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Ruble Rabble

Posted by kdadmin on December 3rd, 2014.

Though I have been intrigued by Putin’s stubborn attempts to use Cold War tactics in the modern era, the negative financial impact his decisions are having on his “inner circle” of Russian billionaires must be remarkably unpleasant. Especially now that oil prices have dropped by over 36% in the past year.

Look how the Euro has changed in value against both the US dollar and the Russian ruble in just the last year. Today, a Euro will buy 8.7% fewer dollars and 46.7% more rubles. In other words, if you’re a Russian billionaire who enjoys the good life in Europe, ouch! But, even worse, what if you’re a Russian billionaire who also earned your billions from oil? Double ouch! Your fortune is down by at least 36% AND everything on vacation is nearly 50% more expensive! All because your supposed “buddy” is playing modern era Cold War.

Rubble Rabble

Dear Putin: Spokoynoy, e Udachi.
(Good Night, and Good Luck.)

Now, Russian oil and natural gas are very important to Europe. The fact that Russia scrapped plans for the southern pipeline (another way to get oil to Europe) and instead plans to run it through Turkey doesn’t really bode well for the European economy. Further, we do NOT need a less stable Russia with a Cold War era leader who feels backed into a corner. Bad things happen in these circumstances.

The Point: Before we wade into the global markets, let’s see if the traditionally stalwart ECB (European Central Bank) decides to make a significant move when they meet tomorrow, December 4. It’s been three weeks since my post, “You, Me & the ECB,” and VGK (a diversified Eurozone ETF based on the FTSE) has moved up roughly 1.7%. Much of that can probably be tagged to speculators betting on a significant move by the ECB (or a significant move in sentiment leading up the announcement). Though a significant stimulus move would likely be good for the Eurozone’s economy and markets, the problems in Russia certainly complicate matters.

In other words, I’m not interested in the potential carnage of being an early adopter.

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