Markets Ablaze, Ukraine Invasion, Neon Nightmare, What If? Gold and Silver

A stiff wind blew in, drowned by glaring alarm

From north, from south, and especially from east

A barren branch reaching out like a wounded arm

The leaf hangs all by itself

There's still time, the outsiders said

Time has passed, now only dread

Where children on a another day would play

Where birds on a another day would sing

Where the sun on another day would shine

Dawn

Mothers weep

Fathers wonder

Youth ebbs

Light grows dark

One single leaf loses

Its grip

On a barren branch on a barren tree

That stood alone

On the very worst day

"The Leaf"

Special Military Operation

On Wednesday night on the East Coast, Bloomberg News reported that Russian news agency TASS had reported the Kremlin had responded to two letters appealing for help from the two separatist regions of eastern Ukraine with a "special military operation." Oil prices jumped immediately. Precious metals ran higher. European equities sold off with U.S. equity index futures. Investors poured into the perceived safety of U.S. Treasury securities, and the U.S. dollar, while running away from Russian markets and cryptocurrencies.

From what I can tell, as the zero hours pass, and news comes in from everywhere, Russian forces have invaded Ukrainian territory from the east, from the north via Belarus, from the south via both Crimea and amphibious assault. Explosions have been heard in a number of Ukrainian cities as Ukrainian authorities, according to the Financial Times, report columns of Russian tanks and armored vehicles driving into the country.

Russian President Vladimir Putin... "I decided to conduct a special military operation. Its goal is the protection of people who over the past eight years have suffered abuse and genocide from the Kyiv regime. We urge you to lay down arms immediately and go home. I will explain. All servicemen of the Ukrainian army who comply with this requirement can freely leave the area of military actions and return to their families. Whoever, would try to stop us, and furthermore, create threats to our country, our people, should know that Russia's response will be immediate and lead you to such consequences as you have never faced in your history."

Ukrainian President Volodymer Zelensky... "Today, we need each of you to be calm. If possible, stay at home, please. We are working. The army is working. Don't panic. We are strong. We are ready for everything and we will defeat everyone because we are Ukraine. Glory to Ukraine."

NATO Secretary General Jens Stoltenberg... "I call on Russia to cease its military action immediately and respect Ukraine's sovereignty and territorial integrity. NATO allies will meet to address the consequences of Russia's aggressive actions. We stand with the people of Ukraine at this terrible time. NATO will do all it takes to protect and defend all allies."

Reports from abroad suggest that Putin and Belarusian leader Alexander Lukashenko spoke about an hour prior to Putin's announcement launching the military campaign. In all likelihood, if forces are moving down from Belarus, the capital city would be a target and regime change at a minimum, or outright control at most could be objectives. To that point, Putin has expressed a desire to avoid occupying Ukrainian ground. Then again, Putin also said that Russia had no intention to invade in the first place.

Strategically Problematic

While placing sanctions on Nord Stream 2 and making attempts to cripple Russia's ability to finance both its economy and war effort through the sale of fossil fuel commodities seems obvious, there is a potentially greater problem.

Roughly 90% of the global supply of neon comes from Ukraine and Russia. Neon is used as laser gas for chip lithography. In short, we need it to make semiconductor chips. Surely, Putin has figured this out. About two-thirds of this neon is purified for the entire planet by one company in Odessa (which is on the Black Sea in Ukraine). The U.S. and the West are in fact more dependent than most understand on either Ukrainian or Russian suppliers where as not just neon, but also palladium, scandium, C4F6 gas and even titanium are concerned.

There is significant reason to believe that NATO and U.S. forces will be forced to draw closer to various points of contact than any of us would be comfortable with. It's not like the U.S. Navy can move assets into the Black Sea, and close to Odessa, without drawing enemy fire if amphibious operations are already underway in the area.

Thought the semiconductor shortage had already been severe? That's where the cards currently lie.

Markets Ablaze

U.S. equity markets opened higher on Wednesday morning. After that, it was all downhill literally. On Wednesday morning, I wrote to you that I could not call the end of the attempted restoration of the bull market that began with the sharp intraday upside reversal of Jan. 24, until that low was broken to the downside.

Well, that didn't take long. The Nasdaq Composite closed at 13,037, -2.57% for the session, down 16.67% year to date, and 19.6% off of its November high. The index has now broken the low of the day for Jan. 24.

The Dow Jones Industrials also closed below that crucial spot on Wednesday, as did the Nasdaq 100...

The S&P 500 closed at 4,225, -1.84% for the day, down 8.82% year to date, and 12.3% off of the early January high. That's now well into correction territory with futures markets pointed decisively lower. The low of the day for the S&P 500 on Jan. 24 was 4,222, so "officially" our market's broadest large-cap index will have to wait for the opening bell at 11 Wall Street on Thursday morning to technically end the bull's attempt to rally the markets from that point on.

I don't have to tell you how bullish this all is. The bright spots for market watchers would be that the FOMC will obviously have to traverse a much more severe economic minefield at this point. Though U.S. suppliers might be able to make up for Soviet production of crude and natural gas, there will almost certainly be a new and impactful global inflationary force placed upon post-pandemic developed economies.

The Fed can't fix scarcity. I have told you that before. All they can do is to reduce demand through intentionally slowing economic activity. Now add the probability of a shortage of semiconductor chip production much more severe than previously anticipated as a new threat.

What If?

Beijing, post-Winter Olympics, makes use of this eastern European "distraction" to increase their ongoing military harassment of Taiwan?

Buy

Gold and silver, preferably the physical. Yes, it's late.

Economics (All Times Eastern)

08:30 - GDP (Q4-rev):Flashed 6.9% q/q SAAR.

08:30 - Initial Jobless Claims (Weekly):Expecting 233K, Last 248K.

08:30 - Continuing Claims (Weekly):Last 1.593M.

10:00 - New Home Sales (Jan):Expecting 803K, Last 811K SAAR.

10:30 - Natural Gas Inventories (Weekly):Last -137B cf.

10:30 - Oil Inventories (Weekly):Last +1.121M.

10:30 - Gasoline Stocks (Weekly):Last -1.1331M.

11:00 - Kansas City Fed Manufacturing Index (Feb):Last 20.

The Fed (All Times Eastern)

11:00 - Speaker: Richmond Fed Pres. Tom Barkin.

11:10 - Speaker: Atlanta Fed Pres. Raphael Bostic.

12:00 - Speaker: Cleveland Fed Pres. Loretta Mester.

11:00 - Speaker: Richmond Fed Pres. Tom Barkin.

20:00 - Speaker: Reserve Board Gov. Christopher Waller.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (AMT) (2.30), (DISCA) (0.85), (KDP) (0.45), (MRNA) (9.81), (W) (-0.70)

After the Close: (BYND) (-0.68), (SQ) (0.22), (ETSY) (0.98), (VMW) (1.97), (ZS) (0.11)

At the time of publication, Guilfoyle was long ZS equity.