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Seasoned Investors on Managing Stress

My call for questions yielded an enormous response. I’m working through them for a video to be published Friday. Please look forward to that.

Meantime, I have other material to boost your spirits.

I asked some of The Kelly Letter’s longtime subscribers for their thoughts on managing stress, both of the stock-market variety and the war variety. So much good material came back that it will take a few notes to get to it all.

Let’s start this first installment with stocks.

Managing Stock-Market Stress

Tamar Frankiel in Los Angeles subscribed to the letter in 2013.

She’s a believer in understanding what it means to put volatility to work. She describes it as accepting that “things will change, sometimes fast,” but once you’ve committed to a stock investing system, you should stay committed:

“Our brains are wired to overreact to negative news and underreact to positive. So don’t expose your brain to too much stock market news. You’ve made responsible (not perfect but good enough) decisions, stick with them.”

Ah, yes, the fear/greed cycle.

It shows up in subscriber emails as clearly as in sentiment indicators. After upstreaks, newcomers wonder why we weren’t all-in to leveraged ETFs. After downstreaks, they wonder why our plans didn’t switch into inverse ETFs at the most recent peak.

Because we can only identify them in retrospect, of course.

And by not having switched at the ten falsely identified previous “peaks,” we improved profit enough to create buying power to take advantage of cheaper times, like this one. It’s easy to forget all the previous times you felt iffy, read warnings, and thought of going to the sidelines—and were later glad you didn’t.

If you’re kicking yourself for having missed selling at this year’s early January peak, because it now seems obvious when you look back, Greg Kennedy has some thoughts for you. He lives in Louisiana, and subscribed to the letter in 2010.

Like Tamar, he believes in tuning out and staying the course:

“Stick to the plan. Emotions cloud the picture, so let’s execute our financial plans dispassionately. We know we are in a z-val environment so let’s not suddenly believe that we can predict the future. If you are a frequent account-checker, it might be wise to check them less often to buffer your emotions. Otherwise, focus on the great bargain we will hopefully be getting when things are down, and the benefits we will receive when things recover.  If we didn’t believe things would recover then we wouldn’t be in the market anyway.”

Chad Fischer in Portland, Oregon, subscribed to the letter in 2016. The Covid crash of March 2020 was hard on him, but he stuck with the plans and emerged wealthier and steadier for it. He sent the following:

———-

First, I think it’s important to have a solid belief that whatever turbulence the market is currently going through today, will pass.

At some point in the not-too-distant future the market will once again be setting new highs, just the way it always has. …

When the market goes down day after day and there only seems to be worse and worse news on the horizon, I understand that it can make people feel powerless. I’ve been there. Something Jason mentioned that I found to be very profound is the idea around the moment when the market turns the corner and starts heading back up. It’s not when all the problems are addressed and there is no more fear on the horizon, it’s the moment just after the worst news has been given. The market goes up on the days when there is less bad news than the days prior.

The item above gets to why you continue to hold. Your entire being may ask, Why am I doing this? I’m fairly certain the market is going to go even lower, but Jason says don’t sell.

Selling requires you to be right twice to come out ahead.

You need to be right first about guessing that the market will continue to go lower, then you need to be right about the moment to buy at the bottom (lower point). As discussed above, we know that the market starts going up when there is still a lot of fear.

[Do you think] that the same you who sold because you didn’t feel good about the prevailing fear is later going to buy at a moment when there is actually more fear (as evidenced by lower prices)? You will need to buy into more fear in the future, to come out ahead.

Guess what, you will not come out ahead by attempting this.

Related to the above, we will be rewarded greatly with increased returns by riding out this period of discomfort and later buying in at the quarterly rebalance. It will be an action that many in the market won’t have the guts to do in real time, but will later say that they would have been all about it in hindsight. The Sig plan will be your guide through this critical transition.

We all know this is the right move even though it can be frightening. Make the investing decisions today that your future you will be very proud of when that you looks back on the scary time when Russia invaded Ukraine. …

In the short term, don’t rest your emotions on your account balance. If you believe in the ideas above, it’s not necessary to keep score every day / week / month. This is never good practice anyway, but certainly not in a plan that trades today’s downside for tomorrow’s greater returns.

