Markets End Down for First Quarter, Worst in Two Years

I hope my retirement accounts didn't take too drastic of a hit. I'm not getting any younger!

At WSJ, "Stocks Post Worst Quarter in Two Years Despite Strong Finish":

A head-spinning quarter came to a disappointing end, with major stock indexes suffering their worst performance in two years and other markets recording some of the most extreme moves on record.

The action reflects a sense of dislocation shared by many traders and portfolio managers who are confronting challenges not seen in years. Yet their unease has been offset in part by a fierce determination among many investors to take advantage of any price declines to add to positions in stocks, bonds and commodities.

Inflation has surged to its highest level in four decades, Russia’s invasion of Ukraine has rattled already stretched supply chains and the Federal Reserve has embarked on a rate-increase plan whose pace investors are struggling to handicap.

All three major U.S. indexes declined more than 1.5% on Thursday, with losses accelerating in the final hour of the session as traders dumped stocks to end the quarter. The declines have dragged the S&P 500 down 4.9% over the past three months, snapping a seven-quarter streak of wins. The Dow Jones Industrial Average and Nasdaq Composite have lost 4.6% and 9.1%, respectively, this year.

U.S. oil futures cleared $130 a barrel in early March, a level that flashed a warning signal for many economists. But the futures have since declined to around $100, a price that likely limits immediate economic damage but still marks the biggest quarterly gain since 2008.

“There are different parts of this market that rhyme with history, but really not even that well,” said Eric Veiel, head of global equities at T. Rowe Price, which oversees $1.5 trillion in assets. “This is a truly unique time.”

Underpinning the uncertainty that permeated the first quarter was the Fed’s plan to raise rates. In doing so, the central bank removed a historic wave of stimulus that had driven stocks to dozens of records over the past two years and fueled a rush into some of the most speculative investments in the market.

That made the recent market downturn markedly different from the crash in 2020, which was abnormally short and severe.

“The changes to our market views are just as dramatic as they were when the Covid-19 pandemic emerged two years ago,” Erik Knutzen, multiasset class chief investment officer at Neuberger Berman, wrote in a note to clients after the Ukraine invasion, adding that he is pessimistic about stocks over the next year.

Few assets were left untouched by the volatility. Investors have dumped bonds, sending yields on corporate and municipal bonds as well as Treasurys sharply higher. The Bloomberg U.S. Aggregate bond index—largely U.S. Treasurys, highly rated corporate bonds and mortgage-backed securities—returned minus 6% in 2022 through Wednesday, headed toward the biggest quarterly loss since 1980.

Wheat prices have climbed 31%, logging the best quarterly performance since 2010. The swings in nickel prices during the Ukraine crisis were so large that the London Metal Exchange closed trading in the commodity after a huge run-up in prices inflicted severe financial pressure on producers that sold nickel as a hedge.

“That’s not rational behavior for an instrument, and that’s terrifying,” said Paul Britton, founder of Capstone Investment Advisors, an investment firm specializing in trading volatility. He says he expects the turbulence to continue the rest of the year.

Adding to the pain for many investors was the decline among shares of big technology companies, the biggest market leaders of the past decade.

Facebook’s parent company, Meta Platforms Inc., lost about $232 billion in market value in a single session after posting disappointing earnings, the biggest loss in market value for a U.S. company in history. The next day, Amazon.com Inc. recorded the biggest-ever one-day gain in market value.

Meta had its worst quarter since its shares started trading publicly in 2012 and has been one of the biggest losers within the S&P 500. Other former market leaders also struggled. Netflix Inc. has lost 38% this quarter, its worst period since 2012. PayPal Holdings Inc. has also lost around 39%, its worst quarter on record, and Salesforce.com Inc. finished its worst quarter since 2011.

The S&P 500 outperformed the tech-heavy Nasdaq Composite by about 4.2 percentage points, the greatest margin since 2006, according to Dow Jones Market Data.

Other corners of the market have fared better. The S&P 500’s energy sector has soared 38% and notched its best quarter in history. Energy stocks like Occidental Petroleum Corp. and Halliburton Co. have skyrocketed more than 95% and 65%, respectively.

​Some optimism crept back into the market recently. After the Fed raised rates in March for the first time since 2018, a familiar pattern emerged. Investors piled back into stocks and stepped in to buy the dips in shares of tech and growth companies, as well as more speculative bets that had suffered to start the year.

Bitcoin prices have rebounded in March. Meme stocks like GameStop Corp. and AMC Entertainment Holdings Inc. have soared, gaining more than 30% for the month.

Some analysts said individual investors appeared to be piling back into the market, driving some of the gains, a move reminiscent of last year...

 

Natural-Gas Industry Gets Boost as Biden Shifts Stance

Baby steps. Baby steps.

At WSJ, "Shares of large U.S. natural-gas companies rose as Biden softened position against fossil fuels":

President Biden’s pledge to boost U.S. liquefied natural-gas exports to Europe marks a further retreat from his hard-line stance against fossil fuels, sending share prices surging for natural-gas companies.

The president, who campaigned on a platform to transition the U.S. to cleaner energy, said Friday the U.S. is working to ship 50 billion cubic meters of LNG to Europe annually through at least 2030 to help the continent wean itself from dependence on Russian supplies.

The announcement came a day after Democrats on the Federal Energy Regulatory Commission backtracked on new environmental policies, suspending implementation of heightened requirements on reviews that industry officials and Republicans said would impede gas-pipeline development.

Shares of large U.S. natural-gas companies rose 9% on average Friday as major stock indexes were mixed. Shares of EQT Corp and Southwestern Energy Co., two large producers, shot up to close about 12% and 16% higher.

Cheniere Energy Inc., LNG 5.46% the top U.S. exporter, was up about 5.5%. Tellurian Inc., which is seeking financing for an LNG project, soared 21%.

The gas industry’s prospects have been a concern among the sector’s executives because of Mr. Biden’s stance against fossil fuels. But the president has softened some of his positions in the wake of rising energy costs, which have been driven in part by the economic rebound from Covid-19, and more recently by Russia’s invasion of Ukraine.

The White House pivot has also put the U.S. and its vast oil and gas reserves in shale rock back at the center of a global scramble for energy resources as a bulwark against petrostates and authoritarian regimes. The U.S. is the world’s largest oil and gas producer.

Daniel Yergin, the vice chairman of S&P Global and a noted oil-industry historian, called recent developments “a huge turn.”

“There’s a recognition now that shale—and particularly LNG—is a real geopolitical asset,” Mr. Yergin said.

Mr. Biden and his advisers have said they are still committed to ending the world’s reliance on fossil fuels, including gas, and will continue to fund renewable energy as part of their work with European allies. But they also acknowledged the need to deal with the reliance that exists today.

“While gas is still a substantial part of the energy mix, we want to make sure that the Europeans do not have to source that gas from Russia,” national security adviser Jake Sullivan told reporters on Friday.

Toby Rice, chief executive of top U.S. natural-gas producer EQT, said the Biden administration’s shift is an extremely encouraging political signal that natural gas will play a key role in the world’s future energy mix.

Mr. Rice said the U.S. could sharply increase LNG exports over time if companies build thousands of miles of new pipelines and billions worth of new LNG facilities. But unleashing that will require broader support for that infrastructure and speeding up the sluggish permitting process, he said.

“The problem we face is it takes longer to permit something than it takes us to build it,” Mr. Rice said. “The faster we move, the faster we move toward achieving our climate goals and providing energy security for people around the world.” Shippers of LNG have already sent most U.S. cargoes to European destinations this year, as prices have skyrocketed following Russia’s invasion. American exporters are moving cargoes as fast as physically possible and are on pace to send a record 11.4 billion cubic feet a day of LNG overseas this month, with more than 60% bound for Europe, according to market intelligence firm Kpler.

FERC has approved 13 LNG facilities across the U.S. that have remained unbuilt with the combined capacity to export about 25 billion cubic feet each day, according to FERC’s February update. Companies haven’t begun construction on those largely because they haven’t yet gathered enough supply agreements with customers overseas to finance the construction of those facilities.

Part of the arrangement between the U.S. and Europe is to ensure that European countries also come through to show they can take more U.S. gas. They are to build out their infrastructure to accept up to 50 billion cubic meters of additional U.S. supply a year between now and 2030, Mr. Sullivan said.

Before the Russian invasion, Biden administration officials had been hesitant about putting U.S. development money into fossil-fuel projects abroad...

 

What is Bitcoin?

