US Missiles in Poland and the Ukraine Crisis
Russia has amassed about 150,000 troops, tanks, artillery, and support facilities on its border with Ukraine and in the nations of Moldova to the Southwest and Belarus to the North of Ukraine. Russia’s president, Vladimir Putin, says he does not want Ukraine to join NATO and that he is concerned about treatment of Russian speakers in the Southeast of Ukraine where he has been supporting a separatist rebellion for seven years. Things that have not been mentioned specifically in the news are the US missile installations in Poland and Romania. How do US missiles in Poland and the Ukraine crisis figure into the market and how precisely might they figure into your options trading?
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Putin Wants Emasculation of NATO
Putin’s actions in regard to Ukraine have nothing to do with mistreatment of Russian speakers in Ukraine or even keeping Ukraine out of NATO as there is no mistreatment going on and NATO would not currently take Ukraine even if it applied at this time. What Putin wants is to roll back forces in NATO out of its former Eastern Bloc vassal states (Poland, the Czech Republic, Slovakia, Romania, Hungary, Estonia, Latvia, and Lithuania. Putin’s dream is to reestablish Russian hegemony over Eastern Europe like it had when the USSR was still viable. He has chosen this time when he thinks the alliance is weak to force concessions from NATO.
Missiles Close to Russia
Poland was an independent nation before Hitler’s Wehrmacht and the Red Army rolled in from opposite directions in 1939. First Hitler drove back the Russians and then the Russians returned to subjugate Poland as well as East Germany and all of Eastern Europe until the USSR fell apart. It should surprise no one that Poland was ready to join NATO as soon as it could and wanted advanced weaponry up against its border with Russia. The USA has installed two advanced missile bases in the region, one in Poland and the other in Romania. They are capable to intercepting missiles from Iran but also missiles coming from Russia. They do not have the capability for attacking Russia. The Russian argument is that these sites negate the doctrine of mutually assured destruction that helped keep the USSR and USA from attacking each other during the Cold War.
NATO Will Increase and Not Decrease Its Forces in Eastern Europe
As during the Cold War NATO will not try to match the Russian forces in numbers of soldiers but rather deter them with advanced weaponry. The company that makes the Patriot Anti Missile systems in Poland, Romania, and elsewhere is Raytheon. If you look at Raytheon stock for the last 40 years you can see that it typically spikes up and down. It trades for $94 in mid-February, 2022 as Russia threatens Ukraine. We might expect that to go higher as the crisis heats up and down if and when Putin backs off. Certainly, if NATO were to cave in to Russian demands, the stock would likely fall. But, given that NATO is like to beef up its forces along its Russian front more upward spikes are more likely.
Trading the Military Industrial Complex
Besides Raytheon, other big defense contractors such as Northrop Grumman, General Dynamics, and Lockheed display significant spikes and valleys in their stock charts. As we so often note, as Americans we don’t want war, recession, or a market crash but as options traders we will trade the market into the dirt in the event of an implosion and trade to make millionaires (like in the Covid Crash and recovery) when any stock or index goes up, down, or sideways.
