Russia/Ukraine 2022-Present
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Product prices, especially diesel, stayed higher as global refinery capacity has been significantly reduced.
A widening war in the Middle East (and/or Russia/Ukraine), combined with lower reserves, could see crude and products trade above this year’s highs. Ukrainian attacks on Russian refineries have caused Russia to stop exporting diesel and gasoline, leaving Europe short on transportation fuels in addition to being short of natural gas supplies due to SOH closures. As Doomberg writes in his July 31 post, “It could be a doozy of a 2026-2027 winter for Europe.”
The equity indices have experienced heightened short-term volatility tied to “wild” VOL in the tech sector, yet stocks seem oblivious to the Iran war and bond yields rising to 20-year highs. If the Yen really has made a low and starts to work higher, that will impact global carry trades and may shake the Jenga tower of leverage that has fuelled the bull market in risk assets. If the Iran war and the Russian/Ukraine war continue to grind on, let alone widen, energy price increases will put additional pressure on risk assets.
I started this week with no positions held over from last week. I shorted the S&P on Monday and Tuesday and was stopped each time for slight losses, and I missed Wednesday’s big break. I shorted OTM bond puts on Thursday after the long bond fell about 2 full points on Wednesday/Thursday, but covered the position on Friday for a slight loss as bonds continued lower. I was flat at the end of the week.
The hit to my P&L this week was less than 1%, and my losses in July were only a little more than that, but I have been in a “slump” in July as I try to navigate these volatile markets.
I should mention that I “grumbled” on Thursday morning when I saw the Yen nearly 200 points higher after I had covered the last of my long Yen positions last week. When you’re cold, nothing works.
Here’s a quote from my Substack Notes in reply to a question about my trading process (The question is below my answer).
Barney will be five years old next month. He weighs ~80 pounds and is truly a happy dog, but he’s learned how to get my attention by wimpering. I tell him that’s for baby dogs, not for Big Dogs like him, but he keeps doing it, probably because Papa keeps responding. Who’s teaching who? Here he is, striking a pose outside our front door.
On this week’s Moneytalks show, Mike and I discussed the blow-up of the Situational Awareness hedge fund, the wicked short-term VOL in the equity markets, bond yields surging to 20-year highs and the intervention in the Japanese Yen. You can listen to the entire show here. My spot with Mike starts around the 51-minute mark.
The Archive Readers can access any of the weekly Trading Desk Notes from the past six years by clicking here.
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Victor Adair retired from the Canadian brokerage business in 2020 after 44 years and is no longer licensed to provide investment advice. Nothing on this website is investment advice for anyone about anything.
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