I have no personal interest in digital money, though I'm not saying it's not a thing. It's a real big thing. But I've yet to see any conclusive evidence that bitcoin isn't one big speculative bubble where hedge-fund junkies and big-money dark-web urchins spend their time buying digital art masterpieces with blockchain non-fungible tokens. Cryptos gonna crypto, I guess. *Shrug.*

The most basic problem: Can cryptocurrencies serve the real, historical, and fundamental functions of money? Can digital money serve as a medium of exchange, a unit of account, and a store of value? I don't know. It remains to be seen. 

Meanwhile, it doesn't hurt to bone up on the trend. I mean, if you want to be hip with all the cool crypto cat blockchain bros.

At the New York Times, "The Latecomer’s Guide to Crypto":

Until fairly recently, if you lived anywhere other than San Francisco, it was possible to go days or even weeks without hearing about cryptocurrency.

Now, suddenly, it’s inescapable. Look one way, and there are Matt Damon and Larry David doing ads for crypto start-ups. Swivel your head — oh, hey, it’s the mayors of Miami and New York City, arguing over who loves Bitcoin more. Two N.B.A. arenas are now named after crypto companies, and it seems as if every corporate marketing team in America has jumped on the NFT — or nonfungible token — bandwagon. (Can I interest you in one of Pepsi’s new “Mic Drop” genesis NFTs? Or maybe something from Applebee’s “Metaverse Meals” NFT collection, inspired by the restaurant chain’s “iconic” menu items?)

Crypto! For years, it seemed like the kind of fleeting tech trend most people could safely ignore, like hoverboards or Google Glass. But its power, both economic and cultural, has become too big to overlook. Twenty percent of American adults, and 36 percent of millennials, own cryptocurrency, according to a recent Morning Consult survey. Coinbase, the crypto trading app, has landed on top of the App Store’s top charts at least twice in the past year. Today, the crypto market is valued at around $1.75 trillion — roughly the size of Google. And in Silicon Valley, engineers and executives are bolting from cushy jobs in droves to join the crypto gold rush.

As it’s gone mainstream, crypto has inspired an unusually polarized discourse. Its biggest fans think it’s saving the world, while its biggest skeptics are convinced it’s all a scam — an environment-killing speculative bubble orchestrated by grifters and sold to greedy dupes, which will probably crash the economy when it bursts.

I’ve been writing about crypto for nearly a decade, a period in which my own views have whipsawed between extreme skepticism and cautious optimism. These days, I usually describe myself as a crypto moderate, although I admit that may be a cop-out.

I agree with the skeptics that much of the crypto market consists of overvalued, overhyped and possibly fraudulent assets, and I am unmoved by the most utopian sentiments shared by pro-crypto zealots (such as the claim by Jack Dorsey, the former Twitter chief, that Bitcoin will usher in world peace).

But as I’ve experimented more with crypto — including accidentally selling an NFT for more than $500,000 in a charity auction last year — I’ve come to accept that it isn’t all a cynical money-grab, and that there are things of actual substance being built. I’ve also learned, in my career as a tech journalist, that when so much money, energy and talent flows toward a new thing, it’s generally a good idea to pay attention, regardless of your views on the thing itself.

My strongest-held belief about crypto, though, is that it is terribly explained.

Recently, I spent several months reading everything I could about crypto. But I found that most beginner’s guides took the form of boring podcasts, thinly researched YouTube videos and blog posts written by hopelessly biased investors. Many anti-crypto takes, on the other hand, were undercut by inaccuracies and outdated arguments, such as the assertion that crypto is good for criminals, notwithstanding the growing evidence that crypto’s traceable ledgers make it a poor fit for illicit activity.

What I couldn’t find was a sober, dispassionate explanation of what crypto actually is — how it works, who it’s for, what’s at stake, where the battle lines are drawn — along with answers to some of the most common questions it raises.

This guide — a mega-F.A.Q., really — is an attempt to fix that. In it, I’ll explain the basic concepts as clearly as I can, doing my best to answer the questions a curious but open-minded skeptic might pose.

Crypto boosters will likely quibble with my explanations, while dug-in opponents may find them too generous. That’s OK. My goal is not to convince you that crypto is good or bad, that it should be outlawed or celebrated, or that investing in it will make you rich or bankrupt you. It is simply to demystify things a bit. And if you want to go deeper, each section has a list of reading suggestions at the end...

Still more.

 

Roman Abramovich, Russian Oligarch, Hit by Sanctions

This guy's getting slammed

Chelsea's a diamond on the football world and the team plays in the Premier League, the top division in England.

This is from yesterday at WSJ, "Russian Billionaire Roman Abramovich, Owner of Chelsea Soccer Club, Is Sanctioned by U.K."

And from this evening, "Roman Abramovich U.S. Hedge Fund Investments Are Frozen":

Hedge funds told to freeze Russian oligarch’s assets after he was sanctioned by the British government.

A number of U.S. hedge-fund firms that have investments from Russian oligarch Roman Abramovich have been told to freeze his assets after he was sanctioned by the British government Thursday, according to people familiar with the instructions.

A message from fund administrator SS&C Globe Op to one firm said, “Currently accounts attributed to Roman Abramovich are blocked from transacting, as such any distributions, redemptions or payment cannot be made and no subscriptions or contributions can be accepted.”

SS&C, whose clients include hedge funds and other investment managers, said in the message it was monitoring the situation for guidance from the U.K. Treasury, the Office of Financial Sanctions Implementation and the Cayman Islands Monetary Authority. Other funds have received similar messages, according to people familiar with the matter.

The guidance likely puts a stop to recent efforts by Mr. Abramovich to sell his interests in a slew of hedge funds, said people familiar with the matter.

Mr. Abramovich, who for years has accessed hedge-fund investments through New York-based adviser Concord Management, had been trying to sell interests in funds including those managed by Empyrean Capital Partners in Los Angeles and Millstreet Capital Management in Boston, the people said.

Mr. Abramovich had been seeking to sell the funds on the secondary market since at least late February, the people said. For at least some of the funds, the investor is Concord, with Mr. Abramovich or entities connected with him being the underlying investor, said people familiar with the matter. People familiar with the matter said Concord was a small investor in Millstreet.

Mr. Abramovich also is invested through Concord in hedge funds including Millennium Management, Sarissa Capital Management and Sculptor Capital Management, SCU -2.09% formerly known as Och-Ziff Capital Management, said people familiar with the matter. It couldn’t be determined Friday if he had tried to sell his interests in those funds as well. Mr. Abramovich’s hedge-fund portfolio includes investments in many small funds betting on and against stocks, one person briefed on the matter said.

A spokeswoman for Mr. Abramovich didn’t respond to requests for comment. Concord didn’t respond to a request for comment.

The New York Times earlier reported Mr. Abramovich’s ties to Concord.

The U.K. on Thursday froze Mr. Abramovich’s assets and prevented him from doing any business in the country or selling assets including soccer club Chelsea F.C.

While managers in the past welcomed Concord’s money—the firm has a reputation for being a thoughtful, long-term investor in the hedge-fund industry–the relationship is proving delicate following Russia’s invasion of Ukraine and the cascade of sanctions it triggered.

Managers would have welcomed a sale as a way to distance themselves from a sanctioned oligarch, and some had been thinking about forcibly redeeming Mr. Abramovich from their funds, said people familiar with the matter.

One manager had been considering the possibility of replacing Mr. Abramovich with other investors, another person familiar with the matter said...

 

California Gas Prices Hit More Than $5.00 Per Gallon on Average for First Time, Breaking Record Highs for the State (VIDEO)

I'm glad I'm not commuting to work everyday. I teach online. You wouldn't believe the continuing strong demand for online classes. Kids don't want to come back on campus, and not just because they might get sick. No, they like "going to school" in their pajamas. They don't have to pay for gas, parking, and maintenance on their vehicle. 

My college administration was stunned when on-campus classes were under-enrolled for the spring semester, which was supposed to be the first time everyone was fully "on-campus" since March 2020. 

Didn't work out that way. Even employees aren't looking to go back if their gasoline budget balloons to $600 a month and counting.

Following up from yesterday, "Gas Prices in Los Angeles," at KABC News 7 Los Angeles:

Biden Wokeness on Energy Is Weakness

From Ned Ryun, at American Greatness, "Wokeness on Energy: Is Weakness Biden’s energy policy is bankrupting the country and making us a paper tiger abroad?"