I loved Roger’s wisdom [my friend and research partner, whose investing experience I shared in an email sent 3/18/20] that today’s market fears will be a distant memory in a shorter time than you realize today. Put another way, it may not feel like it today but whatever the market just did today won’t be any concern to you two years from now (most likely much sooner than that). Covid was two years ago and what the market did back then is no one’s concern today—well, no one who held through or bought into that market at that time.

Oh, and I STRONGLY recommend periodically revisiting the onboarding guide.

I think everyone should have a homework assignment to do this once a year minimum. In that guide is the reasoning behind why we feel so strongly about these plans. It’s likely what led you to buy in and sold you on the concept.

I think it’s only natural to forget this “why” after some time. Especially in the moments of rough financial seas we are facing. Two years back I started doing this. The concepts are even more meaningful after you experience the emotions of the plan.

I love the section that starts at the end of page 59 with the passage below:

I’m pleased with the research methodology behind 9Sig for a couple of reasons. First, and most important, because it was rigorous. I’m confident that the 9Sig plan will navigate real-life price fluctuations ahead because it demonstrated its ability to navigate 100 random price environments to an impressive outcome, as well as the historical Nasdaq 100 modified to a 3x daily path.

The guide is linked on the help page of the subscriber site.

———-

Jonathan Kelley,  also in Portland, Oregon, who subscribed in 2012, wrote that the Sig system is one of the few things that provide peace in this nutty world:

“In that world, I find the Sig programs an enormous comfort. Markets took a dump? I’ll care at the end of the quarter. If they are still low, I’ll get to shop at employee discount prices. If they’re recovered or even high, I’ll book some gains. I have enough to worry about with the domestic and global situation. I no longer have to worry much about my investments. Everything is perspective, and from my perspective, markets go up and down. We profit from that because we buy cheap and sell dear.

“Yesterday I was thinking of how many networks, producers, and corporations just can not resist the urge to ‘change it up.’ Famous last words, all by people who basically want to ruin good things so as to ‘make their mark.’ What is not broken ought not to be fixed.

“This mentality extends into investing, where even if one presents people with a mechanistic, disciplined system that will let them forget about the whole thing for three months at a time, they just can’t resist that itchy urge to ‘change it up.’ Yeah, it’s different this time. Right. Fact is, if we could do better, we would be doing that. We can’t. We know it. If that isn’t true, one is not in the Sig systems. If I knew I could make 25% per year reliably, I wouldn’t be doing this. Fact is, I can not, and I know that I can not. So I’ll settle for a good return that is less than that.

“I’m just glad there is one aspect of my life that is easy. I have more energy to spare for stressy stuff.”

Speaking of stressy stuff…

Managing War Stress

Many people report feeling deep despair over Russia’s invasion of Ukraine.

Some are not sleeping well at night, minds fixated on news images of the violence, seething with frustration at the senseless cruelty of Vladimir Putin, wanting to help but not knowing how.

Brian Donnelly in Los Angeles, who subscribed in 2006 while serving in Afghanistan, sees reasons to feel good about how the war is unfolding.

“First,” he wrote, “this was going to happen eventually, no matter what. Russia didn’t really have a choice, given how they view the world.” And given their collapsing country.

He linked to a February article by Peter Zeihan, which concludes:

“The Baltic beaches and the plains of Poland are where the future of Russia and the West, of the European Union and NATO, will ultimately be decided. It is there that Russia will succeed or die.”

Second, Brian wrote, “Russia botched it pretty badly and now Ukraine has a chance. [Russia] underestimated the resolve and response of the West. So in all the ways this could have happened, actually so far it has happened in a way that is tremendously damaging to Russia and has given Ukraine a chance. Twenty-thousand foreigners have signed up to fight there while Russia fumbles around.”

That’s right. From Monday’s Daily Mail:

“Around 20,000 people from 52 countries have already volunteered to fight in Ukraine, where they will serve in a newly created international legion, the Ukrainian Foreign Minister said. In a television address on Sunday Dmytro Kuleba said: ‘The whole world today is on Ukraine’s side, not only in words but in deeds.’”

This can help us feel better about Ukraine’s chances, about the good guys winning this one, but it does little to comfort people worried about nuclear war and feeling awful about the atrocities taking place.

Even Brian concluded: “Needless to say, Russia will very likely pull out the Syria playbook next and start reducing cities to rubble, unfortunately.”

