Morning Brew - ☕️ The social media war

How the West is using finance as a weapon...
February 28, 2022 View Online | Sign Up | Shop

Morning Brew

Fundrise

Good Monday morning. I’ll skip the quippy intro and get right into it: Overnight, the Russian ruble collapsed to a record low against the dollar and its central bank more than doubled interest rates from 9.5% to 20% in response to unprecedented sanctions—moves that will reverberate (not in a good way) around global markets.

To quote the FT’s Moscow Bureau Chief Max Seddon, “We are truly in uncharted territory here.”

Neal Freyman

MARKETS: YEAR-TO-DATE

Nasdaq

13,694.62

S&P

4,384.65

Dow

34,058.75

10-Year

1.902%

Bitcoin

$37,729.04

Oil

$98.11

*Stock data as of market close, cryptocurrency data as of 7:00pm ET. Here's what these numbers mean.

  • Markets: Stock futures sank, cryptocurrencies also sank, Treasuries rallied, and oil spiked to begin what will be an exceptionally nervy week for investors. That rise in oil prices is spilling over at the gas pump: The average gas price in the US has jumped 10 cents, to $3.64/gallon, in the past two weeks.
  • Ukraine: As Russian forces bear down on Kyiv, Ukraine and Russia agreed to peace talks with “no preconditions” today near the Ukrainian-Belarusian border. The EU also said it would buy weapons for Ukraine, the first time in its history it will deliver weapons to a country under attack.

GEOPOLITICS

The weaponization of finance

Moscow skyline Sergei Karpukhin/TASS via Getty Images

The invasion of Ukraine has made clear that modern warfare isn’t just drones, cyberattacks, and hypersonic missiles—it’s also asset freezes, export controls, and sanctions on billionaires. High finance has become a prominent weapon in the West’s confrontation with Russia.

And over the weekend, Western leaders rolled out the financial equivalent of the bazooka, announcing new economic penalties on Russia, the type of which have only been applied to hostile regimes like Cuba, Iran, and Afghanistan. They include…

  • Partial SWIFT ban: Western governments put aside their hesitations and proposed banning some Russian lenders from SWIFT, the global messaging service that facilitates cross-border transactions. It’s a move that could cause turmoil across global financial markets.
  • Targeting oligarchs: A task force is being created to go after the prized luxury assets (cars, homes, yachts) of ultra-wealthy Russians, in the hopes that they’ll put pressure on Putin to back off. Two Russian billionaires already called for peace yesterday.
  • Central bank freeze: Western leaders said they’d move to “paralyze” the assets of the Russian central bank, something that’s never happened to a G20 central bank before.

The central bank freeze is worth unpacking, because for all the talk of booting Russia from SWIFT as the “nuclear option,” targeting Russia’s central bank could be far more devastating.

Here’s why: Last week, we described how Russia had prepared for the war by padding its foreign reserves, which can be deployed to keep its currency stable in the event of sanctions. But by freezing the reserves held abroad, the West would be blocking Putin from accessing them—and the consequences could be calamitous for the Russian economy: a plummeting ruble, spiraling inflation, and a run on banks are some possible scenarios. Even yesterday, Russians lined up at ATMs to withdraw cash ahead of the potential collapse of the ruble.

What can Russia do? Not much. One potential solution would be to ask its pal China for assistance, given that 14% of its reserves are held in that country. But China, whose financial support of Russia is already fraying, might not be willing to help out for fear of secondary sanctions.

Bottom line: Things are about to get more painful for the average Russian.

        

PHOTOS

Snapshots from the weekend

At least 100,000 people gathered in central Berlin to protest the war in Ukraine. Anti-war demonstrations were also held in 48 cities across Russia, where more than 2,000 people were arrested.

Tens of thousands of people gather in Tiergarten park to protest against the ongoing war in UkraineSean Gallup/Getty Images

Soccer teams and players across Europe showed their support for Ukraine as pressure mounts on FIFA to ban Russia from competition. Poland, Sweden, and the Czech Republic are refusing to play against the Russian national team in World Cup qualifiers.

view inside the stadium as FC Barcelona and Athletic Club players pose for a photograph together with a banner reading 'Stop War' in sympathy with UkraineEric Alonso/Getty Images

Ukraine’s Antonov AN-225 Mriya, the world’s largest plane (seen here landing in Perth, Australia), has reportedly been destroyed in a Russian attack on an airport near Kyiv, according to Ukrainian authorities. The company that manages Antonov said it will take five years and more than $3 billion to rebuild.

The Antonov AN-225 Mriya lands at Perth International airport on May 15, 2016Paul Kane/Getty Images
        

SOCIAL MEDIA

A war for the social media age

A tweet saying "For no reason, here are some yachts owned by Russian billionaires and their current locations" Twitter screenshot of @scottbix

Even as Russian and Ukrainian forces battle in the physical world, a substantial amount of the war is being meticulously documented on, and profoundly influenced by, internet platforms.