Gas Prices in Los Angeles

On Twitter earlier today:

Now this would be accurate price for Los Angeles: pic.twitter.com/Jo34sNPtM7

— Donald Douglas 📘 (@AmPowerBlog) March 6, 2022

A Flourishing Democracy in Ukraine?

A flourishing Ukrainian democracy. 

That's what Vladimir Putin fears, according to Michael McFaul, former U.S. Ambassador to Russia and Professor of Political Science at Stanford University, along with Robert Person.

(Contrast this article to John Mearsheimer's, post earlier. The two contrasting takes represents a very common axis in international relations theory: realism vs. liberalism,)

At the Journal of Democracy, "What Putin Fears Most":

Russia’s invasion of Ukraine has begun. Russian president Vladimir Putin wants you to believe that it’s NATO’s fault. He frequently has claimed (including again in an address to the nation as this invasion commenced) that NATO expansion—not 190,000 Russian soldiers and sailors mobilized on Ukraine’s borders—is the central driver of this crisis. Following John Mearsheimer’s provocative 2014 Foreign Affairs article arguing that “the Ukraine crisis is the West’s fault,” the narrative of Russian backlash against NATO expansion has become a dominant framework for explaining—if not justifying—Moscow’s ongoing war against Ukraine. This notion has been repeated by politicians, analysts, and writers in the United States, Europe, and elsewhere. Multiple rounds of enlargement, they argue, exacerbated Russia’s sense of insecurity as NATO forces crept closer to Russia’s borders, finally provoking Putin to lash out violently, first by invading Georgia in 2008, then Ukraine in 2014, and now a second, likely far larger, invasion of Ukraine today. By this telling, the specter of Ukraine’s NATO membership points both to the cause of the conflict and its solution: take membership off the table for Ukraine, so the argument goes, and war will be prevented.

This argument has two flaws, one about history and one about Putin’s thinking. First, NATO expansion has not been a constant source of tension between Russia and the West, but a variable. Over the last thirty years, the salience of the issue has risen and fallen not primarily because of the waves of NATO expansion, but due instead to waves of democratic expansion in Eurasia. In a very clear pattern, Moscow’s complaints about NATO spike after democratic breakthroughs. While the tragic invasions and occupations of Georgia and Ukraine have secured Putin a de facto veto over their NATO aspirations, since the alliance would never admit a country under partial occupation by Russian forces, this fact undermines Putin’s claim that the current invasion is aimed at NATO membership. He has already blocked NATO expansion for all intents and purposes, thereby revealing that he wants something far more significant in Ukraine today: the end of democracy and the return of subjugation.

This reality highlights the second flaw: Because the primary threat to Putin and his autocratic regime is democracy, not NATO, that perceived threat would not magically disappear with a moratorium on NATO expansion. Putin would not stop seeking to undermine democracy and sovereignty in Ukraine, Georgia, or the region as whole if NATO stopped expanding. As long as citizens in free countries exercise their democratic rights to elect their own leaders and set their own course in domestic and foreign politics, Putin will keep them in his crosshairs....

The more serious cause of tensions has been a series of democratic breakthroughs and popular protests for freedom throughout the 2000s, what many refer to as the “Color Revolutions.” Putin believes that Russian national interests have been threatened by what he portrays as U.S.-supported coups. After each of them—Serbia in 2000, Georgia in 2003, Ukraine in 2004, the Arab Spring in 2011, Russia in 2011–12, and Ukraine in 2013–14—Putin has pivoted to more hostile policies toward the United States, and then invoked the NATO threat as justification for doing so.

Boris Yeltsin never supported NATO expansion but acquiesced to the first round of expansion in 1997 because he believed his close ties to President Bill Clinton and the United States were not worth sacrificing over this comparatively smaller matter. Through Partnership for Peace and especially the NATO-Russia Founding Act, Clinton and his team made a considerable effort to keep US-Russian relations positive while at the same time managing NATO expansion. The 1999 NATO bombing of Serbia to stop ethnic cleaning in Kosovo severely tested that strategy but survived in part because Clinton gave Yeltsin and Russia a role in the negotiated solution. When the first post-communist color revolution overthrew Slobodan Milosevic a year later, Russia’s new president, Putin, deplored the act but did not overreact. At that time, he still entertained the possibility of cooperation with the West, including NATO.

However, the next round of democratic expansion in the post-Soviet world, the 2003 Rose Revolution in Georgia, escalated U.S.-Russian tensions significantly. Putin blamed the United States directly for assisting in this democratic breakthrough and helping to install what he saw as a pro-American puppet, President Mikheil Saakashvili. Immediately after the Rose Revolution, Putin sought to undermine Georgian democracy, ultimately invading in 2008 and recognizing two Georgian regions—Abkhazia and South Ossetia—as independent states. U.S.-Russian relations reached a new low point in 2008.

A year after the Rose Revolution, the most consequential democratic expansion in the post-Soviet world erupted in Ukraine in 2004, the Orange Revolution. In the years prior to that momentous event, Ukraine’s foreign-policy orientation under President Leonid Kuchma was relatively balanced between east and west, but with gradually improving ties between Kyiv and Moscow. That changed when a falsified presidential election in late 2004 brought hundreds of thousands of Ukrainians into the streets, eventually sweeping away Kuchma’s—and Putin’s—handpicked successor, Viktor Yanukovych. Instead, the prodemocratic and pro-western Orange Coalition led by President Viktor Yushchenko and Prime Minister Yuliya Tymoshenko took power.

Compared to Serbia in 2000 or Georgia in 2003, the Orange Revolution in Ukraine in 2004 was a much larger threat to Putin. First, the Orange Revolution occurred suddenly and in a much bigger and more strategic country on Russia’s border. The abrupt pivot to the West by Yushchenko and his allies left Putin facing the prospect that he had “lost” a country on which he placed tremendous symbolic and strategic importance.

To Putin, the Orange Revolution undermined a core objective of his grand strategy: to establish a privileged and exclusive sphere of influence across the territory that once comprised the Soviet Union. Putin believes in spheres of influence; that as a great power, Russia has a right to veto the sovereign political decisions of its neighbors. Putin also demands exclusivity in his neighborhood: Russia can be the only great power to exercise such privilege (or even develop close ties) with these countries. This position has hardened significantly since Putin’s conciliatory position of 2002 as Russia’s influence in Ukraine has waned and Ukraine’s citizens have repeatedly signaled their desire to escape from Moscow’s grasp. Subservience was now required. As Putin explained in a recent historical article, in his view Ukrainians and Russians “were one people” whom he is seeking to reunite, even if through coercion. For Putin, therefore, the loss of Ukraine in 2004 to the West marked a major negative turning point in U.S.-Russian relations that was far more salient than the second wave of NATO expansion that was completed the same year.

Second, those Ukrainians who rose up in defense of their freedom were, in Putin’s own assessment, Slavic brethren with close historical, religious, and cultural ties to Russia. If it could happen in Kyiv, why not in Moscow? Several years later, it almost did happen in Russia when a series of mass protests erupted in Moscow, St. Petersburg, and other cities in the wake of fraudulent parliamentary elections in December 2011. They were the largest protests in Russia since 1991, the year the Soviet Union collapsed. For the first time in his decade-plus in power, ordinary Russians showed themselves to have both the will and the capability to threaten Putin’s grip on power. That popular uprising in Russia, occurring the same year as the Arab Spring, and then followed with Putin’s return to the Kremlin as president for a third term in 2012, marked another major negative turn in U.S.-Russian relations, ending the reset launched by Presidents Obama and Medvedev in 2009. Democratic mobilization, first the Middle East and then Russia—not NATO expansion—ended this last chapter of U.S.-Russian cooperation. There have been no new chapters of cooperation since.

But U.S.-Russian relations deteriorated ever further in 2014, again because of new democratic expansion. The next democratic mobilization to threaten Putin happened a second time in Ukraine in 2013–14. After the Orange Revolution in 2004, Putin did not invade Ukraine, but wielded other instruments of influence to help his protégé, Viktor Yanukovych, narrowly win the Ukrainian presidency six years later. Yanukovych, however, turned out not to be a loyal Kremlin servant, but tried to cultivate ties with both Russia and the West. Putin finally compelled Yanukovych to make a choice, and the Ukrainian president chose Russia in the fall of 2013 when he reneged on signing an EU association agreement in favor of membership in Russia’s Eurasian Economic Union. To the surprise of everyone in Moscow, Kyiv, Brussels, and Washington, Yanukovych’s decision to scuttle this agreement with the EU triggered mass demonstrations in Ukraine again, bringing hundreds of thousands of Ukrainians into the streets in what would become known as the Euromaidan or “Revolution of Dignity” to protest Yanukovych’s turn away from the democratic West. The street protests lasted several weeks, punctuated by the killing of dozens of peaceful protestors by Yanukovych’s government, the eventual collapse of that government and Yanukovych’s flight to Russia in February 2014, and a new pro-Western government taking power in Kyiv. Putin had “lost” Ukraine for the second time in a decade.

