Date: March 3, 2014

Modern Day Cold War?

Geopolitical news now dominates the news cycle with nothing more front and center than the sudden and disturbing turn of events in Ukraine. It’s hard to believe that after spending $51 billion to showcase Sochi and build goodwill throughout the world, Russia has effectively hit the delete button on the whole winter Olympics with aggression in the Crimea. Is an invasion of the Ukraine next? The odds are probably 60-40 in favor. It’s something that really makes you scratch your head, not so much their actions, which are bad enough, but the incredibly poorly timing. Olympics and G-8 Summit all in your newly created destination resort have now been reduced to nothing more than a footnote. Is this a prelude to a new modern day Cold War?

World markets will likely open sharply lower on Monday with gold, the dollar and treasury bonds all expected to rally as safe haven plays. Is the bull market over? Not by my count. Is this the beginning of the long awaited 10%+ correction? Possible but not probable. Without any market action yet to factor in, this should be just another routine and healthy pullback to buy unless Putin really goes off the deep end. I will be keenly watching how the leading sectors behave this week as we head into the February employment report on Friday.

Speaking of Putin, I am sure every psychologist and psychiatrist on earth would like to examine him and his mental state for the timing of this action. I don’t think the action itself is totally surprising since he already knows that the U.S. and Europe will sit idly by as our interests are not at risk. Sure, there may be some economic sanctions, but I don’t think Putin really gives a hoot about them. He seems intent on rebuilding some facsimile of the old Soviet Union.

After President Obama warned Syria’s Assad against using chemical weapons on his own people and then double warned him and perhaps even triple secret warned him, what happened? He gassed his own people without even a single repercussion from the almighty United States of America. So it’s a pretty safe assumption that Putin isn’t really worried about America or Europe getting involved against Russia.


Paul Schatz, President, Heritage Capital