Several time bombs are ticking
On 7 December, US President Joe Biden and the Russian president met for a very significant video conversation where both presidents recorded “red lines” that must not be crossed. For Biden, a “red line” would be crossed if Russia actively attacked Ukraine militarily. In addition to the sabre rattling on the Ukrainian border due to Russia’s troop deployment, the stock markets were burdened last week not only by the new virus variant Omikron, but also by the more restrictive behaviour of the FED in the future in the case of further rising inflation rates. However, the sharp drop in oil and gas prices in combination with Russia’s sabre-rattling on the Ukrainian border were more responsible for the slump on the Moscow stock exchange. However, if the situation on the Ukrainian border escalates, this could turn into a black swan not only for the Moscow stock exchange, but for all world stock exchanges.
After all, by the end of November, 11 Eastern European stock exchanges had clearly outperformed the DAX and S&P index. It is regrettable that the Eastern European stock exchanges are still treated very stepmotherly in the media and that even bank advisors hardly have the know-how to give competent advice here. Andres Männicke also gives his assessments of future opportunities in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 192 at www.YouTube.com .
Is there a war in Ukraine or even with Ukraine?
On 7 December, Russian President Vladimir Putin met with US President Joe Biden for the first extensive video conference. Biden made it clear to Putin that he would respond with severe economic sanctions if Russia did indeed attack Ukraine militarily. Putin replied that he never intended to do so. The 2-hour video conference resulted in no rapprochement. The CIA previously issued a warning that Russia was planning a major attack on Ukraine in January or February of next year. The reason was the deployment of over 170,000 soldiers on the Ukrainian border with many tanks. In addition, the Ukrainian President Selinskyi spread the rumour that Putin was planning a coup in Ukraine in cooperation with Ukrainian oligarchs. Both were immediately denied by the Russian side.
A Russian attack on Ukraine would have a high price for Russia
NATO chief Fogh Rasmussen also intervened earlier and warned of a new aggression by Russia similar to the one in Crimea. NATO chief Rasmussen threatened that an attack on Ukraine’s sovereignty would have severe consequences for Russia and would be very costly. Angela Merkel expressed similar sentiments, saying that she would stand by Ukraine in any case, although that would now be the task of the new German Chancellor Olaf Scholz. Russian Foreign Minister Lavrov, on the other hand, spoke of aggressive behaviour by NATO and unnecessary scaremongering on the part of the Russian secret service CIA. Putin warned the West, and NATO in particular, against giving Ukraine too much military support or even jeopardising Russia’s security needs. The USA now wants to release 300 million US dollars for military support for Ukraine from the US arms budget. There are already many military advisers and trainers on Ukrainian soil. None of this, however, serves to bring peace to the region.
Dangerous “red lines
Even before the talks, there were “red lines” on both sides that must not be crossed, which would otherwise have fatal consequences. The situation remains highly explosive. Russia wants a treaty with NATO on eastern enlargement. If this does not happen, Moscow sees a real danger of war in Ukraine. Under no circumstances does Russia want Ukraine to become a NATO member, as NATO could then build missile sites directly on Ukraine’s border, which in turn would directly affect Russia’s security. So there is still a real danger of war if red lines are crossed. However, Joe Biden made it clear to Putin in a video conversation that he would not accept any “red lines”. A possible proxy war in Ukraine could turn into a world war, especially if China attacks Taiwan next year. The USA wants to boycott next year’s Winter Olympics in China, although only diplomats will be affected, not athletes. Australia wants to join in. China was outraged that the USA was “politicising” sport. There is also something politically building up, which is not entirely harmless.
Is the 4th corona wave only serving as a distraction?
Is something like a military confrontation already planned and are the next corona waves only serving as a welcome diversion? After all, it is also about the formation of a new world order in which China and Russia, in addition to the USA, want to have their say. Or is the “Great Reset” being strategically prepared? Ukrainian President Volodymyr Selensky went to the front and said to the soldiers: “We will defeat them all! But he also previously used Turkish drones in violation of the treaty to bomb separatist positions in eastern Ukraine. He is desperate to take back Crimea, but needs American backing to do so One thing should be clear: If there is trouble in Ukraine or Taiwan, there will also be trouble on the stock exchange!
Skilful détente is the order of the day, but can the new chancellor and the new foreign minister do that?
In addition, there was the new (planned?) wave of migration via Belarus to Poland, which Belarusian President Alexander Lukashenko may have initiated on purpose, which is allegedly even supported by Putin. In this context, Belarusian President Lukashenko also repeatedly warns of a third world war provoked by the West. Lukashenko has already threatened not to let the gas flow to Europe if there are further sanctions against him. Putin, however, relented. But if the Nordic pipeline is not certified, this would be a further affront to Russia, which would only increase tensions. The question is whether the new traffic light coalition with Angela Bearbock as foreign minister could then initiate a skilful policy of détente along the lines of Willy Brandt, which is urgently needed to prevent the situation from escalating. Bearbock, however, is not only against the construction of the Northern Pipeline, but also very negative towards Putin. This does not bode well politically for the next year.