This time, Putin struck back with military force to punish the alleged American-backed, neo-Nazi usurpers in Kyiv. Russian armed forces seized Crimea; Moscow later annexed the Ukrainian peninsula. Putin also provided money, equipment, and soldiers to back separatists in eastern Ukraine, fueling a simmering war in Donbas for eight years, in which approximately 14,000 people have been killed. After invading, not before, Putin amped up his criticisms of NATO expansion as justification for his belligerent actions.

In response to this second Ukrainian democratic revolution, Putin concluded that cooption through elections and other nonmilitary means had to be augmented with greater coercive pressure, including military intervention. Since the Revolution of Dignity, Putin has waged an unprecedented war against Ukraine using a full spectrum of military, political, informational, social, and economic weapons in an attempt to destabilize and eventually topple Ukraine’s democratically elected government.

 

Why the Ukraine Crisis Is the West's Fault

This article from John Mearsheimer is getting a lot of attention, as well as the lecture video I posted the other night. 

Prescient, you might say. (And liberalism here means "classical" liberalism grounded in philosophies of the Enlightenment, from folks like Emmanuel Kant, John Locke, etc.). It's not the American ideological "liberalism" associated with an earlier version of the Democrat Party, now a radical, extreme left party, not *liberal* at all). 

At Foreign Affairs, "The Liberal Delusions That Provoked Putin":

According to the prevailing wisdom in the West, the Ukraine crisis can be blamed almost entirely on Russian aggression. Russian President Vladimir Putin, the argument goes, annexed Crimea out of a long-standing desire to resuscitate the Soviet empire, and he may eventually go after the rest of Ukraine, as well as other countries in eastern Europe. In this view, the ouster of Ukrainian President Viktor Yanukovych in February 2014 merely provided a pretext for Putin’s decision to order Russian forces to seize part of Ukraine.

But this account is wrong: the United States and its European allies share most of the responsibility for the crisis. The taproot of the trouble is NATO enlargement, the central element of a larger strategy to move Ukraine out of Russia’s orbit and integrate it into the West. At the same time, the EU’s expansion eastward and the West’s backing of the pro-democracy movement in Ukraine—beginning with the Orange Revolution in 2004—were critical elements, too. Since the mid-1990s, Russian leaders have adamantly opposed NATO enlargement, and in recent years, they have made it clear that they would not stand by while their strategically important neighbor turned into a Western bastion. For Putin, the illegal overthrow of Ukraine’s democratically elected and pro-Russian president—which he rightly labeled a “coup”—was the final straw. He responded by taking Crimea, a peninsula he feared would host a NATO naval base, and working to destabilize Ukraine until it abandoned its efforts to join the West.

Putin’s pushback should have come as no surprise. After all, the West had been moving into Russia’s backyard and threatening its core strategic interests, a point Putin made emphatically and repeatedly. Elites in the United States and Europe have been blindsided by events only because they subscribe to a flawed view of international politics. They tend to believe that the logic of realism holds little relevance in the twenty-first century and that Europe can be kept whole and free on the basis of such liberal principles as the rule of law, economic interdependence, and democracy.

But this grand scheme went awry in Ukraine. The crisis there shows that realpolitik remains relevant—and states that ignore it do so at their own peril. U.S. and European leaders blundered in attempting to turn Ukraine into a Western stronghold on Russia’s border. Now that the consequences have been laid bare, it would be an even greater mistake to continue this misbegotten policy.

THE WESTERN AFFRONT

As the Cold War came to a close, Soviet leaders preferred that U.S. forces remain in Europe and NATO stay intact, an arrangement they thought would keep a reunified Germany pacified. But they and their Russian successors did not want NATO to grow any larger and assumed that Western diplomats understood their concerns. The Clinton administration evidently thought otherwise, and in the mid-1990s, it began pushing for NATO to expand.

The first round of enlargement took place in 1999 and brought in the Czech Republic, Hungary, and Poland. The second occurred in 2004; it included Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia. Moscow complained bitterly from the start. During NATO’s 1995 bombing campaign against the Bosnian Serbs, for example, Russian President Boris Yeltsin said, “This is the first sign of what could happen when NATO comes right up to the Russian Federation’s borders. ... The flame of war could burst out across the whole of Europe.” But the Russians were too weak at the time to derail NATO’s eastward movement—which, at any rate, did not look so threatening, since none of the new members shared a border with Russia, save for the tiny Baltic countries.

Then NATO began looking further east. At its April 2008 summit in Bucharest, the alliance considered admitting Georgia and Ukraine. The George W. Bush administration supported doing so, but France and Germany opposed the move for fear that it would unduly antagonize Russia. In the end, NATO’s members reached a compromise: the alliance did not begin the formal process leading to membership, but it issued a statement endorsing the aspirations of Georgia and Ukraine and boldly declaring, “These countries will become members of NATO.”

Moscow, however, did not see the outcome as much of a compromise. Alexander Grushko, then Russia’s deputy foreign minister, said, “Georgia’s and Ukraine’s membership in the alliance is a huge strategic mistake which would have most serious consequences for pan-European security.” Putin maintained that admitting those two countries to NATO would represent a “direct threat” to Russia. One Russian newspaper reported that Putin, while speaking with Bush, “very transparently hinted that if Ukraine was accepted into NATO, it would cease to exist.”

Russia’s invasion of Georgia in August 2008 should have dispelled any remaining doubts about Putin’s determination to prevent Georgia and Ukraine from joining NATO. Georgian President Mikheil Saakashvili, who was deeply committed to bringing his country into NATO, had decided in the summer of 2008 to reincorporate two separatist regions, Abkhazia and South Ossetia. But Putin sought to keep Georgia weak and divided—and out of NATO. After fighting broke out between the Georgian government and South Ossetian separatists, Russian forces took control of Abkhazia and South Ossetia. Moscow had made its point. Yet despite this clear warning, NATO never publicly abandoned its goal of bringing Georgia and Ukraine into the alliance. And NATO expansion continued marching forward, with Albania and Croatia becoming members in 2009.

The EU, too, has been marching eastward. In May 2008, it unveiled its Eastern Partnership initiative, a program to foster prosperity in such countries as Ukraine and integrate them into the EU economy. Not surprisingly, Russian leaders view the plan as hostile to their country’s interests. This past February, before Yanukovych was forced from office, Russian Foreign Minister Sergey Lavrov accused the EU of trying to create a “sphere of influence” in eastern Europe. In the eyes of Russian leaders, EU expansion is a stalking horse for NATO expansion...

 

Putin Follows Through on His Word

It's Pat Buchanan, at the American Conservative, "Putin Warned Us":

When Russia’s Vladimir Putin demanded that the U.S. rule out Ukraine as a future member of the NATO alliance, the U.S. archly replied: NATO has an open-door policy. Any nation, including Ukraine, may apply for membership and be admitted. We’re not changing that.

In the Bucharest declaration of 2008, NATO had put Ukraine and Georgia, ever farther east in the Caucasus, on a path to membership in NATO and coverage under Article 5 of the treaty, which declares that an attack on any one member is an attack on all.

Unable to get a satisfactory answer to his demand, Putin invaded and settled the issue. Neither Ukraine nor Georgia will become members of NATO. Russia resolved that it would go to war to prevent that from happening, just as it did on Thursday.

Putin did exactly what he warned us he would do.

Whatever the character of the Russian president, now being hotly debated here in the USA, he has established his credibility. When Putin warns he will do something, he follows through.

Days into this Russia-Ukraine war, potentially the worst in Europe since 1945, two questions need to be answered: How did we get here? And where do we go from here?

How did we get to a place where Russia—believing its back is against a wall and the United States, by moving NATO ever closer to Russia’s borders, put it there—reached a point where it chose war with Ukraine rather than accept the fate and future it believed the West had in store for Mother Russia? ...

Keep reading. 

U.S. and NATO Pressed on Ukraine Aid

 At WSJ, "As Russian Invasion of Ukraine Widens, the West’s Options Shrink":

Seven days into Russia’s invasion of Ukraine, the U.S. and its North Atlantic Treaty Organization allies are coming under increasing pressure to do more to help Ukraine, even as they face diminishing options for doing so.

