'Demand Destruction'  remains a key to inflation; the Fed's slightly scripted policies; and even the prospects to see humanity (not just Ukraine) prevail in this horrid war.. that overrides almost all other economic considerations too.

This is not about the latest 'Jobs' increase; though given inflation's pace, that actually is a plus to slightly enable people to cope with rising prices. Obviously inflation impacts everyone, but proportionately more to those dependent upon Oil & Gas for heating, for transportation, and well. .. for most everything.

Want a clue to what will motivate Putin to reassess? How about either or both: the Iran Nuclear Deal gets done; and the U.S. removes Venezuelan sanctions on Oil sales to the USA. Pipelines; new drilling and so on take longer; release of the 9 Chevron guys detained in Caracas takes 5 minutes. Quid-pro-quo? It isn't that I'm in-favor of either; but suggest these would be hints of 'reversion'.

It won't be alternative energy; or anything that takes long that would cause the Bear to stop poking. And it even takes about 2 weeks from opening the SPR, to the point where any Oil actually ships. Not to mention diminished supply. In a pinch I suggest something like the aforementioned ideas would motivate an otherwise recalcitrant Putin to reassess; as that really would starve his game more than seizing assets of oligarchs.

Today (Friday) I chatted with an old friend in Europe sufficiently prominent in EU circles that his car is armored for security. All I can say is 'they' already seized Billions belonging to the oligarchs, and I don't just mean yachts. Also, 'they' already have people working with Ukraine to build a war-crimes dossier against Putin, should it happen that formal charges are brought at the Hague.

Also, the future of nuclear power is back into discussion after last night's 'fire' in Southern Ukraine at Europe's largest nuclear power plant. Some clearly will say shelling it with artillery was irresponsible (and it was) by the Russians; as well as saying 'hooray somehow they missed the reactor'. Perhaps not quite so simple: structural engineers have commented that artillery shock-waves of course are not benign, and likely created 'micro-fractures' in the containment structures. Others noted that reactor was the older design (ahem; Chernobyl generation), with metal rather than concrete containment.

All that's debatable (and unknown unless information is withheld) while clearly it was sobering; and besides the broad fusillade of acrimony hurled at Russia, it caused some jittery pivoting in Germany, which was just contemplating new focus on electrical generation, by recommissioning older nuclear reactors. For sure they need to go forward; but now the opposition is slightly empowered.

Ukraine, by the way, has/had the highest proportional nuclear generation with Russia obviously trying to control 'power' by virtue of capturing the reactor(s). France and Spain have very high nuclear utilization; but using European or a very classic reliable design from GE, which is more resilient to accidents or in this case enemy attack. Point is: Europe needs to unite on being pro-nuclear, with exception of a couple Baltic countries that effectively harnessed the sea. I recall writing about a 'hydro' system demonstrated at the Science Museum in Munich about 4 years ago; which was being deployed in the Netherlands.

All this takes us to the pressure from some in Congress (including Pelosi) to cut-off all Russian Oil shipments to us and/or the EU. I totally understand that; but that's the risk of thrusting Oil to an exorbitant price per barrel compared to current levels that people generally think is high. It is. And I thought the 80's were enough a month ago 'unless there was war' in which case I agreed with a 120/bbl (or more) prospect. And I felt that even 'if' we make a deal with Iran (probably will, otherwise why carry the talks this far); that's a nominal factor.

I shared a chart about what Iran back online would mean (not much); where a simple cut-off of Russian exports is viewed by the Administration as not in our 'strategic interest', and that's absolute right. Not talking morally or militarily just alone; but because it would compound an exponential impact on commodities in-general, which are already feeling the high-production-cost ramifications. It isn't politically welcomed to hear the U.S. helping 'fund' the war via continuing Russian oil purchases; but in 'real-politik' as they say; alternative is $150/bbl+.

On top of all this, we have Ukraine passionately imploring the West to provide aircraft if not pilots, since there's no way to continue holding-off the Russians merely on the ground. Poland was going to send their old MiG-29's days ago; and apparently it was the U.S. State Dept. that interceded to block that.

Sure, I realize Russia would somehow view that sternly; but who are they now kidding: sending Stinger missiles, Javelins, and providing intelligence certainly is participating in aiding Ukraine; so might as well give them the Jets and also munitions for the jets. They either prevail or Russia finds themselves poised in strength on NATO borders, if not just parts of Ukraine, in Poland by Belarus. It was so sad that the people of Belarus didn't successfully toss the dictator; as all of this could have been different if the election there wasn't squashed.

