The Ukrainian Tipping Point
The Ukrainian Tipping Point
One of the nice things about these articles is we don’t always agree. On this week’s Truth or Skepticism, Dylan argued the market, as evidenced by the level of volatility futures, is not overly concerned about the geopolitical situation with Russia. On the other hand, Josh sees a greater threat emerging.
Josh: I don’t think this is just about Ukraine. Putin isn’t an idiot. He’s explicitly stated the collapse of the USSR was the greatest mistake in history. He would not be making a move like this without tacit approval, or at least no objection, from China.
China isn’t imposing sanctions on Russia and they won’t. In fact, I think China is likely to move on Taiwan at the same time Russia is on the march in Eastern Europe. This is an attempt to divide the global economy into three main spheres of influence amongst China, Russia and the U.S, with a weakened Europe playing a smaller role. It will weaken U.S. power globally, a stated objective of both Russia and China.
Dylan: Objectively looking at the markets and volatility in particular, I just don’t see it. Volatility futures are not even half as high as they were at the onset of Covid. You’re talking about a massive disruption of the global economy. In fact, not just massive, but a sustained paradigm shift. If what you’re suggesting is correct, and I’m not saying you’re wrong, but if you are right, wouldn’t you expect VIX futures much higher?
Josh: The thing about Covid was, it was so fast and unlike anything we’ve seen. That’s why you saw the spike in volatility to such an extreme. Instead of saying vol hasn’t spiked to Covid levels, I would argue vol over-spiked at the onset of Covid and the subsequent rally we saw in the market attests to that.
I think the fundamental problem right now is everyone trying to dissect what Putin is thinking vis-a-vis Ukraine and missing the bigger picture. There are already reports of increased fighter jets flying over Taiwan. Both Russia and China are making a calculated gamble that we will not militarily defend both Eastern Europe and Taiwan. The American public is done with wars. And economically, a strong Russia and strong China put Europe in a precarious position. Europe is dependent on China for technology and, call it USSR 2.0, for energy. I’ll take the Russian/China team over Europe in an economic battle.
Dylan: Again though, as we’re talking it’s Thursday morning and Nasdaq futures just went positive. The Russel is about to do the same and the S&P is off just 1%. You’re an efficient market theorist, or at least I believe you are. The juxtaposition of that and what you’re suggesting with the geopolitical situation are completely at odds.
Josh: Hey, I could be wrong. I’m 48 and still have yet to crack the nut on walking so take my opinion for what it’s worth. But I’m looking at VIX futures and while the market has come back this morning, those are still up 7%. Either this rally we’re seeing doesn’t hold or I would expect vol futures to fall. And let me be clear, I hope I’m wrong. I just don’t think I am.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.