As Russia continues its push to capture urban areas, one of the more drastic options discussed publicly has been a no-fly zone, which would stop Russian aircraft from launching strikes over Ukraine, eliminating a key military tactic. But the idea has been dismissed by the U.S. and NATO countries.

“That is in many ways for many people, the unspoken question. Why not just engage militarily? But that’s not something any NATO member is thinking of doing. And there’s a reason for that, which is in order to have a no-fly zone above Ukraine, in the current circumstances, you would have to take decisions to shoot down Russian jets,” British Prime Minister Boris Johnson said Wednesday. “And that’s not something that any Western country is contemplating.”

British officials say that while the no-fly zone has been discussed at senior levels, it isn’t a realistic option given the risks of it provoking a direct conflict with Moscow.

Creating a continuous, effective no-fly zone over Ukraine, particularly with several NATO nations, would require several hundred planes, not only to uphold the no-fly zone but to support those aircraft maintaining that no-fly zone. In addition, air forces across multiple nations would have to coordinate. And, should Russia attack NATO-member aircraft, that would be seen as an attack on the 30-member alliance.

The British government has said it would instead continue to impose more sanctions on Russian individuals, deliver more weapons to Ukraine and make it easier for refugees fleeing the conflict to settle in the U.K.

Sanctions, however, won’t have an immediate effect on the battlefield, Western leaders have acknowledged. “This is going to take time,” President Biden said last week as the U.S. began rolling out punitive financial measures that included cutting off some of Russia’s largest banks from the global financial system.

However, officials hope that the unprecedented economic hit will bite the Russian economy rapidly, meaning that as the bombs fall on Kyiv, there will be Russian bank runs and Russian businesses collapsing, showing real-world consequences for Russian President Vladimir Putin.

A no-fly zone could be part of an eventual peace agreement, one official said.

While NATO members have rejected any notion of direct intervention, they have recently increased their defensive presence, with more than 100 jets now at high alert, operating from 30 locations, more than 120 ships on patrol from the Baltic Sea to the Mediterranean Sea, and thousands more troops deployed to NATO’s east.

Mr. Putin’s reference to putting his nation’s nuclear-weapons arsenal on alert has also raised concerns among NATO allies about the potential risks of military involvement. There appears to be no consensus yet as to how the West would react to such an escalation, and one European diplomat suggested the nuclear-posture change was a bid to deflect attention away from the conduct of the war.

But if Mr. Putin did follow through with his threat, the nuclear-armed NATO members would put their nuclear arsenal on alert, officials said.

One NATO official speculated that Western countries could in such a scenario attempt to send more substantial support to Ukraine by private channels, without specifying what that would entail. A European official said this had already been discussed in government circles.

“The situation is escalating and Putin seems keen for it to escalate, he is following a logic of war,” the European official said.

On Friday, foreign ministers from NATO member states will hold emergency talks about Ukraine. Among the issues they will discuss, U.S. officials said, is how the alliance can support Ukraine, even though it is a non-NATO member. But officials conceded there aren’t many options.

Even the Western weapons shipments now streaming into Ukraine via Poland could lead to an escalation of hostilities between Russia and NATO, some officials fear, and the alliance members are divided on how much military assistance to provide. Over the weekend, the EU’s top diplomat, Josep Borrell, said the bloc would send jet fighters to Ukraine, and, for the first time, finance member countries’ deliveries of offensive weapons to Kyiv.

Several officials familiar with the discussions said that there was never any agreement on such a move, which had merely been discussed among foreign ministers of the bloc. On Tuesday, officials in several countries that have the types of aircraft Ukrainian pilots are trained to fly said they were unwilling to provide them despite Mr. Borrell’s comment.

NATO and European officials said that there was a great concern about Russia attacking the supply lines that channel weapons and other materiel to Ukraine via Poland. The positioning of troops in Belarus as well as around Kyiv suggested that Russia was planning to cut off the western part of the country and end the shipments of arms and humanitarian aid to Ukraine.

NATO members appear to accept that regardless of what measures they take, Mr. Putin appears set on widening the conflict...

Putin the Powerful: Oligarchs Can't Take Out Russian Dictator

Somewhere I read that Vladdy's hold on power had weakened since last Thursday, especially since things were going so badly on the ground. 

Perhaps not.

See Max Seddon, at the Financial Times, "Russia’s oligarchs powerless to oppose Putin over Ukraine invasion: President responds to any criticism with reprisals, leaving business leaders with diminished influence":

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As Russia’s tanks rolled into Ukraine last week, Vladimir Putin gathered the country’s top businessmen in the Kremlin’s ornate Hall of the Order of St Catherine to discuss their response to the economic shocks that would follow.

The Russian president, seated about 20ft away in a conspicuous social-distancing measure, told them he had “no other choice” but to invade Ukraine — and, if they wanted to keep their businesses, neither did they, according to people briefed on the meeting.

“It was a pointless meeting. The main idea was to explain himself. The explanation was: ‘I get it, but I didn’t have any other way out.’ That’s really what he thinks,” one of them said.

The EU on Monday froze the assets and imposed travel bans on more than half a dozen of Russia’s most prominent businessmen in a move officials have said is aimed at compelling the country’s elite to demand Putin change course.

But the power dynamic of the meeting made for a much starker message to the assembled billionaires. He warned that anyone who avoided doing business with companies sanctioned by the west would face punishment under the law — implying that the oligarchs had to make a stand — while also stating that Russia would help companies hit by western sanctions.

The comprehensive guest list for the meeting, where attendees sat in alphabetical order, showed that any form of dissent has become a distant prospect as Putin’s power becomes near-absolute, people close to some of the attendees said.

Though some, such as banker Petr Aven and Vladimir Yevtushenkov, owner of the Sistema conglomerate, were among the first to make a fortune in Russia’s turbulent 1990s, they were outnumbered by the heads of the state-run banking and energy groups that now dominate Russia’s economy — many of whom have ties to Putin’s inner circle.

Mikhail Fridman, Aven’s business partner, has criticised the war in general terms but told reporters on Tuesday he did not want to attack Putin directly because it “will not have any impact for political decisions in Russia” while endangering his employees.

“Nobody really wants to suffer. But the message is we will have to,” said a senior state banker. “Being on the US sanctions list used to be a status symbol of patriotism. But now it’s a requirement. If you’re not on it, it’s suspicious.”

The meeting showed how far Russia — and Putin himself — had come since his first meeting with the oligarchs a few months after he took office in 2000.

Then, the fledgling leader offered a deal to the wealthy businessmen: keep the gains they had made from privatising Russian state assets after the Soviet Union’s collapse in return for pledging fealty and staying out of politics.

Since then, Putin has imposed his will on the oligarchs by responding to any criticism with reprisals, leaving them with vastly diminished influence — and some of them in prison, such as the former oil magnate Mikhail Khodorkovsky, who spent 10 years in prison on tax and fraud charges that were largely seen by international observers as politically motivated.

Some who built their fortunes before Putin came to power — such as Khodorkovsky and the banker Sergei Pugachev — have left the country. A few other more recently minted businessmen have left the country or been arrested...

Putin Accidentally Revitalized the West's Liberal Order

It's Kori Schake, at the Atlantic, "The Russian president thought he sensed an opportunity to take advantage of a disunited West. He has been proved wrong":

Russia’s invasion of Ukraine has unleashed a chorus of despair—beyond the cost in Ukrainian lives, the international order that the U.S. and its allies built after World War II is, we are told, crumbling. The writer Paul Kingsnorth has declared that the liberal order is already dead. The Indian journalist Rahul Shivshankar has argued that “in the ruins across Ukraine you will find the remains of Western arrogance.” Even the brilliant historian Margaret MacMillan has written that “the world will never be the same. We have moved already into a new and unstable era.”

The reverse is true. Vladimir Putin has attempted to crush Ukraine’s independence and “Westernness” while also demonstrating NATO’s fecklessness and free countries’ unwillingness to shoulder economic burdens in defense of our values. He has achieved the opposite of each. Endeavoring to destroy the liberal international order, he has been the architect of its revitalization.