Insiders agree. Fox reported Monday:

“Maria Baronova resigned as editor-in-chief of Russia Today, a state-run media operation also known as RT, last week after condemning Russian President Vladimir Putin’s invasion of Ukraine. …

“‘The problem is, I know these people very well,’ [she said.] ‘They never send threats, they just kill, so there is kind of [a] weird silence around me, but I really think we’re on the brink of a nuclear war right now. I’m not exaggerating.’”

So the awful feelings are here to stay for a while. How to manage them?

JP Harris, who subscribed in 2016, lets it all out:

“Sometimes, I just allow myself to stop and scream.  Then, I move on. Scream and move, scream and move.”

Several people recommend accepting that you’re not going to alter the course of Ukraine by obsessing over the news.

Russ Hullet in Boulder, Colorado, a new subscriber but longtime friend, put it thusly:

“I’m convinced if I follow the Ukraine crisis closely I can influence the outcome. What do you think of my strategy?”

Tamar agrees:

“On the war stress:  Not too much television either. I am an information hound myself so it is really hard to stay away from the news, but I’m disciplining myself to check it just twice a day; if I see the same video a second time I turn it off. (Well, sometimes I switch to BBC.)

“I remind myself that even my favorite, much beloved news commentators are being paid to sell emotional stories, and they may sincerely like that part of their job. On my side, I’m glad to hear stories that touch my heart. I don’t want cold reporting. But if the stories rerun in my brain at night, it’s too much exposure.

“Also there’s a danger that I might go around feeling depressed because ‘there’s nothing I can do.’

“It’s not true though: I can do something in the world every day by being kind, affable, generous with time and smiles as well as money; offering help in little ways to people in my own life. You can do that too, and it will help you as well as others. This will rebuild the world.

“As for dread of horrible things, the answer is: Cultivate trust. Instead of thinking about people who screwed up, look around and see all the competent, responsible people who keep our incredibly complex society running every day. These same folks and thousands more at every level have done and will do their best in whatever the circumstances. The worst thing you can think of probably will not happen, but if it does we will be in it together.

“We are together already. Humanity is one being.

“What is happening in Ukraine is like a dangerous injury to a person’s body. Thankfully, compassion is flowing to it like blood bringing healing nutrients to a wound. Every system in the body is going into emergency mode—that’s where we are. It’s okay: Each of us is a cell in one of the body’s organs that has to do its part.

“Whether it’s protect and defend, or conserve resources, or just keep the regular things going in the best way possible, we are going to do our jobs and we will bring humanity back to a healthier way of being.

“And if I don’t really feel that brave or confident: When all else fails, I steel myself with the thought that one thing the world does NOT need is another madwoman (in either sense of the word mad). So, Tamar, do the world a favor: shut off the hysteria, clamp down on the constant chatter, and do what’s in front of you today.”

Thank you to all of these Kelly Letter veterans.

Let’s get through this day, and all days, together.

I’ll have more for you soon, and you can always email me.

With you all the way,

Posted in Geopolitics, Sig System | Comments closed

Ukraine Resources

If you’re pressed for time, but would like to see highlights from my interview with Ukrainian subscriber Sergei Hovyadinov, you can use the linked timestamps to jump straight to a topic.

To do so, visit the video on YouTube (the link is below the following images) and follow these instructions:

Click SHOW MORE in the show notes.

Click the timestamps of interest to you, i.e. 7:07 to see “Just you watch: Next, Russia will try claiming that the Kherson region wants to be independent. It’s a stage fake.”

The link will take you straight to that location in the video.

Here’s the video’s page on YouTube:

youtube.com/sergei-interview

 

___________________________________

HOW TO HELP UKRAINE

Aid
Sergei suggested visiting The Washington Post free page listing how Americans can donate to help people in Ukraine.

In the Deseret News, Art Raymond reported that a longtime Airbnb host in Salt Lake City “decided the fastest and most direct path of getting money into Ukraine was to book a ‘no stay’ stay with a fellow Airbnb host in Kyiv.”

Airbnb said in a statement that to help the effort, it is “temporarily waiving guest and host fees on bookings in Ukraine at this time.” It set up a page for its initiative, at:

airbnb.org/help-ukraine


Info
You can stay ahead of misleading and false news at France’s AFP Fact Check Europe.

