years out and start dumping an exuberant amount of money into renewables

I know nuclear is and has been talked about, but I don’t know if much renewable has been talked about and if there are plays there

95

To add to this, I believe its possible we see policy shifts away from bioethanol if this holds up
Corn-Based Ethanol May Be Worse For the Climate Than Gasoline, a New Study Finds - Inside Climate News (non-paywall)

3 Likes
96

It certainly seems like the SWIFT sanctions are going through as early as tonight. If that occurs, I’m going to be looking at taking advantage of what I expect will be a short-term dip in the prices of financial institutions’ stocks. This is going to be a regulatory nightmare and none of the market investors know how much of an institution’s money flows indirectly through Russian banks. That uncertainly should lead to some short-term volatility in the financial institution sector.

Specifically, I’m looking at opening puts in the morning on KBWB, FTXO and IAT, as well as holding of individual hedge funds and banks such as GS, JPMC, etc. I want to see how these ETFs react to the news before opening positions in individual companies.

8 Likes
97

Parking another point or vertical here…insurance and risk exposure in Ukraine and Russia. To include cyber, maritime, property, etc. Large international carriers conduct business in these areas such as Chubb, AIG, Zurich, etc.

I am not in this space so maybe others would have some insight.

Here is a recent article from AU relative to this:

2 Likes
98

AIG been volatile as of late. Gonna watch these for potential.

2 Likes
99

https://www.reuters.com/markets/europe/russian-sberbanks-european-units-are-failing-due-wars-impact-ecb-says-2022-02-28/

Sberbank is 2.6% in RSX

3 Likes
100

I strongly believe there is no way RSX won’t set a new all time low. It was about $10.34 in 2008, but this situation is very different. Funds and major investors pulling out of the ETF. Companies within the ETF being sanctioned and divested.

My plan: take profit on all puts at IV peak @ market open. Reenter at a slightly lower IV assuming the ETF is still trading above $10.50.

6 Likes