Privacy lawyer Whitney Merrill detailed some examples in a thread.

Wikipedia: Amateur historians are chronicling the war in real time on Wikipedia. The “2022 Russian invasion of Ukraine” article, which didn’t exist until last week, has had well over 400 contributors since the conflict began, and runs over 12,000 words.

Crowdsourcing aid: On Saturday, Ukraine’s Twitter account solicited crypto donations for the war effort by posting the addresses of two crypto wallets. It’s resulted in more than $10.2 million worth of donations, as of yesterday, including $1.86 million from the sale of an NFT.

Knowledge sharing: Experts on urban warfare have been dishing out advice to Ukrainian civilians with no military training. The first recommendation: “Go out and build obstacles in the streets!”

Billionaire watch: Sleuths are sharing the locations of the yachts and private jets that belong to Russian oligarchs.

Misinformation: Many viral images and videos purporting to show the war in Ukraine are simply fake, from the famed “Ghost of Kyiv” fighter pilot (which is a clip from a PC game) to a photo of “paratroopers” over Kyiv that are just reflections from street lights.

Waging a meme war: Users are sharing anti-Putin memes, remixes of Ukrainian President Volodymyr Zelensky’s speeches, and “tactical shitposting” from Ukrainian soldiers to rally support.

        

TOGETHER WITH FUNDRISE

The real breakfast of champions

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CALENDAR

The week ahead

The Bacchatality float in the Krewe of Bacchus parade during Mardi Gras Skip Bolen/WireImage

US progress report: President Biden will deliver his first State of the Union tomorrow night—a speech he’s probably had to rewrite a bunch of times since Putin invaded Ukraine. Besides addressing his administration's response to Europe’s largest ground war since World War II, he’ll talk about the path out of the pandemic, his strategy for combating inflation, and ways to revive his Build Back Better agenda.

Jerome Powell on the mic: The Fed chair will testify twice before Congress this week. It’ll be interesting to hear whether the war in Ukraine is affecting the Fed’s calculus for interest rate hikes.

The jobs report drops on Friday. Economists expect the US labor market to continue its roll after the economy added a better-than-expected 467,000 jobs in January.

Earnings: We’re not done yet with Q4 earnings season. Companies including Lucid, Salesforce, Target, Domino’s, Wendy’s, AMC, Costco, and Sweetgreen will release their financials for the previous quarter.

Everything else:

  • Mardi Gras is on Tuesday, and New Orleans is (mostly) going all out. The following day is Ash Wednesday.
  • The Batman comes out on Friday and yes, we already have tickets.
  • Make sure your boss doesn’t forget Employee Appreciation Day on Friday.
        

GRAB BAG

Key performance indicators

A photo of a rocket taking off for a Starlink mission in Nov. 2019 "Starlink Mission" (CC BY-NC 2.0) by Official SpaceX Photos

Quote: “Thanx, appreciate it.”

Ukraine’s official Twitter account gave a hat tip to Elon Musk, who said SpaceX’s Starlink internet service was available in Ukraine and that he was sending more terminals. Ukraine’s internet has experienced “significant disruptions” due to the war, according to the monitoring group Netblocks.

Stat: The Kyiv Independent, an English-language online news startup that was founded in Ukraine a few months ago, topped 1 million followers on Twitter. The crazier part: It had 20,000 followers last week.

Read: Warren Buffett’s latest annual letter to shareholders. (Berkshire Hathaway)

        

WHAT ELSE IS BREWING

  • The EU banned Russian aircraft from flying in its airspace and Russian state-run media companies from broadcasting in the region.
  • German Chancellor Olaf Scholz pledged to nearly double defense spending and reduce the country’s dependence on Russian gas, overhauling policies that have been in place for decades,.
  • New studies released on Saturday identify a seafood market in Wuhan as the origin of the Covid pandemic.
  • New York City could lift its vaccine mandate on restaurants, bars, and theaters as soon as March 7, Mayor Eric Adams said.

BREW'S BETS

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Dive back into the week:

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GAMES

The puzzle section

Turntable: We know that was a lot of news to take in. Give your brain a different kind of challenge with today’s Turntable.

Street smarts

We’ll give you a few famous streets from certain US cities, and you have to name the cities.

  1. Frenchmen Street, Magazine Street, St. Charles Avenue
  2. 300 N, 800 S, North Temple Street
  3. Michigan Avenue, Lake Shore Drive, Logan Boulevard
  4. Newbury Street, Beacon Street, Commonwealth Avenue
  5. Broad Street, Walnut Street, Spruce Street

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ANSWER

  1. New Orleans
  2. Salt Lake City
  3. Chicago
  4. Boston
  5. Philadelphia

✢ A Note From Fundrise

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Written by Neal Freyman

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