Sunday 1 January 2023

How is my war profiteering going?

The Russo-Ukraine war was one of the 'black swan' events of 2022. It has cost me about $1K (in donations to charities providing humanitarian aid to Ukraine), but as war has historically been an 'investment opportunity' (the Rothschilds made a killing when Wellington won at the battle of Waterloo - but introduces an obvious ethical dilemma. I decided to have a small 'punt' on guessing how the war would impact some asset classes - particularly agricultural products exposed to Ukraine and Russia disruptions (Corn and Wheat), the general negative impact on global markets (via the QQQ - the Nasdaq-100 index), and the industrial-military complex of 'the West' gearing up to cater to the support being provided to Ukraine (I chose the iShares US Aerospace and Defence ETF - ITA).

I initially also punted on a boost in the price of oil, but the slowing global economy due to interest rate hikes aimed at fighting inflation overwhelmed any positive impact due to supply disruptions, so I closed out that position as it was too uncertain.

I ended up with a small investment (via my Superhero trading account) that has done quite well during the past 6 months. Especially in terms of volatility and also overall performance compared to the general stock market:

At some time in 2023 I'll probably close out the short position (SQQQ) and probably open a long position in the S&P 500 if it looks like the current cycle of interest rate hikes has ended if inflation continues to moderate in the US, and the prospects of a global recession (mild or severe) become clearer as 2023 unfold.

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