Posts by: sowallah

Sep 052014 0 Responses

Insight into Russia’s Intervention in Ukraine

Sam Wilkin, Head of Business Research at Oxford Economics and a professional public speaker on global political and economic outlook, wrote an article with an interesting insight into the activity in Russia. I found his view particularly intriguing because he presents a contrarian view arguing Russia’s involvement in the Ukraine does not depict Russia’s power and strength but instead shows their weakness.

Intervention in Ukraine reflects Russia’s weakness, not strength


By Sam Wilkin

Following Russia’s de facto ‘invasion’ of Crimea there has been a great deal of navel-gazing commentary regarding the “weakness” of the West. Some say the EU is impotent; others say the US lost Ukraine; others that the Obama administration is weak.

These comments reflect an astonishing lack of even short-term memory.

The most obvious point first: it is not the US or EU that has lost Ukraine, it is Russia. Until protesters toppled Ukraine’s government, the contest for Ukraine was in the main a soft-power contest. The EU offered Ukraine a trade agreement (a Deep and Comprehensive Free Trade Area, DCFTA, in the jargon); Russia offered a Customs Union as an alternative. (Admittedly, Russia’s approach was not 100% soft, as the Customs Union offer was coupled with threats of goods embargoes and energy price hikes.)

Until recently, it appeared that Russia had won. The Customs Union was indeed an attractive package. Signing it would probably have been economically beneficial for Ukraine (although, over the long term, the EU deal would have been much better). Yet Ukrainian premier Yanukovych, after a good deal of wavering, announced that he would sign the Russian deal. Perhaps his oligarch backers (reportedly including men such as Rinat Akhmetov, Dmitry Firtash, and Andriy Klyuyev) feared the legal and governance reforms that would accompany the EU deal. Perhaps Russia’s economic threats and bailout offer were persuasive given Ukraine’s precarious economic position.

That moment, in early 2014, when Yanukovych sided with Russia, was the high point of Putin’s success. But then Ukraine’s (relatively small) middle-class rose up in the “Euromaidan” people power protest movement that toppled the government.

And thus in a few short months Russia’s success turned into failure. This was by no means a foregone conclusion. But the final calculation is inescapable. Without offering bailouts, without making economic threats, and without military power in play, the EU had trumped Russia’s offer. This is a stunning verdict on the limits of Russian power in its own backyard, as well as a striking illustration of how effective soft power can be.

Russia’s military intervention in Crimea is not some brilliant counterstroke – it is a desperate gambit that makes this failure permanent. Putin might have hoped, in months to come, to win back Ukraine via subterfuge or further economic incentives. A new government is due to be elected, and pro-Russian candidates (such as Yanukovych) have won free and fair national elections in Ukraine before.

This is now off the table. Any soft power Russia had in Ukraine has been thoroughly destroyed. Ukraine’s oligarchs, including Rinat Akhmetov, the country’s richest man, have lined up to denounce Russia, and some are taking positions in the country’s transitional administration (including in relatively pro-Russian Donetsk). The only way Russia might regain Ukraine now is via outright military conquest of the country as a whole, which is profoundly unlikely as it would be bloody.

Indeed, just how humiliating a loss this is for Russia is worth contemplating. The games in Sochi were intended to demonstrate Russia’s burgeoning resource wealth and its resurgent state power. And yet, with only days elapsed, Russia has sacrificed all of this, and any international goodwill, in a desperate bid to hold Ukraine.

So why did Putin decide to take this option?

The best-case scenario for Russia at this point is to retain influence in Crimea (presumably by having the region elect to break off from Ukraine, and perhaps join Russia’s Customs Union). But this is by no means a foregone conclusion. While the majority-ethnic-Russian population of Crimea seems, on balance, to back Russia’s action, or at least to have acquiesced, unrest is possible and would be difficult to manage. The international community is rallying against Russia, and Western Ukraine will do all it can to foil this initiative.

It is, in sum, a high-risk gamble. That Putin has taken this tactic certainly suggests how deeply and personally humiliating it is for him to have lost Ukraine, and sacrificed any goodwill from Sochi, so soon after the Olympics. His best hope is, by engineering an independent Crimea, to turn the loss of Ukraine into a partial win.

It is, in short, the kind of gamble that reflects Russia’s weakness, not its strength.

This article was posted on Sam Wilkin’s blog ( on March 4, 2014.

Nov 252013 0 Responses

Ray Dalio Interview and ICMC Market Outlook

Ray Dalio is one of the most successful and respected hedge fund managers in the world, having built his hedge fund company, Bridgewater Associates, into the largest hedge fund in the world with over $150 billion in assets under management. He is often credited with forecasting market events, including the 2008 credit crisis, and known for his deep understanding of how the “Economic Machine” works, having written an essay under that title in 2008. Recently Mr. Dalio gave an interview at the New York Times DealBook Conference in which he shared his thoughts on the current state of economy and investment markets. Below are some remarks from this interview, as well as his most recent letter to investors.

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Oct 232013 0 Responses

High Yield Investing

At ICMC we invest across the entire spectrum of investment opportunities. For practical purposes we group all investments into 10 different asset classes: US Equities, International Equities, US Fixed Income, International Fixed Income, Cash, Hedge Funds, Private Equity, Real Estate, Natural Resources and High Yield. Given the current fixed income environment, the High Yield asset class plays an ever increasingly important role in our clients’ portfolios.

Generating yield can be one of the most important considerations of an investment allocation as it not only provides income to a portfolio but also can contribute meaningfully to portfolio diversification. From 2009 through 2012 the “traditional” high yield investment markets (i.e. junk bonds) performed well as risk of the private sector was absorbed by the government through stimulus and quantitative easing programs. In that time income Investors were able to enjoy equity like total returns with a good margin of safetyin several high yield assets including Corporate Bonds, REITs, MLPs, Bank Loans, Mortgage Back Securities, and High Yielding Stocks (see table below).

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