RUSSIA = BUY BUY BUY

After the long holiday weekend markets have reopened.

We received numerous messages, emails, and even calls during the weekend asking us what the play is given the standoff between Russia and the U.S.

The simple and concise answer is SUPPORT THE WINNER. Russia is winning and will CONTINUE TO WIN. We are not referring to all-out conflict and war, but rather to the geopolitical field, which eventually trickles down to the economic sectors.

Biden can impose further sanctions or decide to back down. Further sanctions will lead to higher domestic U.S. inflation and a detrimental outcome come November elections. In either scenario, Russia comes out ahead. How come?

Well, we handle investments in numerous sectors, but our forte has always been natural resources and energy. Who supplies the majority of the commodities and energy the world heavily depends on? Russia.

The top exports of Russia are Crude Petroleum ($123B), Refined Petroleum ($66.2B), Petroleum Gas ($26.3B), Coal Briquettes ($17.6B), and they are the world's biggest exporter of Wheat ($8.14B), Semi-Finished Iron ($6.99B), Coal Tar Oil ($4.49B), Raw Nickel ($4.03B), and Nitrogenous Fertilizers ($3.05B).

Sanctions have already created downward pressure on the Russian Ruble. The chart on the cover image represents a 5% drop in just the last 5 days. Moreover, if you consider the depreciation since end of October, the depreciation comes to more than 15%.

Mineral and energy commodities are quoted in USD (whether Russia or China complain) but the production costs are always local. The production costs in Rubles will naturally equate to higher margins, especially since they will be multiplied by a price increase (inflation and supply pressure) combined with a favorable USD/RUB exchange rate.

What is the play? It would be risky to invest in single companies as they could be on the specific receiving end of U.S. Sanctions. There are a limited number of Russia Focused ETFs, but our two favorites are the iShares MSCI Russia ETF (ERUS) and the VanEck Russia ETF (RSX), both are down almost 31% YTD. You can also dabble with Direxion Daily Russia Bull 2x Shares (RUSL), down 52% YTD, but then it is a much smaller ETF with only 58 $MM in total assets.

Think about it-- the "bet" is either "Against Biden" or in "Favor of Putin". It is the same outcome, but with a different perspective.