Is there a Russian False Flag Operation being undertaken?
Definition: A false flag operation is an act committed with the intent of disguising the actual source of responsibility and pinning blame on another party.
As anybody who has been following the news would be aware, there has been an interesting development in Europe. Russia has begun amassing troops on the Ukrainian border, and today even took their actions one step further by launching a cyberattack on them. Obviously, all-out war is far from assured, there is the risk of something not so pleasant occurring.
Ukraine are currently fearing the possibility of a false flag operation, where Putin would utilise this to create goodwill at home along with having a justification for war. Obviously, the rest of the world wouldn't buy it, however, this really doesn't matter if bullets are flying.
I honestly am unsure as to how a modern and sophisticated false flag operation would work, but the use of highly trained operatives running a guerrilla war would be likely. In this chaos the full force of the massed troops would come crashing down upon Ukraine.
Now, we are on LeoFinance, so I will now switch from making geopolitical assumptions to financial ones. Just how would the markets react to a Russian invasion of Ukraine? In line with these reactions, how might one capitalise on this?
My first prediction is that the stock market will fall, especially in the European centres. This is no great insight and anybody would likely come to the same conclusion based off the evidence.
My second main prediction is that the Euro will fall dramatically. With the invasion by Russia, the very integrity of the EU will be severely rattled, and it seems likely that the markets will take flight from here. This will also mean that some other currency will likely strengthen, and I can't see it being the USD due to their entanglement with the matter too. This leads to my hypothesis that an invasion of Ukraine would lead to an increase in cryptocurrency prices, simply as every other currency is far too risky.
The third massive financial shift I see occurring is in the world of natural gas. This is an area far too volatile to make a prediction with any sense of honesty. Russia has been threatened with massive financial sanctions if they invade Ukraine, however, they can simply cut off the EU's gas supply. It would then become a game of chicken where the winner is the nation with the strongest public will.
So how exactly are you supposed to create an investment strategy for this? I would follow Nassim Taleb's strategy and focus on many small bets with outsized potential returns. The invasion isn't really a black swan event, as far too many people are aware of it, but many instruments would still be quite cheap.
I would buy far-out-of-the-money-puts on the stock indexes of the major financial centres. The closer to Ukraine the better. These would only be a tiny percentage of my portfolio, yet if there is an invasion, the return would be immense. Secondly, I would buy options on several futures, focusing heavily on wheat, oil and gas. These three commodities are likely to experience the greatest volatility. Again, these options are far out of the money and a small percentage of the overall portfolio. No bets can be allowed to lose the house, but they should allow you to upgrade to a mansion if successful.
Keeping with the theme of options, I would also buy puts on the Euro. Honestly, I feel like Russia isn't necessary for the eventual collapse of the EU, but they sure could be a strong catalyst. With regards to crypto, this potential invasion isn't a reason to buy more of it, there are plenty of other ones that I need not explain here.
I would rather peace any day of the weak compared to any profit from this strategy, but if worst comes to worst, there is no point in just letting the opportunity slide.
This is not financial advice, just one man's simple opinion. Any losses caused by following this strategy is not my problem. As always DYOR