Germany has long soft-pedaled policies targeting Russia, but its chancellor, Olaf Scholz, made a moving and extraordinary change, committing an additional $100 billion to defense spending immediately, shipping weapons to Ukraine, and ending the Nord Stream 2 pipeline, which was constructed to bring gas to Germany from Russia. Hungary, thought to be the weakest link in the Western chain, has supported without question moves by the European Union and NATO to punish Moscow. Turkey, arguably the most Russia-friendly NATO country, having bought missile defense systems from Moscow, has invoked its responsibilities in the 1936 Montreux Convention and closed the Bosporus strait to Russian warships. NATO deployed its rapid-reaction force for the first time, and allies are rushing to send troops to reinforce frontline states. A cascade of places have closed their airspace to Russian craft. The United States has orchestrated action and gracefully let others have the stage, strengthening allies and institutions both.

We are a long way from the ultimate outcome of Russia’s invasion, but even if Ukrainian military forces cannot prevail or President Volodymyr Zelensky and his government are killed or captured, it’s difficult to see how Putin’s broader gamble succeeds. If Zelensky falls, another leader will step forward. Even Russian-speaking Ukrainians have become anti-Russian. The scene depicted in Picasso’s Guernica, one of wanton and barbaric violence, is the best Putin can hope for: Conquering Ukraine will require unspeakable brutality, and even if Moscow succeeds on this count, foreign legions are flowing to Ukraine to assist an insurgency in bleeding Russia’s occupation. If Ukraine fends off Russia’s assault, it will be welcomed into NATO and the EU.

The Ukrainian government that so recently seemed mired in corruption and division has been outstanding: President Zelensky has refused to flee and inspired resistance; outgunned and outmanned Ukrainian military forces seem to have held their own. They understand that they’re in a battle of ideas, establishing, for example, a hotline for Russian prisoners of war to call their families.

Civil activism is the lifeblood of free societies, and Ukrainians have been excelling, including the sunflower lady, who cursed Russian soldiers; civilians lining up to collect arms and make Molotov cocktails, or change out street signs to confuse the invaders; and breweries retooling to produce weaponry.

Ukraine’s tenacity and creativity have ignited civil-society energy, corporate strength, and humanitarian assistance. The hacker group Anonymous has declared war on Russia, disrupting state TV and making public the defense ministry’s personnel rosters. Elon Musk’s SpaceX has promised to help keep Ukraine online. The chipmakers Intel and AMD have stopped sending supplies to Russia; BP is divesting from its stake in the Russian energy giant Rosneft; FedEx and UPS have suspended service to Russia. Norway’s sovereign wealth fund is cutting all its investments in Russia. YouTube and Meta have demonetized Russian state media. (Even Pornhub is denying Russians access.) Belarusian hackers disrupted their country’s rail network to prevent their government from sending troops to support the Russian war. Polish citizens collected 100 tons of food for Ukraine in two days. Bars are pouring out Russian vodka. Iconic architecture in cities all over the free world is lit up with the colors of the Ukrainian flag to show solidarity. Sports teams are refusing to play Russia in international tournaments. The London Philharmonic opened its Saturday concert by playing the Ukrainian national anthem, and the Simpsons modeled Ukrainian flags. This is what free societies converging on an idea looks like. And the idea is this: Resist Putin’s evil...

Still more.

 

The West's Sanctions Barrage Severs Russia’s Economy from Much of the World

I'm fairly blown away by how monstrous these economic sanctions are. Putin had squirreled away $650 billion in gold reserves, of which he can't even get his hands now. 

It's also fascinating that Russia's oil industry was largely spared from the sanctions barrage, explicitly because Western Europe is so dependent on Russian supplies. This is the killer weakness among the Western democracies, extreme vulnerability interdependence: The abject reliance on the world's worst authoritarian regimes (including Saudi Arabia, etc.) for their energy supplies.

This is conflict oil and should be completely repudiated by Western societies. In the U.S., that would mean the stupid Biden administration would have roll back its green energy agenda, deregulate, restore pipeline projects, allow drilling and production on federal lands, etc., and then just leave freakin' energy markets alone to boost supplies of oil, natural gas, and whatever else we need.

Sheesh. 

At the Wall Street Journal, "The country has been all-but-unplugged from a global system that powered its yearslong transition from a closed society":

Western nations dropped economic sanctions of historic scale on Russia that are hobbling its financial system and effectively reversing 30 years of post-Cold War engagement.

The economic moves by the U.S. and Europe, in response to the invasion of Ukraine, reverberated Monday through Russia’s economy, which was largely cut off from much of the West, and hindered the ability of Russia’s central bank to manage the country’s financial system and mitigate the damage.

Western banks and businesses added to the governments’ actions by halting operations in Russia and sales to Russian companies. Many cited the risks of potentially violating sanctions. More broadly, businesses prize stability, and invasions create chaos.

In just days, Russia has been all-but-unplugged from a global system that powered its transition from a closed, government-controlled economy to a more modern one that yielded Western goods, foreign travel and a middle-class lifestyle.

“Today, Russia’s financial system and economy are facing a totally abnormal situation,” the usually reserved Bank of Russia Gov. Elvira Nabiullina, dressed in black, said Monday.

The impact hit Russian stock, bond and currency markets. Its central bank shut the stock market, avoiding an expected selloff, and raised benchmark interest rates to 20% from 9.5%, to make holding the ruble more attractive and cushion its expected fall.

The ruble fell to 108.014 to the U.S. dollar from 83 on Friday—a drop of more than 20% and its worst one-day decline since Sept. 3, 1998. Shares of several large Russian companies traded in London and they fell as well. Sberbank, the country’s largest lender, was down 74%. The bank was sanctioned by Western nations. The country’s energy giants also got hit, with Gazprom falling almost 53% and Rosneft declining 42%. The central bank said the Russian stock market would remain closed Tuesday.

Russia imposed capital controls, blocking residents from sending money to foreign bank accounts and restricting payments on offshore debt. On the streets, Russians on Monday lined up at ATMs to take out cash.

The speed and breadth of the sanctions overwhelmed years of preparation by Russia after the 2014 sanctions. In a strategy dubbed Fortress Russia, the country built up more than $600 billion in foreign reserves, bought gold and pivoted some exports to China. Closing off Russia’s access to those reserves undercut the strategy, a fact acknowledged by Ms. Nabiullina, the central bank chief.

Timothy Ash, an emerging-market strategist at BlueBay Asset Management, wrote in a note to clients Monday: “From Fortress Russia to Rubble Russia in a week.”

The latest round of sanctions are likely to cause a sizable contraction for Russia’s economy this year, and could prompt bank runs and higher interest rates as the Russian ruble depreciates, according to the Institute for International Finance, a Washington-based global association of financial firms, Elina Ribakova, deputy chief economist at the IIF, said Monday she expected sanctions to bring about a contraction of at least 10% in Russia’s gross domestic product along with double-digit inflation.

“The pressure on the Russian economy is just tremendous,” said Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs. “And it’s going to get even more dramatic over the next weeks and months.”

Even before Russian President Vladimir Putin’s decision to invade Ukraine, Russia’s central bank had difficulty bringing inflation under control. In January, the inflation rate stood at 8.7%, more than double the central bank’s target, despite a series of interest rate increases that began last March.

Boris Titov, Mr. Putin’s business ombudsman, criticized the central bank’s rate increase Monday, saying in an Instagram post that it chose to “further strangle” Russian businesses that are already “at the front-line” of sanctions...

 Keep reading.

Jason M. Kelly, Market Maoists

At Amazon, Jason M. Kelly, Market Maoists: The Communist Origins of China’s Capitalist Ascent.

Stephen Soukup, The Dictatorship of Woke Capital

At Amazon, Stephen Soukup, The Dictatorship of Woke Capital: How Political Correctness Captured Big Business.

Dow-Jones Industrial Average Suffers Worst Trading Day of 2021

My retirement funds are getting bashed.

At WSJ, "Stocks, Oil Drop Sharply on Concerns Over New Covid-19 Variant":

Stocks, oil prices and government-bond yields slumped after South Africa raised the alarm over a fast-spreading strain of the coronavirus, triggering concern that travel restrictions and other curbs will spoil the global economy’s recovery.

The Dow Jones Industrial Average fell 905.04 points, or 2.5%, to 34899.34. It was the Dow’s biggest one-day percentage drop since October 2020.

The S&P 500 lost 106.84 points, or 2.3%, to 4594.62 and the Nasdaq Composite dropped 353.57 points, or 2.2%, to 15491.66. It was the worst Black Friday session on record for all three indexes. Markets closed early because of the holiday.

U.S. crude oil tumbled 13% to $68.15. Traders fretted that lockdowns could reduce demand for transportation fuels. Bitcoin, following the path of other risk assets, skidded lower.

