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Ukraine? Nah, I Ain't Worried

Recs

2

March 04, 2014 – Comments (2)

What, me worry?

RUSSIAN FINANCIAL MELTDOWN

Yes, I know. The bottom fell out of the Russian stock market and the Rouble (or rubble). Yet, in previous cases such as Argentina or Greece had, in the end, little international effect outside of much hand-wringing. Bad economic news for the citizens thereof certainly, but little else.

UKRAINE DEFAULT

The original cause of the current crisis is that Ukraine is flat broke, and is about to default on $35B of paper. Yeah, debt holders are going to get one heckuva haircut, but this has happened before without causing international panic.

MILITARY INVASION

Yeah, I know: AK-47 rifles, T-90 tanks, and SU-35 fighters are currently being aimed at Ukrainian citizens. Still, Russia has done this before: 2008 Georgia (the country, not the state). For those who have forgotten, the Evil Empire invaded said country, occupied a small portion thereof, and forced a referendum to annex it. Using intimidation, the Evil Empire won (shades of the old Soviet Union). Much as I wanted to slap someone, it barely made a ripple in financial markets. Just this morning, Darth Putin has temporarily pulled in his horns.

EU GETS GASSY

The Evil Empire is one of the main sources of natural gas for the EU: about 1/3. Half of that traverses through Ukraine. You see the problem. NG prices spiked 10%. If this gets worse or lasts for any length of time, it could plunge the EU back into recession. That would be bad.

MARKET REACTION

The reaction of equity and commodity markets has been downright placid.

CAPS

In the end, the only actions I took was to give thumbs-down on a few Russian ETFs, as I think the Evil Empire's economy will suffer in the near term.

 

2 Comments – Post Your Own

#1) On March 05, 2014 at 1:08 AM, valunvesthere (< 20) wrote:

"UKRAINE DEFAULT

The original cause of the current crisis is that Ukraine is flat broke, and is about to default on $35B of paper. Yeah, debt holders are going to get one heckuva haircut, but this has happened before without causing international panic."

It's weird how financial crisis work.

When United States sneezes the world gets sick 2008 subprime mortgage financial crisis.

When Asia sneezes the whole world gets sick 1997 Asian Financial Crisis .

"RUSSIAN FINANCIAL MELTDOWN

Yes, I know. The bottom fell out of the Russian stock market and the Rouble (or rubble). Yet, in previous cases such as Argentina or Greece had, in the end, little international effect outside of much hand-wringing. Bad economic news for the citizens thereof certainly, but little else."  

If my memory serves me correctly investors promptedly heavily bought gold driving the prices to record $850.00 high in January 1980, when Soviet intervened in Afghanistan as well as the impact of the Iranian revolution, strong oil prices, and high inflation.

What Happened to the Gold Price in 1980? 

Monday, January 14, 2008

Author Michael Moore

excerpt:

"Iranian radicals in Nov. 1979 took over the US embassy in Tehran…At the same time, the Russians were building up their strength in southern Yemen near Saudi Arabia, near Afghanistan’s border with Iran, and near Bulgaria’s border with Yugoslavia."

then again it is not prudent to make investment decisions solely based on history.

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#2) On March 05, 2014 at 10:26 AM, Mega (99.97) wrote:

Ukraine's debt to GDP is actually pretty low at 36%. They have a liquidity problem not a solvency problem. The EU is planning to offer Ukraine $15B in below market loans and the US an additional $1B. Plus the EU has offered to cut tariffs.

http://abcnews.go.com/International/wireStory/eu-provide-ukraine-aid-worth-15-billion-22779786

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