Tobin Smith’s Putin Protection Plan: It’s Not Too Late to Protect Your Portfolio


Courtesy of Tobin Smith, Transformity Research

Tobin Smith, 2-17-22:

"Markets Hate Uncertainty" starts to apply when 1) the stocks that worked for 10 years stop working… 2) $8 trillion of unprecedented monetary expansion/stimulus transforms to rapid monetary de-stimulation to fight 7.5% inflation with the bond market pricing in a rapid tightening… 3) an aging Russian Czar who sees weakness in NATO leaders (see Afghanistan) and has 170,000 troops surrounding Ukraine…the Russian military machine is building a network of field hospitals and getting massive blood donations from patriotic citizens as I type these words. 

PS: I love this graph of a Silicon Valley technology s-curve:

2-21-22: I wanted to rush out the news that as our contacts warned us last week and we warned our subscribers Wed/Thursday and Friday and our managed account clients. "…a dangerously disorganized NATO can do nothing about it: Nearly 70-year-old Vladdy Putin's dream of regaining old USSR territory for Russia before he retires to his $1 billion castle on the "Russian Riviera" starts next Tuesday or Wednesday latest. Be prepared and be hedged/ 

Our Subscriber Advice Early Friday last week: "With our 75% Energy Income Portfolio Allocation up 28% so far this year and 20% CASH Allocation (versus 8% DOWN S&P 500), be fully hedged, for example:
1) Buy the SHORT QQQ ETF SQQQ Mar 18 42 Calls RIGHT NOW
2) The March 18 $BOIL The 3X Leveraged Natural Gas Price ETF CALL Option With a Market Order and
3) BUY the March 18 $23 RSX Put Options @$2 or Better 

Here was my commentary on this issue on BBCTV last week:

A series of cyberattacks on Tuesday knocked the websites of the Ukrainian army, the defense ministry, and major banks offline as tensions persisted over the threat of a possible Russian invasion. Considering an invasion appears imminent, what does this mean for the global economy and, more importantly, the US stock market?  First I'd characterize our hedging as being more safe than sorry–we manage investors' money for a living and they really like it when we make them richer.

Secondly, there's no actual evidence thus far that Russian forces are receding "post-exercise" and military experts tell me that the active building of field hospitals AND the cyber denial of service attack which today was the worst in Ukrainian history and is considered a common precursor to Russian pre-military activity next Tuesday or Wednesday–our money management clients and investment research subscribers are LONG energy and short QQQ ETF and Russian Equities ETF RSJ via options. 

Finally, all our subject matter experts tell us that even IF there are diplomatic talks, that's not the language Putin acknowledges–the only thing Putin understands is strength and exploitable weakness and will 100% use any diplomatic talk to create a "false flag" situation where he justifies invasion as "peacekeeping mission."

Bottom line, we don't see a pathway to de-escalation in the near term and WE ARE HEDGING OUT that geopolitical and oil/nat gas prices risk for our clients and subscribers.  As far as the global economy goes, the economies of countries that have hydrocarbon energy supplies like North America will perform better than countries that do not, i.e., much of Europe and Asia, but oil prices at the margin could easily hit $125 a barrel from $95 today and natural gas prices double or triple in Europe and Asia which import a lot of natural gas and crude oil from Russia.

ALL of which pardon the pun "pours gasoline on the existing inflation bonfire" aka crippling levels of energy and food price inflation–people forget virtually ALL the fertilizer for their salads and vegetables is made from natural gas which Russia supplies a huge amount to Europe and China–it's not just for cooking and heating your home."

We will be updating our hedging advice tomorrow and I want you to protect your investment portfolio. (Check our newsletter out here.)

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