Russia-Ukraine Update: Wrong but Optimistic

It looks like the first part of my prediction was wrong yesterday: Russia invaded Ukraine. This is why I don’t wager money on binary political outcomes, like on prediction markets, because I don’t have much of an edge (and the evidence suggests that neither does anyone else, which I will expand on in a forthcoming post [1]). All anyone has are hunches. However, the prediction has a second part part, which is that the situation will not spiral out of control and will remain self-contained and limited to Ukraine, although this is harder to quantify than ‘war or no war’. The US is involved militaristically, sending troops to Europe, even if it’s not a war.

The post was titled that I was not concerned, and despite the media hype, it’s not going to be an ethic cleansing or anything like that. Putin hopes to demilitarize/neutralize Ukraine and set up some some sort of administrative government, and is taking painstaking efforts minimize collateral damage and civilian deaths. The invasion is being billed by the media as the ‘largest European attack since WWII,’ in which for Europe alone there were 15-20 million casualties. By comparison, there has been minimal Ukrainian casualties: media sources put the death toll as high as 140.

Also, it does not threaten to destabilize the world economy at all, even if inflation rises (stocks did well in the 80s, 90s, and from 2002-2007 despite high inflation and high interest rates). Russia torpedoing its economy does not not threaten the earnings of major US companies such as Facebook, Disney, and Microsoft.

The stock market, assuming that the market is a forward indicator, confirmed that the worst is over, recovering from a 3% loss in the morning and ending with a 1% gain, and another 2% gain today. It’s not WWIII, as so many pundits and anonymous people online were predicting or hoping. However, it’s too early to celebrate yet. It’s not like we’re going to wake up and these problems are going to just go away. This Ukraine situation is gonna be in the news for a long time, but the stock market will recover long before such problems resolve, if they ever do.

Regarding predictions of the post-Cold War era peacetime ending, that too is premature. There have been few, AFIK, hostile and long-standing takeovers of territory since the Cold War, in which the winner forcibly or coercively annexed land from the loser. The last time China annexed a country was the handover of Hong Kong in 1997, and Portugal handing Macau to China in 1999, which was also peaceful [It would seem to be the opposite pattern of old, European powers in the final stages of decolonization]. Russia may install some sort of provisional government in Ukraine. 30 years since the end of the Cold War, and I see little reason to believe yet that things spiraling out of control.

A lot of people don’t like the status quo and are hoping for some sort of upheaval to reshuffle the deck. Liberals wanted Covid to create a ‘new normal’, and now that society is returning to normality, perhaps they secretly were pinning their hopes on Russia being the next Covid even if publicly they are condemning Putin. Many on the dissident/at-right are also equally dissatisfied with society, so seeing someone like Putin throw his weight around is a much needed respite to the quotidian monotony of the ‘liberal world order’. Trump talked tough but didn’t do anything, and after the election ended retreated to Florida as his Jan 6th supporters were getting picked off one by one by the FBI, but here is Putin actually doing something.

It also shows how useless campaign promises are, because all it takes is some sort of outside event to change or derail the agenda for good. Bush campaigned on Social Security reform (because after the 90s economic boom and peacetime under Clinton, what else was there left), but then came 911. For the left, with Biden preoccupied with Russia, much like how Trump was preoccupied with Covid and fighting off impeachment, makes student loan forgiveness even less likely to ever happen.

On twitter, the amount of debate rivaled in intensity and quantity probably any past event, even Jan 6th. Posts by Eric Weinstein, Michael Malice, Tim Pool, and other pundits were generating tens of thousands of likes and thousands of comments, an increase of 2-10x from this time last year. Every pseudo crisis only amplifies the culture wars to the next level. How much longer can this continue until some breaking point is reached, I find myself asking.

[1] It’s easier for me to predict that the stock market will recover conditional on war, then predicting if there will be war or not. So rather than betting on a binary outcome on a prediction market, which is a crapshoot, I just buy stocks on the dips instead, like yesterday, which is a much more surefire bet. The past 10 years taught us to buy all dips, and that 99% of the time what the media calls a crisis is either not a crisis, or will be short-lived, or does not affect earnings. Even a million Americans dying due to a pandemic [probably a sizable number of those deaths were people who died with Covid, not from it, and even if they did die from Covid the economic impact is still minimal] does not hurt major tech and retail earnings. The Ukraine situation does not affect tech earnings either. People are not going to stop going to Disneyland or shopping at Walmart or Amazon due to Ukraine.

Leave a comment

Your email address will not be published.