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Thursday, August 14, 2014

Russia/Ukraine

Does this situation matter to the market?  Some days it seems like it does and others it seems to be ignored.  Russia has been carrying out military exercises along the border for quite some time now.  It first started out with 20,000 troops.  It then went up to 33,000 troops.  The latest round that ended on Friday had 45,000 troops.  I think we can all agree that there is a 0 percent chance that Ukraine is going to invade Russia.  So why the troop build up?  Can there be any other motive other then invasion?.  We have seen this same play before many times in history.  Move your troops next to the border of your less well defended neighbor.  Then one day invade.  Anybody remember Iraq/Kuwait.  Pay absolutely no attention to what Putin says.  Pay great attention to what he does.  What he is doing now points to an invasion of Ukraine someday.  The game is to intimidate the Ukrainian military forces so much they will offer little to no resistance when the invasion comes.  Until Putin reduces troops back below 20,000 or so we must assume invasion is the end game.  I don't think the markets will like that very much.  The current level of sanctions seem to be having economic impacts already in Europe.  Since NATO is not going to go to war with Russia over Ukraine I must assume an invasion will ratchet up the sanctions.  Are money managers really anxious to buy now with all this going on?  I think it will be very difficult for the market to keep making new highs without a clear peaceful resolution. 

Bob

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