In any event, Belarus to a degree, and Ukraine primarily, are the breadbasket of much of the world; and prices for wheat, corn and everything else also rise due to the war and it's not just energy; but that's a big contributing factor. Now no matter what is being shipped; the Black Sea is a 'conflict zone' and that's a red flat to insurance carriers, that have instituted force majeure or high rates.

In-sum: the general idea is that 'reaching demand-destruction' levels actually will be more difficult, because the economy and jobs keep percolating pretty well so far. If we get to that point, consumers will step-back somewhat (might already just a tad); prices will continue rising (almost exponentially) and a Fed thinking any single, multiple, or larger Funds rate hike will quell it, are wrong.

So while we've said the Fed was and is 'behind the curve' for over a year now, it's double-down time given the changed world situation; and makes their job harder if not impossible. I believe Chairman Powell should redact stating that the Fed will do whatever necessary to bring inflation down; since they can't.

I assume he knows that. Now if the war miraculously ends and Oil drops; that of course will do the Fed's job for them. But if not, the Fed is impotent anyway, since going to a 2-2.5% Funds rate sounds like neutral; but not with inflation at a torrid pace. That's the point; they might as well calm down about 'goals' in this crisis, and conform to the situation; which is to fund the Nation at a time of potential peril. To argue otherwise (absent a ceasefire or similar) is about like a chorus arguing against Kviv issuing Ukraine 'war bonds'. I suggested it was a bit like the U.S. doing so in WW2, and a moral obligation to be supportive. I note the take-up apparently is strong so far; and that is just as it should be.

Information Warfare . . . is basically the latest aspect of the war; as Russia is cutting-off most external news and social media outlets for average citizens of that beleaguered society (generally the new generation fed-up with Putin).

Speaking of 'warfare'; Fed Chairman Powell evoked memories of Paul Volcker (I've done that on-occasion); which suggests a heavy-hand to break inflation. I just don't see how such an approach works effectively as long as Oil is spiking higher; but of course Oil won't spike higher indefinitely.

However, Chairman Powell's comments understandably have investors newly in retreat; particularly money managers that didn't lighten-up throughout 2021, as big-cap rallies invited building cash for a decline which occurred internally, especially outside of the leading mega-caps, and even now pummels prices.

So I certainly don't take issue with understanding why money managers are in a liquidation mode; but for those who prepared - not for war but for the Fed at last coming out from behind the curve - and especially who were long Oil (our top call for all of last year); there's little to do but sprinkle a little on purges as a mass of money managers throws stocks out just to belatedly build liquidity.

It may be popular to slam the S&P downside prospects; I myself regularly call for a '3' in-front of the level before this is over; but I also realize the bulk of hits should be behind for the smaller disruptive stocks; and getting there for larger.

Again liquidity-building was our general call about the S&P and NDX 'all year' last year; so in that respect I'm not excited to short generally and will look for a low, which because of internal correction may not be as broad-based as the nailed March 23rd 2020 low; because so much of the market already tanked.

Bottom-line: a slowing global economy despite higher jobs with inflation; you get a challenging situation conceivably beyond what we have now. So many have been 'too bullish' belatedly after the Covid 'crash' / 'Inger Bottom', that it is ridiculous to cheer-on the downside 'after' the broad internal plunge; even if it persists. I certain have envisioned S&P 3700-3800 or thereabout; and could be worse than that; it all depends.

There is also an upside warning I must give: not just 'peace' or a ceasefire (as Putin is unlikely to stop on a dime because in his view 'he's done' if he does); but 'mean reversion' for Oil & Gas. Both are spiking and both can't sustain an advance at exponential angles of attack (technically); while respecting military angles of attack (like the taking of Odessa by Russia in the days just ahead).

So, while I don't presume anything, including Russian success of Ukrainians surrendering (heck no); I am open-minded to what happens 'if' there's a deal. If so at that point Oil might well spike and reverse lower; and the S&P higher. It is NOT an immediate forecast; just something to be aware of amidst all the barrages of after-the-fact warnings coming from over-invested managers and funds that are dealing with sales even just to meet redemption requests.

That is part of how you normally get 'to' a bottom, but it's all a process and in a war you have to recognize unpredictable aspects; such as a Julius Caesar solution to Putin, or conversely even (temporarily) an Iran Nuclear Deal that at least for a moment gets Oil to break; stocks to rebound; and then likely lower again, unless of course some momentum toward peace occurs concurrently.