Learn more about Ukrainian citizens’ commitment to democracy by watching the NetFlix documentary Winter on Fire: Ukraine’s Fight for Freedom (the trailer is here).

It covers the Euromaidan protests in Ukraine from November 2013 to February 2014, which were sparked by the Ukrainian government’s sudden decision not to sign the European Union–Ukraine Association Agreement, instead choosing closer ties to Russia and the Eurasian Economic Union.

Combat
Ukraine is inviting non-Ukrainians to literally join its fight against Russia by serving in the International Legion of Defense of Ukraine. From its page:

“If your citizenship is other than Ukrainian, but you are standing with Ukraine against the Russian invasion; If you want [to] actively participate in fighting for European freedom and democracy; If you have combat experience, or want to gain it standing with brave Ukrainian defenders: Now is [the] time to act! Join the International Legion of Defense!”

From the bullet points:

<> Full Support Provided
<> Visa Requirements Cancelled
<> Vital Experience — Guaranteed!

The page is at:

fightforua.org

To see how they feel about Russia, click its name in the list of countries.

Posted in Geopolitics | Comments closed

Interview With Ukrainian Subscriber Sergei Hovyadinov

Ukrainian Sergei Hovyadinov subscribed to The Kelly Letter in 2012, when he worked in Moscow as a lawyer for Google. After that, he completed graduate studies at Stanford University, and currently lives in Indiana.

To better understand the situation in Ukraine, I spoke with him last night.

The following are highlights from our 40-min conversation, which took place via Zoom on the evening of Thursday, March 3, 2022 US time:

(2:15) Who is Sergei Hovyadinov?

(3:37) His hometown of Kherson is near Crimea, so the 2014 annexation was stressful for his family.

(5:27) His family is now hiding at home, seeing Russian troops out the windows.

(7:07) Just you watch: Next, Russia will try claiming that the Kherson region wants to be independent. It’s a stage fake.

(8:06) Difference in Western and Russian media coverage of the invasion. It’s black and white.

(9:30) Putin’s justification for the war makes no sense. It’s not about a buffer against NATO, or natural gas deposits, or water for Crimea. And his historical rationale is absolute nonsense. This is just about him wanting to reconstitute the Soviet Union.

(15:20) We can’t know if he was bluffing and proceeded from pride, but few expected him to invade.

(18:55) Russian soldiers invading from Belarus might have thought it was a training exercise, but the ones invading from the south knew it was a real war.

(22:33) There’s a lot of evidence that Russian troop morale is low.

(24:08) Putin is acting irrationally.

(26:14) Sergei has not heard that Russians do not expect Putin to survive this. However, there’s a brain-drain exodus of information technology workers from Russia.

(29:45) We can’t know how this will end, but Ukrainians want to keep fighting.

(30:45) On Tuesday, Russians bombed the Babi Yar holocaust memorial near Kyiv, killing the memory of those people (the more than 30,000 Jews massacred there by Nazi Germany in 1941).

(31:30) The West has resisted helping Ukraine militarily, but seems to be coming closer.

(32:36) Ukraine’s weakest point is control of its skies.

(33:07) How long will the West stand down as atrocities mount in Ukraine? Probably longer than you think. Remember Syria, and President Obama’s meaningless red lines.

(35:32) Please support Ukrainians in any way you can. The humanitarian crisis is going to grow.

He suggested looking over aid ideas offered by The Washington Post at:

washingtonpost.com/world/2022/02/27/how-to-help-ukraine/


Want more videos like this? Subscribe to The Kelly Letter YouTube channel.

Thank you for watching!

Posted in Geopolitics, Video | Comments closed

2,300 words on Ukraine

THE CHASE

Yes, Putin is capable of causing boundless suffering. Just ask Grozny.

He used vague language to say Russia’s nuclear arsenal is ready, probably to distract from his lack of success in Ukraine.

Missile defense is good these days, probably even better than publicly known.

Vlad’s looking nutty. He accused the Jewish president of Ukraine of being a Nazi.

Putin wants to revive an ancient Russian empire, but his main goal might be a better footing in his next election.

Sanctions without oil are a joke.

No, this is not all NATO’s fault—but Vlad hopes you’ll think it is.

___________________________________

INTRO

Russia has increased the intensity of its Ukraine invasion. It blew up Kharkiv’s central Freedom Square with a missile, and is about to encircle the capital city of Kyiv with a 40-mile-long convoy.