“It’s not a great day to wake up on Black Friday and see news about a concerning variant,” said Jessica Bemer, a portfolio manager at Easterly Investment Partners.

Investors reached for safe havens. The yield on the 10-year Treasury note tumbled to 1.484% from 1.644% before the Thanksgiving break, its biggest drop since March 2020. Gold, another perceived store of value when riskier assets retreat, rose 0.1% to $1,785.30 a troy ounce.

The pullback created whiplash for markets that had, to a great extent, parked worries about coronavirus.

Scientists say the new coronavirus variant, dubbed B.1.1.529, has a high number of mutations that may make it more transmissible and allow it to evade some of the immune responses triggered by previous infection or vaccination. Dozens of countries have already imposed travel restrictions to and from southern Africa.

Investors feared the strain could set back months of efforts to revive the world economy and save lives.

“For now, Covid is back on the table,” said Takeo Kamai, head of execution services at CLSA in Tokyo.

Investors seemed to be following the playbook they pulled out early in the pandemic: sell travel stocks, buy work-from-home stocks. “This is a market that is well practiced in terms of reacting to Covid,” Ms. Bemer said.

Delta Air Lines, United Airlines and American Airlines Group all dropped 8% or more, after the U.K., Israel and Singapore restricted travel from southern Africa. The European Union said it would propose stopping air travel from the region. Cruise stocks including Royal Caribbean Group were hammered, while Exxon Mobil fell 3.5%, or $2.23, to $61.25. Chevron fell 2.3%, or $2.68, to $114.51.

Moderna rose 21%, or $56.24, to $329.63. Pfizer gained 6.1%, or $3.11. to $54. Netflix and DoorDash, which previously benefited from stay-at-home orders, rose 1.1% and 1.6%, respectively.

The World Health Organization on Friday said the new strain was a “variant of concern.” Rising caseloads of other variants have already led some European countries to tighten rules for transportation, shopping and workplaces.

Many U.S. investors had taken the day off, extending their Thanksgiving holiday. Ms. Bemer said she’d planned on working Friday, though she was staying with relatives for the holiday. “It’s a busier day than we expected,” she said.

The combined trading volume on the New York Stock Exchange and Nasdaq was about 6.9 billion shares. The average Black Friday volume since 2007 has been 2.9 billion shares, according to FactSet.

Oil prices experienced some of the biggest declines. Traders said money managers were rushing to unwind wagers that a mismatch between tight supplies and rising demand would push crude prices toward $100 a barrel. The swoon might encourage the Organization of the Petroleum Exporting Countries and a group of Russia-led allies to pause steps to pump more oil when they meet next week.

“If the announcement is, the vaccine works on this, back up we go,” said Adam Webb, chief investment officer of Blue Creek Capital Management. “If the vaccines don’t work against it, then good night Vienna.”

Money managers said that even if the variant proves more resistant to vaccines than earlier strains, there were reasons to think the economic damage could be contained. MRNA vaccines, such as those manufactured by Pfizer and Moderna, can be quickly updated, and businesses have adapted to containment measures, ensuring that the blow from each lockdown has lessened.

However, elevated inflation could prevent central banks and governments from spraying economies with stimulus in the event of renewed widespread lockdowns...

 

Stocks Close Sharply Lower as Bond Yields Hover Near Three-Month High

I hope my retirement accounts aren't taking a hit, yikes!

At WSJ, "Tech shares pull S&P 500, Nasdaq down more than 2%, while bond yields rally on inflation concerns":

U.S. stocks tumbled Tuesday, logging their sharpest pullback since May, as rising bond yields deepened a rout in shares of technology companies.

For much of the past decade, many investors had piled into shares of fast-growing technology companies, wagering they would deliver relatively robust profit growth even in a sluggish economic environment. This week, that trade hit a roadblock.

With the economy out of the worst of the pandemic-fueled crisis, the Federal Reserve signaled last week that it could start to reverse its pandemic stimulus programs as soon as November and raise interest rates sometime next year. That appears to have prompted an unwind of some of the market’s most enduring trades—pushing Treasury yields to their highest level in months and sending investors out of popular technology stocks.

Investors agree the economic outlook has improved significantly since 2020. But many wonder how well the market will be able to stand on its own once the Fed begins to taper its monthly asset purchases—especially since they credit much of the market’s rebound from its pandemic low to extraordinary levels of monetary and fiscal support from Washington. Some investors have also expressed concerns about the economic outlook. Inflation has made a surprising comeback this year, something some worry will start to cut into companies’ profit margins. The fast-spreading Delta variant of Covid-19 has also complicated economists’ efforts to forecast the global economy’s growth outlook.

“People are realizing, or at least remembering, that central banks are going to have to start raising rates,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “The patient has become used to being given all these drugs, but soon those drugs are going to have to be reduced.”

The S&P 500 fell 90.48 points, or 2%, to 4352.63, marking its second straight day of losses and worst one-day percentage decline since May. The tech-heavy Nasdaq Composite Index slid 423.29 points, or 2.8%, to 14546.68, while the Dow Jones Industrial Average shed 569.38 points, or 1.6%, to 34299.99.

All three major indexes are on course to end the month lower.

Tuesday’s market selloff was broad, pulling all but one of the S&P 500’s sectors down for the day.

Traders yanked money out of the technology sector. Shares of companies like Facebook, Google parent Alphabet and Microsoft, each of which had vastly outperformed the broader market this year, fell more than 3.5% apiece.

Meanwhile, selling pressure accelerated in the government bond market. The yield on the benchmark 10-year Treasury note rose for a sixth consecutive day Tuesday, climbing from 1.482% Monday to 1.534%, its highest level since late June. Bond yields rise as prices fall.

Shares of energy companies avoided the broader selloff...

 

Global Markets Swoon as Worries Mount Over Superpowers' Plans

Well, my investment portfolios are going to take a hit, but they'll swing back, despite what bonehead Biden does.

At NYT, "The S&P 500 closed down 1.7 percent over a number of jitters, like China’s sputtering real estate market and the phasing out of stimulus measures in the United States":

Investors on three continents dumped stocks on Monday, fretting that the governments of the world’s two largest economies — China and the United States — would act in ways that could undercut the nascent global economic recovery.

The Chinese government’s reluctance to step in and save a highly indebted property developer just days before a big interest payment is due signaled to investors that Beijing might break with its longstanding policy of bailing out its homegrown stars.

And in the United States, the globe’s No. 1 economy, investors worried that the Federal Reserve would soon begin cutting back its huge purchases of government bonds, which had helped drive stocks to a series of record highs since the coronavirus pandemic hit.

The sell-off started in Asia and spread to Europe — where exporters to China were slammed — before landing in the United States, where stocks appeared to be heading for their worst performance of the year before a rally at the end of the trading day. The S&P 500 closed down 1.7 percent, its worst daily performance since mid-May, after being down as much as 2.9 percent in the afternoon.

The catalyst for the swoon was the continued turmoil at China Evergrande Group, one of that country’s top three developers of residential properties. The company has an estimated $300 billion in debt, and an interest payment of more than $80 million is due this week.

Analysts said Evergrande’s plight was severe enough that it would be unlikely to survive without Chinese government support. “The question is to what degree are there spillover risks within Chinese equities and then cascading into the global markets,” said John Canavan, lead analyst at Oxford Economics.

Few entities move markets the way the American and Chinese governments can, by their actions and inaction, and the worldwide tumble on Monday made this clear. Until recently, investors seemed content to ignore a variety of issues complicating the recovery — including the emergence of the Delta variant and the supply chain snarls that have bedeviled consumers and manufacturers alike.

But beginning this month, as Evergrande began to teeter and the likelihood of the Fed’s scaling back — or tapering — its bond-buying programs grew, the market’s protective bubble began to deflate. Some U.S. investors are also concerned that tax increases are in the offing — including on share buybacks and corporate profits — to help pay for a spending push by the federal government, the signature piece of which is President Biden’s proposed $3.5 trillion budget bill. Separately, Congress also must act to raise the government’s borrowing limit, a politically charged process that has at times thrown markets for a loop.

On Monday, those currents combined, reflecting the interconnectedness of the global markets as investors everywhere sold their holdings.

The decline was ugliest in Asia, where Evergrande’s woes — its shares fell 10.2 percent — dragged down other Chinese real estate companies’ stocks by 10 percent or more. Markets on the Chinese mainland were closed for the day, but Hong Kong’s Hang Seng index fell 3.3 percent.

