by Ivan Martchev

February 15, 2022

The intraday rally in Treasury bonds on Friday was impressive – seemingly based on news that the timeline for a Russian invasion of Ukraine was being pulled forward. The Ukrainian situation has been slowly deteriorating since 2014, with the annexation of Crimea and, according to the White House, Vladimir Putin has made the calculation that now is the time to finish what he started eight years ago.

Crimea has never been a Ukrainian territory over the centuries, in the sense that it was merely folded into the Ukrainian SSR away from the Russian SSR in an administrative reform of the Soviet Union in 1953 after Stalin’s death. Suffice to say that if the Russians had any idea in 1953 that the Soviet Union could disintegrate, they never would have carried out that administrative reform. The seizure of Crimea in 2014 was the countermove to what the Russians perceive as a coup d’etat by Ukrainian President Yanukovych in late 2013 and the beginning of the domino effect that is leading to any upcoming Ukrainian invasion.

Russian Empire 1914

Roman Empire Text 1914

The issue is that the Russians feel threatened by NATO expansion on their borders. They perceive it as a long-term threat that has not been appropriately dealt with. It is unacceptable to the Kremlin that the West is encroaching on their sphere of influence, which can loosely be characterized as their old Soviet borders.

Parallels with the expanding Roman Republic on the territories of the Carthaginian Empire come to mind:

Carthage 264BC

Battles over Rome’s borders resulted in three wars in 100 years and destruction of the Carthaginian civilization. Sicily was Carthaginian territory for hundreds of years with many Phoenicians living there other than the Eastern tip, which belonged to the Greeks of Syracuse. It must have been hard for citizens of Carthage to see Sicily as Roman territory given that Phoenicians still lived there after the First Punic War.

Carthage 150BC

If push comes to shove, Putin will invade if he perceives this is the only way to protect Russia’s long-term security concerns. According to the White House, the invasion will likely happen this week. I don’t think the Russian Federation, with its military capabilities, will end up like Carthage, but the motivation, from their perspective, surely comes from three decades of encroachment on their sphere of influence.

The Russian Federation today is a direct result of the expansion of the Russian empire eastward by Ivan the Terrible (Tsar of Russia, 1547 to 1584). Regrettably, the name “Ivan the Terrible” in English has been terribly butchered. In the Russian language, the word for “Terrible” actually means “Ivan the Fearsome,” which clearly has a very different connotation. After the Russian Empire became the Soviet Union, it then disintegrated in 1991 into many countries with Ukraine and Belarus being closest to the Russian ethnicity.

Today, nearly half the population of Ukraine (those in the southeast) consider themselves to be Russian, not Ukrainian. The Russian Federation has 22 autonomous republics and many more ethnicities with their own languages. Further erosion of the Russian Federation territory is clearly unacceptable to the Kremlin, and it appears they would like to reintegrate Belarus (amicably) and Ukraine (less so) back into the fold.

I don’t think this will turn into World War III, as there are no plans for the West to send a coalition of troops to Ukraine – as the Kremlin likes to bundle the U.S., the UK, and the EU together as “the West.” On the other hand, the economic repercussions can get really problematic, as President Biden has threatened cutting off Russian banks from SWIFT, but Europe needs Russian gas in the middle of the winter and if the Russians are not being paid they can surely turn it off. This gives them a lot of leverage.

I think that China will back Russia 100% on Ukraine, as the Chinese foreign minister has already called Washington before the start of the Winter Olympics to discuss Russia’s “legitimate security concerns.”

This is a quid pro quo situation for the coming Russian support for China’s likely invasion of Taiwan, which I believe will come while President Biden is in office. Last year, Russia’s foreign minister said: “Russia, like the overwhelming majority of other countries, considers Taiwan to be part of the People’s Republic of China. We have proceeded and will proceed from this premise in our foreign policy” (“Russia Says Taiwan is Part of China as Two Powers Further Align Against U.S.,” Newsweek, October 12, 2021)

All of this drama, if it does not escalate militarily for more than a week, should not pressure the stock market past the initial invasion, which based on the 2014 Crimean and 2008 Georgian campaigns of the Russian military, is likely to be well planned and should be over pretty quickly. In response, how long can the West afford to cut off Russian banks from SWIFT, as this can turn into a major economic problem for the European Union? Any escalation of economic sanctions can push the EU into a recession.

US Natural Gas Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In the middle of this mess, it is hard to see the Federal Reserve being more aggressive if the economic repercussions from an invasion cause a recession in Europe and a spike in the price of oil and European natural gas. European natural gas is significantly more expensive than U.S. natural gas due to the botched decarbonization of the EU, which was not well-planned. There wasn’t enough wind for electric wind farms last year, but that alone is not the reason why natural gas was spiking the way it did in Europe.

All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Geopolitics Can Override the Fed – At Least for A While

Sector Spotlight by Jason Bodner
Is It News – Or Just Noise?

View Full Archive
Read Past Issues Here

About The Author

Ivan Martchev
INVESTMENT STRATEGIST

Ivan Martchev is an investment strategist with Navellier.  Previously, Ivan served as editorial director at InvestorPlace Media. Ivan was editor of Louis Rukeyser’s Mutual Funds and associate editor of Personal Finance. Ivan is also co-author of The Silk Road to Riches (Financial Times Press). The book provided analysis of geopolitical issues and investment strategy in natural resources and emerging markets with an emphasis on Asia. The book also correctly predicted the collapse in the U.S. real estate market, the rise of precious metals, and the resulting increased investor interest in emerging markets. Ivan’s commentaries have been published by MSNBC, The Motley Fool, MarketWatch, and others. All content of “Global Mail” represents the opinion of Ivan Martchev

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.