In his first State of the Union address, President Joe Biden said last night:

“Our forces are not going to Europe to fight in Ukraine, but to defend our NATO Allies—in the event that Putin decides to keep moving west. For that purpose we’ve mobilized American ground forces, air squadrons, and ship deployments to protect NATO countries including Poland, Romania, Latvia, Lithuania, and Estonia.

“As I have made crystal clear the United States and our Allies will defend every inch of territory of NATO countries with the full force of our collective power. …

“When the history of this era is written, Putin’s war on Ukraine will have left Russia weaker and the rest of the world stronger. … Putin may circle Kyiv with tanks, but he will never gain the hearts and souls of the Ukrainian people.”

___________________________________

YES, PUTIN IS THAT BAD

If Vladimir Putin has indeed become irrational, there’s no telling how far he’ll go. If the way he treated the Chechen capital of Grozny in 2000 is an indication, farther than we’d like to contemplate. At that time, The New York Times reported:

“Russian soldiers did not capture Grozny. They obliterated it.

“Apartment houses along Lenin Prospekt have been pulverized. Minutka Square, once a bustling plaza, has been blasted beyond recognition.

“It is hard to find a single structure in the city center that has not been wrecked by a bomb, damaged by artillery or raked by gunfire. …

“Grozny looks more like Stalingrad after World War II or Guernica after the Spanish Civil War.”

The United Nations called it the most destroyed city on earth, without a single building left undamaged.

If Putin did that back when the world didn’t question his sanity, just his moral compass, it’s easy to see why his next move is anybody’s guess.

___________________________________

THE NUCLEAR OPTION

The worst-case scenario is probably deployment of nuclear weapons.

On Sunday, Putin announced that he had ordered his military chiefs “to put the deterrence forces of the Russian army into a special mode of combat duty.”

This terminology is unclear, even to Russian military experts in the West.

Consensus holds that it probably means Russia’s nuclear command and control system was moved to a phase enabling it to receive a launch order. Thus, a level up from standby, so to speak. If Putin were unable to be reached for any reason, and nuclear weapons were detonated on Russian soil, the country would be able to retaliate.

The UK’s secretary of defense, Ben Wallace, thinks Russia used the vague terminology deliberately. He told the BBC on Monday that the phrasing was intended to frighten the West and “remind the world he’s got a deterrent” and get global media “talking about it rather than the lack of success they are having in Ukraine.”

Even if so, any mention of the word “nuclear” raises the stress level, and conjures images of mushroom clouds across the planet, but the mere use of nuclear warheads does not necessarily equal such an apocalypse.

For starters, missile defense has come a long way since the early decades of the Cold War. Most of it is secret—trillions of dollars in US military spending has gone unaccounted for. In a world where multiple countries own ICBM arsenals, where would you direct such spending? I’d put it toward preventing enemy missiles from reaching me, thereby giving my arsenal an advantage. I’d strive to remove the “mutual” from “mutual assured destruction,” or MAD, introduced on Wikipedia as:

“a doctrine of military strategy and national security policy in which a full-scale use of nuclear weapons by two or more opposing sides would cause the complete annihilation of both the attacker and the defender.”

Even the parts of US and NATO missile defense known to the public are impressive. Presumably, the secret parts increase overall effectiveness. This, combined with Russia’s poor military showing in Ukraine so far, suggest that a push of the nuclear button by Vlad would equal his assured destruction only, and he probably knows this. Whether he cares is debatable.

And, yes, Russia claims to have hypersonic missiles that America can’t defend against, but if you and I know about them, I’m guessing the Pentagon knows too. The public has been aware of them for more than a decade already. Spies usually find things out earlier.

___________________________________

NO, VLAD, THE JEWISH PRESIDENT OF UKRAINE IS NOT A NAZI

Maura Reynolds at Politico reached out to Fiona Hill, “one of America’s most clear-eyed Russia experts, someone who has studied Putin for decades” in her former capacity as a Russian and European affairs specialist on the US National Security Council. She’s currently a senior fellow at the Brookings Institution in Washington, and a member of the Council on Foreign Relations and the Trilateral Commission.

She told Reynolds that Putin has been acting more emotional than usual lately. “There’s evident visceral emotion in things that he said in the past few weeks justifying the war in Ukraine. The pretext is completely flimsy and almost nonsensical for anybody who’s not in the echo chamber or the bubble of propaganda in Russia itself.”