Ticking time bombs at the same time for the world stock markets
In addition to a possible escalation on the Ukrainian border, which is unlikely, several time bombs are now ticking simultaneously for the world’s stock markets, such as inflation that rises too sharply in the long term, too strong a tapering by the Fed, the bursting of the real estate bubble in China due to the possible insolvency of Evergrande, a banking crisis and wave of insolvencies in Turkey and a split in Europe. It has been completely forgotten that IS warriors can also become active at inopportune times and plan international terrorist attacks.
Will Omikron pose a threat to the world’s stock markets?
Last week, however, share prices worldwide fell sharply, mainly because the new Corona variant Omikron with the designation B.1.1.529 not only spread quickly in South Africa, but also spread to 30 other countries. In Germany, more than 30 cases of Omikron have already been counted, one of them also in Hamburg. The virus has different symptoms than the delta variant. There is now great concern that the new virus cannot be adequately combated by the old vaccines, which would be a fiasco. The head of the doctors’ association, Frank Ulrich Montgomery, immediately raised fears by asking rhetorically: “Didn’t you hear the shot?”. Unvaccinated people will endure more exclusions and unvaccinated people will no longer be able to fly and will have to accept many restrictions on their freedom” In South Africa, however, there were only 9 deaths on 7 December out of 6371 new people infected with Corona – in Germany there were over 500 on the same day! Isn’t this another sow being chased through the village to spread fear and panic worldwide? And if so, cui bono? Surely this is how it started with the delta variant at the beginning of the year in Germany, which now dominates the infection scene by more than 90 per cent.
Travel and aviation stocks first under pressure, then recovered
Many countries, such as Germany and Great Britain, immediately banned air travel to some African countries, which the WHO did not think was right. Prices on the world’s stock exchanges fell sharply in November. There was and still is a danger of new lockdowns and above all new restrictions on travel. Therefore, primarily the prices of tour operators and airlines plummeted by more than 20 per cent, including the Lufthansa share price, which initially fell from € 7 to € 5.5 and has now recovered to over € 6. After initial indications that the omicron variant was not so dangerous, however, prices also rose strongly again this week, so that there is now again the chance for a small year-end rally with new all-time highs on Wall Street.
Ping Pong on the World Stock Markets and Oil Prices
In November, for example, the German DAX 40 index fell from a new all-time high of over 16,200 index points to a low of 15,100 index points, but has now recovered to over 15,700 index points. On 7 December, the DAX alone rose 2.82 per cent to 15,841 index points and the S&P index rose 2.01 per cent to 4686 index points, which was not far from the all-time high of 4700 index points. Investors immediately went from risk-off mode to risk-in mode from one day to the next, which is hardly understandable. Only cryptocurrencies such as bitcoin could hardly recover after the price slump of more than 20 per cent last weekend. Gold and silver were also in little demand.
Gazprom remains extremely cheap
In contrast, oil prices have already recovered strongly. Since the beginning of December, the price of crude oil has risen from 68 to 75 US dollars per barrel. In November, however, it plummeted brutally from 85 to 68 US dollars/barrel because of the fear of the omicron variant, which particularly affected the Moscow stock exchange. The Russian RTS index plummeted from a high of 1900 to 1600 index points. It has hardly been able to recover because of the continued sabre-rattling on the Ukrainian border and the tensions with the USA. The gas giant Gazprom also fell in price from €9 to €7.5. Gazprom reported very good figures for the 3rd quarter with a record profit of 7.8 billion US dollars. Gazprom is still valued extremely low and pays very high dividends.
Is a general vaccination obligation constitutional and opportune at all?
The new lockdowns in parts of Germany such as Bavaria and Austria, where many people have already taken to the streets to protest against the new general compulsory vaccination and the new lockdowns, are causing a lot of discussion. Retail sales were much weaker than last year in both Austria and Germany. The mood in the economy is also getting worse.
In Austria, a general vaccination obligation is now to be introduced from 1 February, and in Germany this is also being discussed. First, however, a facility-based compulsory vaccination for nursing homes and hospitals is to be introduced in Germany from 15 March. This will divide the population even more and there will be more demonstrations. The side effects, vaccination deaths and vaccination breakthroughs are indeed not insignificant and should allow for a controversial discussion also in the media among experts from both sides. The proportionality and legality of the measures are also still being hotly debated, although the Federal Constitutional Court judged the government’s measures to be in conformity with the constitution on the basis of the situation last year. However, we will all only find out later whether this is also the case with a general obligation to vaccinate, should this be decided in the Bundestag. Because then there will be a wave of lawsuits in any case. Here, the FDP is now also disappointing many voters who were previously strictly against compulsory vaccination, like so many politicians who are now making a 180-degree turn.
