The War’s Not Over

  • Despite Ukraine’s recent gains, a military solution to the conflict is unlikely. Both sides will eventually seek negotiations. For Putin, for survival; for Ukraine, under Western pressure.
  • Regardless of the outcome of the war, Europe’s energy supply will be forever changed. LNG will be one of the winners.
  • Cheniere Energy (LNG) and Excelerate (EE) may benefit in the long term and even in the short term if a harsh European winter occurs.
  • Peloton continues to make changes for the better. John Foley, their past CEO and Founder, has left the scene, the final ghost of Peloton Past.
  • And finally, why you should care about the Queen.

The Ukraine War shifted into high gear over the weekend and there is no consensus how it might ultimately play out. My Trader Spidey Senses tell me that Putin is a gambler who will push all his chips into the center of the table. Recover, gain some ground back, and then declare victory and negotiate a cease fire. Basically, a land for energy swap. For Putin, he will silence his critics and remain in power (the ultimate goal of any dictator). And for the Europeans who finally figured out that they could be facing a cold, dark winter, getting their energy back would be a great deal.

All this will take time and assumes that everybody is rational, a questionable assumption. The process will be punctuated by gains and losses on both sides and, if things get very bad for the Russians, some scary threats, including the use of tactical nukes to even the score. To avoid getting even near this, and if the military situation continues to deteriorate for the Russians, the Western powers will encourage the Ukrainians to “Let ’em up easy,” as Abraham Lincoln famously counseled.

My conclusion: despite the latest developments, a military solution is unlikely. The Ukrainians are not going to win, and the Russians are not going to lose. Negotiations will steer to the middle course, albeit slowly and fitfully.

In the meantime, Putin will use every trick in the book to get the Western powers to exert pressure on the Ukrainians to force them to negotiate. The worse the energy crisis gets this winter, the better for him, and that’s contingent upon the price of natural gas in Europe.

Regardless of the outcome of the war, Europe will need to diversify its energy suppliers away from Russia. That’s good news, in the short and long term, for US LNG producers and infrastructure suppliers. I’ve written about Cheniere Energy (LNG) before, but this week I’m adding Excelerate Energy (EE), an LNG services provider with the world’s largest fleet of floating regassification units. If you believe that the European energy situation will never be the same, both of these stocks could be good long-term plays. In the short term, a harsh European winter could propel both to new highs.

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As usual, Cheniere’s implied volatility remains rangebound and should not be a factor.

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Peloton: Some New Developments

Peloton continues to clean house with the departure (finally!) of the ex-CEO and Founder, John Foley. Barry McCarthy, the new President and CEO, is now fully in charge without any past PTON ghosts haunting him. As I’ve written in the past, PTON is essentially a digital play: either the changes will succeed and it will rally, or they will not, and a buyer will step in at lower valuations.

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The Queen: The Most Successful CEO of All Time?

Finally, I would be remiss if I didn’t mention the passing of the Queen. Whatever your opinion of the institution, she represented the monarchy faultlessly for 70 years. She was one of the last remaining links to the 19th century — her great grandmother was Queen Victoria! But most important for a financial blog, she was perhaps the greatest CEO of all time. The monarchy is the oldest business in the world and stretches back at least 1000 years. As head, Queen Elizabeth steered it through numerous crisis, great and small, but most importantly, kept it going for 70 years despite a very outdated product line and the dissolution of the British empire. Name another CEO that could even approach that track record!