That’s for sure. He tried to get Ukraine’s military to topple its own government because the country was run by drug addicts and neo-Nazis. Such a claim is absurd on its face, but doubly nutty in this case because Ukrainian President Volodymyr Zelensky was born to Jewish parents, and Ukraine fought against Nazi Germany. Zelensky explained as much in his plea to Russia for peace before the invasion commenced:

“They tell you that we’re Nazis. But how can a people that lost eight million lives to defeat the Nazis support Nazism? How can I be a Nazi? Say it to my grandfather, who fought in World War II as a Soviet infantryman and died a colonel in an independent Ukraine. …

“Take note, that I am speaking to you all in Russian now … This is our land, and this is our history. What will you fight for and with whom? Many of you have visited Ukraine. Many of you have relatives here. Some might have studied at Ukrainian universities, and befriended Ukrainians. You know our character, you know our people, and you know our principles. You know what we value.”

___________________________________

ANCIENT EMPIRE DELUSIONS

Zelensky’s message apparently resonated with millions of Russians but was lost on the one at the top, acting on his own for reasons even he may not fathom. Hill explained:

“This visceral emotion is unhealthy and extraordinarily dangerous because there are few checks and balances around Putin. He spotlighted this during the performance of the National Security Council meeting, where it became very clear that this was his decision. He was in a way taking full responsibility for war, and even the heads of his security and intelligence services looked like they’ve been thrown off guard by how fast things were moving.”

She thinks he’s chasing pipe dreams of ancient Russian empire reconstitution:

“I’ve kind of quipped about this but I also worry about it in all seriousness—that Putin’s been down in the archives of the Kremlin during Covid looking through old maps and treaties and all the different borders that Russia has had over the centuries. …

“Ukraine was the country that got away. And what Putin is saying now is that Ukraine doesn’t belong to Ukrainians. It belongs to him and the past. He is going to wipe Ukraine off the map, literally, because it doesn’t belong on his map of the ‘Russian world.’”

___________________________________

A KILLER POLITICAL CAMPAIGN

She doubts he’ll stop the campaign underway until he conquers Ukraine. “Now, if he can, he is going to take the whole country. We have to face up to this fact. Although we haven’t seen the full Russian invasion force deployed yet, he’s certainly got the troops to move into the whole country.”

If there’s a reason for this unprovoked aggression, it’s probably his need to appear necessary to Russians for their own safety, ahead of his next election in 2024. Reynolds summarized Putin’s past campaign strategy:

“Putin came to power after a series of operations that many have seen as a kind of false flag—bombings of buildings around Russia that killed Russian citizens, hundreds of them, followed by a war in Chechnya. That led to Putin coming to power as a wartime president. The annexation of Crimea in 2014 also came at a difficult time for Putin. Now we’re seeing another big military operation less than two years before he needs to stand for election again.”

Hill acknowledged the pattern, then: “Part of Putin’s persona as president is that he is a ruthless tough guy, the strong man who is the champion and protector of Russia. And that’s why Russia needs him. If all was peaceful and quiet, why would you need Vladimir Putin?”

She encourages remaining emotionally prepared for Putin to keep doing the unthinkable. “So if anybody thinks that Putin wouldn’t use something that he’s got that is unusual and cruel, think again. Every time you think, ‘No, he wouldn’t, would he?’ Well, yes, he would. And he wants us to know that, of course.”

___________________________________

SANCTIONS WITHOUT OIL? WHAT A JOKE

Sanctions, fine, even the supposedly aggressive ones being applied now, although somehow still not covering oil, Russia’s lifeblood. Attention, business lobby: not enough. Hill addressed this head-on:

“Right now, everyone who has been doing business in Russia or buying Russian gas and oil has contributed to Putin’s war chest. Our investments are not just boosting business profits, or Russia’s sovereign wealth funds and its longer-term development. They now are literally the fuel for Russia’s invasion of Ukraine. …

“Sanctions are not going to be enough. … Just as we wouldn’t be having a full-blown diplomatic negotiation for anything but a ceasefire and withdrawal while Ukraine is still being actively invaded, so it’s the same thing with business. Right now you’re fueling the invasion of Ukraine. … If Western companies, their pension plans or mutual funds, are invested in Russia they should pull out. Any people who are sitting on the boards of major Russian companies should resign immediately.”