For decades, Chinese growth was driven by investment in infrastructure, including the market for residential property, which was financed with huge sums of borrowed money. Banks often lent to developers at the direction of the government, which looked at property building as a source of jobs and economic growth.

“Beijing says lend, so you lend; when or even whether you get your money back is secondary,” wrote analysts with China Beige Book, an economic research firm.

Many lenders therefore viewed companies such as Evergrande as having an implicit guarantee from the government, meaning that if the company couldn’t pay its debts, the government would ensure creditors get repaid...

Pfft.

We should be hammering the Chinese economy: Dump all Chinese listings off U.S. capital markets and retaliate against Chinese currency manipulation, protectionist trade practices, and theft of U.S. technological know-how. And if Xi attacks Taiwan, we should bomb Chinese cities and military-industrial centers and destroy the Chinese navy.

Still more.

Xi Jinping Aims to Rein In Chinese Capitalism, Hew to Mao’s Socialist Vision

Rein in? Yeah, we need to rein in Beijing, the freakin' lyin', cheatin,' heathen rogue regime of the new new world order. 

Jeez, I can't stand China. (Though I'm around Chinese folks all the time in Irvine, and they're just fine; indeed, I see them as hitting the lottery, coming here, getting citizenship, bringing their folks over from the Mandarin prison state; hittin' the lottery indeed.)

At Wall Street Journal, "Going beyond curbing tech giants, he wants the Communist Party to steer flows of money and set tighter limits on profit making":

Xi Jinping’s campaign against private enterprise, it is increasingly clear, is far more ambitious than meets the eye.

The Chinese President is not just trying to rein in a few big tech and other companies and show who is boss in China.

He is trying to roll back China’s decadeslong evolution toward Western-style capitalism and put the country on a different path entirely, a close examination of Mr. Xi’s writings and his discussions with party officials, and interviews with people involved in policy making, show.

For most of the 40 years after Deng Xiaoping first unleashed economic reforms in China, Communist Party leaders gave market forces wider room to flourish. That opening helped lift hundreds of millions of people out of poverty and created trillions of dollars in wealth, but also led to rampant corruption and eroded the ideological basis for continued Communist rule.

In Mr. Xi’s opinion, private capital now has been allowed to run amok, menacing the party’s legitimacy, officials familiar with his priorities say. The Wall Street Journal examination shows he is trying forcefully to get China back to the vision of Mao Zedong, who saw capitalism as a transitory phase on the road to socialism.

Mr. Xi isn’t planning to eradicate market forces, the Journal examination indicates. But he appears to want a state in which the party does more to steer flows of money, sets tighter parameters for entrepreneurs and investors and their ability to make profits, and exercises even more control over the economy than now. In essence, this suggests that he aims to rewrite the rules of business in what could someday be the world’s biggest economy.

“China has entered a new stage of development,” Mr. Xi declared in a speech in January. The goal, he said, is to build China into a “modern socialist power.”

Mr. Xi’s overhaul has generated more than 100 regulatory actions, government directives and policy changes since late last year, according to a Journal tally, including steps aimed at breaking the market dominance of companies such as e-commerce behemoth Alibaba Group Holding Ltd., conglomerate Tencent Holdings Ltd. and ride-sharing leader Didi Global Inc.

The government’s recent measures to tame housing prices are worsening a cash crunch at China Evergrande Group , a heavily indebted real-estate developer, sending chills across global markets. Beijing is unlikely to bail out Evergrande the way it has rescued many state firms, analysts say, and could further tighten the regulatory screws on other private developers.

Mr. Xi has signaled plans to go much further. During a leadership meeting in August, he emphasized a goal of “common prosperity,” which calls for a more equal distribution of wealth. This would be achieved in part through more government intervention in the economy and more steps to get the rich to share the fruits of their success.

An Aug. 29 online commentary circulated by state media called it a “profound revolution” for the country.

“Xi does think he’s moving to a new kind of system that doesn’t exist anywhere in the world,” said Barry Naughton, a China economy expert at the University of California, San Diego. “I call it a government-steered economy.”

A number of countries closely regulate industry, labor and markets, set monetary policy and provide subsidies to help boost their economies. In Mr. Xi’s version, the government would have a level of control that would allow it to steer the economy and industry along a path of its choosing, and channel private resources into strengthening state power.

The big risk for China and Mr. Xi is that the push winds up suppressing much of the entrepreneurial energy that has powered China’s boom and years of innovation.

For foreign businesses, the campaign likely means more turbulence ahead. Western companies have always had to toe the party line in China, but they are increasingly asked to do more, including sharing personal user data and accepting party members as employees. They could be pressed to sacrifice more profits to help Beijing achieve its goals.

“Supervision over foreign capital will be strengthened,” said a person familiar with the thinking at China’s top markets regulator, “so it won’t be able to obtain ultra-high profits in China through monopoly and capital-market operations.”

The Information Office of the State Council, China’s top government body, didn’t respond to questions for this article.

Before this year, Mr. Xi was distrustful of capital, but he had other priorities. Now, having consolidated power, he is putting the whole government behind his plans to make private business serve the state.

A once-in-a-decade leadership transition due for late 2022, when Mr. Xi is expected to break the established system of succession to stay in power, provided an impetus to act and show he is doing something big for the people to justify longer rule, officials involved in policy making say.

At internal meetings, some of them say, Mr. Xi has talked about the need to differentiate China’s economic system. Western capitalism, in his view, focuses too heavily on the single-minded pursuit of profit and individual wealth, while letting big companies grow too powerful, leading to inequality, social injustice and other threats to social stability.

Early this year, when Facebook Inc. and Twitter Inc. took down former U.S. President Donald Trump’s accounts, Mr. Xi saw yet another sign America’s economic system was flawed—it let big business dictate what a political leader should do or say—officials familiar with his views said.

A few months later, when the Chinese Communist party celebrated its centenary on July 1, Mr. Xi donned a Mao suit and stood behind a podium adorned with a hammer and sickle, pledging to stand for the people. After the speech, he sang along with “The Internationale” broadcast across Tiananmen Square. In China, the song, a feature of the socialist movement since the late 1800s, has long symbolized a declaration of war by the working class on capitalism.

Such gestures, once dismissed as political stagecraft, are being taken more seriously by China watchers as it becomes evident Mr. Xi is more ideologically driven than his immediate predecessors.

The difference between his vision and Western-style capitalism, he has said at internal meetings, is that in China, “Capital serves the people.”

Industries that Mr. Xi views as being led astray by a capitalist spirit, including not only tech but also after-school tutoring, digital gaming and entertainment, are bearing the immediate brunt.

A policy aimed at turning private education companies into nonprofit entities all but killed New Oriental Education & Technology Group Inc., which has provided English lessons to generations of students studying abroad. Its shares have plunged about 90% this year.

Founder Yu Minhong, nicknamed “Godfather of English Training” in China, broke into tears during a recent company meeting, according to an employee. “It’s devastating to him, and to all of us,” the employee said.

Mr. Xi’s policy changes have dashed more than $1 trillion in stock-market value and erased over $100 billion of wealth for entrepreneurs such as Alibaba founder Jack Ma and Tencent’s Pony Ma. Private companies and their owners are being encouraged to donate profits and wealth to help with Mr. Xi’s common-prosperity goals. Alibaba alone has pledged the equivalent of $15.5 billion. State-owned companies, having already bulked up under Mr. Xi’s rule, are marching into areas that were pioneered by private firms but are increasingly seen as crucial to national security, such as management of digital data.

A ministry supervising state companies, the State-owned Assets Supervision and Administration Commission, is mapping plans to set up more government-controlled providers of cloud services for data storage, people familiar with the agency’s workings say. Such services have been dominated by private companies, including Alibaba and Tencent.

The city of Tianjin has ordered companies it supervises to migrate data from private-sector cloud platforms to state-owned ones within two months of the expiration of existing contracts, and by September 2022 at the latest, according to an official notice dated Aug. 12. More localities are expected to follow suit, the people say.

Government-controlled entities are acquiring stakes and filling board seats in more companies to make sure they fall in line with the state’s goals. ByteDance Ltd., owner of the video-sharing app TikTok, and Weibo Corp. , which runs Twitter-like microblogging platforms, recently have sold stakes to state-backed companies.

Mr. Xi is fully in charge of the campaign, instead of delegating details to Vice Premier Liu He, his chief economic adviser, as in the past. A central party office reporting directly to Mr. Xi has been sending out directives instructing ministries to take actions and coordinate policies...