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May
04
2022

Overturning Roe v. Wade May Prevent World War III
Portfolio Armor

A Glide Path To World War III

In recent weeks, the United States has been on what's essentially a glide path to World War III. In my previous post on the Ukraine War, I wrote that it was a proxy war between the U.S. and Russia. That's no longer a fringe view: The New Yorker is now calling it a proxy war too. 

In the same post, I noted that the U.S. had so far given Ukraine $3.8 billion in military aid. 

To put that in concrete terms, below is a list of actual equipment given to Ukraine so far (presumably, this doesn't count Biden's latest $800 million installment announced on Thursday).

Since then, Congress passed a lend-lease bill for Ukraine by a vote of 417-10, and President Biden has called for an additional $33 billion in aid for Ukraine. 

Relentless Pro-War Propaganda 

Meanwhile the level of pro-war propaganda has been relentless. One perennial element of war propaganda is the dehumanization of the proposed enemy. Here is the co-chair of European Council of Foreign Relations sharing an artwork that depicts Russian soldiers as orcs. 

At the same time, billboards agitating for further intervention in the Ukraine war have sprouted up in the West. On a highway near my home there's one calling for a no-fly zone over Ukraine. Michael Tracey attempted to determine who paid for the billboards he saw in London and elsewhere and was stonewalled in his investigation. 

In his post, Tracey connected the dots between the aggressive propaganda campaign and increasingly bellicose statements by elected officials: 

Because bear in mind that these government-crafted ads have flooded London, NYC, Washington DC, etc. at the same time as Ukraine officials are furiously lobbying the UK and US governments to ramp up their military involvement in the war. Those lobbying efforts have been incredibly successful, with Respectable Mainstream outfits like The New Yorker finally now admitting that the scale of the US commitment constitutes “a full proxy war with Russia.” (Not so long ago, I was attacked as a peddler of “Putin’s talking points” for using the term “proxy war” on TV.)

It went largely unremarked upon when the head of the Pentagon, flanked by the head of the State Department, transited into Kiev for a secret mission on April 25 — and then hours later, a series of giant explosions ripped through a Russian military logistics hub approximately 90 miles inside Russia. This after US officials began leaking that they would no longer even pretend to recognize any distinction between “defensive” and “offensive” combat operations conducted by the Ukraine military — effectively acknowledging their willingness to provide both weaponry and real-time intelligence to launch attacks on Russia itself.

In the UK, the Armed Services Secretary, James Heappey, followed this up by declaring that it would be “entirely legitimate” for arms delivered by “Western countries” to be used for offensive strikes within Russian territory. Foreign Secretary Liz Truss then went further than even any US official when she declared that total “victory” in Ukraine must also include driving Russia out of Crimea, raising the stakes higher still.

Which each passing week, both these countries adopt a more and more aggressive, bombastic war footing.

"A More Aggressive, Bombastic War Footing"

Consistent with Tracey's observation, we've had Germany's foreign minister make maximalist demands about Crimea, 

Despite Russia experts pointing out that Russia considers Crimea integral to its nation: 

Similarly, in the U.S., we've had one Congressman call for victory over Russia, not just a return to the status quo ante, 

And another Congressman introduce a de facto declaration of war against Russia:

That's a de facto declaration of war because, if it passes, the Ukraine government will almost certainly claim Russia used chemical or biological weapons, no one will bother verifying the claim, and we'll have U.S. troops openly fighting Russia. 

A Social Contagion 

Oxford defines "social contagion" as "The spread of ideas, attitudes, or behavior patterns in a group through imitation and conformity". In the past, teenage girls have been particularly susceptible to social contagion,

But the spread of social media may have made all of us more susceptible to it, as the meme below suggests. 

What made me think of the link between the social contagion of anorexia and the current zeal for war with Russia was seeing the eminent psychologist James Thompson share a tweet by BBC presenter John Simpson downplaying the risk of nuclear war with Russia: 

Thompson has experience treating anorexics, so, to his credit, he didn't dismiss my suggestion out of hand. 

Enter The Alito Leak

On Monday, a highly irregular leak of a U.S. Supreme Court opinion drafted by Samuel Alito revealed that the Court is about to overturn the Roe versus Wade decision that made abortion legal nationwide (it had been legal in a number of liberal states before Roe). On the surface, this would appear to have nothing to do with the prospect of war with Russia over Ukraine, but in practice it may end up saving us from World War III by derailing the pro-war social contagion, as the updated meme below suggests. 

If arguing about abortion--and legislative responses to the pending SCOTUS decision--becomes the new Current Thing in America, it will give Congressmen such as the ones quoted above a higher priority than fomenting a direct war with Russia. 

Not Out of the Woods Yet

If we manage to avoid nuclear war, that will be a huge relief to those of use who live in metropolitan areas likely to be the targets of ICBMs: it will mean we won't be vaporized in the near future. We will again have a long term to invest for, but as investors we will still face headwinds due to the war in Ukraine, and the sanctions in response to it: inflation, shortages, and impending recessions. That raises the question of where one might put money to work now in light of that gloom. Below is an answer. 

Let's say you have $50,000 to invest now, but you don't want to risk losing more than 20% in a worst case scenario. On Monday, our system might have presented this portfolio to you, which is essentially a hedged bet on natural gas and corn getting more expensive, and European and emerging market stocks getting cheaper over the next six months. 

If each of these securities goes sideways for the next six months, you'll be up 12.77% from the net credits from the optimal collar hedges. If each of them tanks, you'll be down no more than 19.89% over the next six months. If each generates a positive return, our ballpark estimate for the return of the portfolio is about 15% in six months. 

Hopefully, by then there will be an armistice in Ukraine and the prospect of World War III will have further receded. 

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Portfolio Armor was developed and is operated by Launching Innovation, LLC. David Pinsen founded Launching Innovation, LLC, to bring together developers, designers, and academic finance experts to create easy-to-use tools to solve complex problems for investors.

 

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