Increasing division of society due to 2G and compulsory vaccination in many countries of the world
The only thing that is clear is that a general compulsory vaccination will further increase the division of the population. But the new 2 G regulation, which puts the unvaccinated at a disadvantage, will also lead to this. It is inexplicable that more has not been invested for a long time in the expansion of hospitals, especially intensive care beds, and that despite relatively high vaccination rates, parts of the economy are already being crippled again, at least among vulnerable groups, and dividing society into 2 G and unvaccinated. In the USA, there is also a battle raging over compulsory vaccination, with many police officers in the southern states there not wanting to be vaccinated, which even endangers safety there. France and Italy also have at least compulsory vaccination for their professions, although there were large demonstrations there as well. The demonstrations escalated especially in the Netherlands and Belgium. It will be interesting to see how the whole thing plays out later next year.
11 Eastern European stock exchanges as outperformers
Despite the price losses in November, 11 Eastern European stock exchanges were also able to significantly outperform the DAX this year by the end of November. The KTX index for shares from Kazakhstan even achieved a plus of 85 percent. The price of Kazatomprom, the world’s largest uranium producer, more than doubled. Uranium shares, like oil/gas shares, also went through the roof until mid-November. The Russian RDX index, an artificial product of the Vienna Stock Exchange for Russian GDRs in euros, was already up more than 50 percent, but is now “only” up 37 percent for the reasons mentioned. But also the CECE index (with Poland, Hungary and the Czech Republic in the boat) clearly outperformed the DAX (+14.5%) with a plus of 19.8%, whereby the Pag Stock Exchange is the biggest outperformer here with a plus of over 40%. Among the Baltic countries, the Tallinn Stock Exchange (Estonia) is particularly convincing with a plus of over 50 percent. One more reason to look more intensively at Eastern European shares now, in order to at least be part of the possible year-end rally. As the ex-Soviet President Gorbachev said so well: “Life punishes those who come too late…”.
First inform, then invest
Inform yourself now in detail about the background and the development of the Ukraine/Russia crisis but also about the future recovery potential of the undervalued shares from Eastern Europe. There are also new opportunities in the Baltics, Romania and Ukraine, with the respective stock indices all up in 2019. For example, some Ukrainian agricultural stocks have already more than doubled in price since 2016, and in 2018 the PFTS index was already up over 70 per cent again. Kazakhstan stocks were among the top performers in the world in 2017 (+56 per cent), but not in 2018 and not in 2019, but again in 2020/21.
In 2018, 10 stock markets from Eastern Europe were already among the best-performing stock markets in the world, all of which clearly outperformed the DAX and also the US stock market. In 2019, the Moscow Stock Exchange was once again the clear outperformer among all global stock markets, with a plus of over 46 percent in euro terms. But also the Bucharest Stock Exchange (Romania) already rose by over 32 percent in 2019. The stock markets in Southeast Europe and also in the Baltic countries remained very stable in the plus (Croatia +13 percent). Last year, 6 stock exchanges from Eastern Europe were among the 30 best performing stock markets in the world and this year, until the beginning of December 2021, even 11 stock exchanges from Eastern Europe. So after the Corona crash, it is still worthwhile to look beyond the horizon to Eastern Europe.
Order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock exchange letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Exchange Letter.
The last EST was published on 29 November 2021, and the old EST model portfolios have already made strong gains in 2019. The “Stock of the Month” from December 2019 TCS Group already rose by 200 per cent and the “Stock of the Month” from March 2021 Gazprom already by over 60 per cent. Russian gold shares, on the other hand, fell a little in price due to the fall in the price of gold. Nevertheless, the “gold sample portfolio” has almost doubled in value since the end of 2018. The shares listed there all still have potential as soon as the gold price picks up again. The “dividend pattern portfolio” with Gazprom and Kazatomprom in the boat has already risen by 70 percent since the end of 2018.
The relatively new December 2019 portfolio with turnaround candidates rose by 40 per cent. The December 2020 “Stock of the Month” TCS Group – a fast-growing fintech bank from Russia – already rose over 230 per cent in 11 months. In Kazakhstan, the new IPO Kaspi.kz, a fast-growing fintech company from Kazakhstan, which was extensively featured in EST in April, is making a splash. The share has already risen by 68 percent since then. The motto therefore remains: Go East!
Interview notes: The last TV interview by Andreas Männicke on Welt TV was on 14 October 2021 and the last radio interview was on 19.10.21 on Börsen Radio Networks. The next interview will be in February 2022 on Börsen Radio Networks. You can download the interviews now at www.eaststock.de, there under the heading “Interviews”, as well as the EastStockTV video of the same name, episode 192. By the way: have you already subscribed to the EastStockTV YouTube channel?
You can also order Andreas Männicke’s free newsletter with the latest news on the world and eastern stock markets at www.eaststock.de .