___________________________________

STOP BLAMING NATO

In the United States, a contingent of commentators argues that this invasion is America’s fault, that the US and NATO applied unnecessary pressure on Russia by creeping eastward.

I mentioned this angle in last Sunday’s Kelly Letter. One phrasing of the argument is that America would not tolerate Russia’s missiles in Canada, Cuba, or Mexico, so why did we expect Russia to tolerate Western military assets advancing toward its western border?

To Hill, and another seasoned commentator I’ll get to in a moment, this demonstrates the success of Putin’s full-spectrum information war.

First, Hill:

“I mean he has got swathes … of the US public saying, ‘Good on you, Vladimir Putin,’ or blaming NATO, or blaming the US for this outcome. This is exactly what a Russian information war and psychological operation is geared towards. He’s been carefully seeding this terrain as well. We’ve been at war, for a very long time. I’ve been saying this for years.”

Now to Marie Yovanovitch, the former US Ambassador to Ukraine, who was interviewed by New Yorker editor David Remnick, who won a Pulitzer Prize in 1994 for his book Lenin’s Tomb: The Last Days of the Soviet Empire. The interview was published just yesterday.

About the argument that Putin’s invasion is the fault of NATO’s eastward expansion, she had this to say:

“Well, that’s certainly the Russian narrative, Putin’s narrative. But what should we have done differently? What should we have said to the countries of Central Europe, who had fears of their own, and fears that they would be left in a no man’s land? Should we have said, ‘Yeah, we’re just not interested’? I think that would’ve been a mistake.

“You know, the thing about the United States and NATO and the European Union is that we have ideas. We are about democracy and freedom and capitalism and security, as well as individual liberties. It’s a fact that people are better off under democracies.

“And, since World War Two, that has been the single most important driver of American influence and power. … it’s our ideas that attract others. Russia under Putin doesn’t really have that power of attraction. He only has the power of coercion, and we are seeing that now in Ukraine in a brutal way. … NATO is a defensive alliance. It does not pose a threat to Putin or Russia. In fact, the leaders of Europe and President Biden were trying to ratchet down tensions before all this.”

In another note, I’ll explore whether this cursed invasion marks the terminal phase of Putin’s malignant reign, and possibly crunch time for the Chinese Communist Party. Rather than representing the rise of an unbeatable Eurasian axis of autocracy, the Beijing-Moscow tie-up might signify the collapse of communism.

Posted in Geopolitics | Comments closed

No Time to Sell

The S&P 500 entered correction territory yesterday.

At the session’s intraday low of $425.86, SPY was -10.3% year-to-date, before ending the session at $429.57.

Blame went to Russia, as usual recently. Barron’s wrote that stocks went “reeling in response to the Russia-Ukraine conflict…” In the short term, probably so, but remember that in the long term geopolitical events exert a negligible impact on the stock market.

That’s all well and good in theory, but when arrows turn red, account balances drop, and media hammer the negative news drum, even investors who had considered themselves rock-ribbed can get queasy.

I want you to know that the letter’s plans are fine. They’ve been through this kind of decline, and far worse, before.

We went into this correction with plenty of buying power that we had hoped to use at lower stock prices. We still hope to do so, on our unfaltering quarterly schedule. Reliability is your friend in turbulent times. The Kelly Letter specializes in it.

If by chance you went into this downdraft with a high stock balance because you didn’t match the letter’s allocation at the beginning of the year, don’t beat yourself up over it.

Just as my advice in the Covid crash—which is to say the system’s advice—was to buy or hold, just do not sell, so it is now. As long as you don’t sell, you’re going to be fine.

On a more general level, yes, you should have followed the letter at the beginning of January, but now is not the time to kick yourself. Now is the time to avoid compounding your problems by locking in a loss. Failing to benefit as much as you could have in a recovery is not as bad as missing the recovery entirely. People who puke in price drops then re-enter at higher prices have no place in the stock market.

Pretty simple directive here: Do not sell.

If you’re feeling the heat, interact with me and other subscribers on the subscriber site, or reply to this email and I’ll get back to you ASAP.

I hope this helps.

We’re in it together. This kind of price cycle is exactly what our plans use to spin long-term profits.

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