|Dow||-264.26 to 16,945.80|
|S&P 500||-32.31 to 1,965.99|
|Nasdaq||-87.54 to 4,467.68|
|10-YR Yield||-.058 to 2.511%|
|Gold||+$1.90 to $1,221.40|
|Crude Oil||-$0.30 to $92.50|
Now THAT was a stock swoon! The Dow plunged 264 points in an ugly day of trading across the board.
The catalyst? News that Russian President Vladimir Putin could move to seize assets of foreign companies operating in his country. As the Moscow Times reports, a draft law introduced this week would permit Russian courts to authorize the confiscation of assets on Russian territory.
The bill appears to be retaliation for what Italy did a few days ago. The country seized property worth $40 million that is controlled by Arkady Rotenberg, including a luxury hotel in Rome and two Sardinian villas.
Rotenberg is a Russian tycoon worth an estimated $4 billion, with interests in the construction, banking and energy industries. He’s also one of the Putin confidantes under fire by U.S. and European sanctions.
|Putin is looking to seize foreign companies’ assets.|
By coming to his aid, Russia is clearly ratcheting up pressure in the tit-for-tat battle with the West. The far bigger risk is that Putin fires his natural gas bazooka — cutting off or reducing supplies to Europe in an attempt to show the Continent who’s boss. That would send the euro reeling even further, and push the European economy even closer to recession.
As if that weren’t creating enough uncertainty on the geopolitical front, we’re now attacking oil facilities in Syria that ISIS has been using to refine oil and generate revenue. It’s estimated that the group makes more than $2 million a day selling oil and oil products from fields and refineries it controls in Iraq and Syria.
U.S. domestic production has helped mute the impact of increasing Middle Eastern chaos on the overall oil market so far. But if conditions continue to deteriorate, can that last?
|“I’ve stayed the heck away from investing in Europe for some time now, and recommended you avoid or ‘short’ the euro currency in multiple columns.”|
Adam Sieminski, the head of the Energy Information Administration, said yesterday that if it weren’t for rising U.S. output, oil prices would likely have already surged to $150 a barrel. That’s because production is being curtailed in various foreign countries, to the tune of around three million barrels per day.
I’ve stayed the heck away from investing in Europe for some time now, and recommended you avoid or “short” the euro currency in multiple columns. I’ve recommended that you stay focused on select, domestically focused stocks.
That strategy has worked so far. But if tensions keep ratcheting up, it may be time to batten down the hatches somewhat. Stay tuned!
What are your thoughts here?
With volatility starting to rise, small caps underperforming multinationals, and geopolitical tensions increasing, are you taking action? Bargain hunting into the declines? Cutting your exposure? Sitting on your hands? Add your comments below and I’ll see what I can do to help!
|Our Readers Speak|
War and its impact on defense stocks. Genetically modified foods. The housing market. There’s a little something for everyone to discuss in the comment section below. Here are some of the key comments I zeroed in on:
Reader Bob S. said: “It’s perfectly understandable for a defense stock to fall at the beginning of a war. I was in that industry during the 1990-91 Gulf War and had a ringside seat. Basically, two things happened …
“Thing One: Reservists who worked for the company got called up and sent to Saudi Arabia. This slowed down all the jobs they’d been doing. Workers had to be hired to replace them during the war, but most of the positions never got filled. The company was late on delivery and the gov’t paid for work finished … not for work attempted.
“Thing Two: Procurement orders got slowed down. The Defense Dept was too busy getting ready for a war, to go shopping for new stuff. They used what they had. If some other country had what we didn’t, they made an alliance.
“Once the war was over, Russia had gone bankrupt and the Cold War was over. Net result: the entire defense industry contracted. So big was the contraction, the U.S. came within a hair of balancing the budget.”
I love these kinds of on-the-ground insights when it comes to specific industries, so thank you, Bob. I believe what we have now (unlike back in Gulf War I) is a series of rolling “state vs. non-state enemies” rather than one big, more-traditional “state vs. state” battle.
That means we’re likely to see a relatively elevated level of defense spending over time. The spending will just be directed at different kinds of weapons systems and personnel.
Reader Gary A. chimed in on housing and the divergence between the performance of the new and existing home markets. His insight?
“Went house shopping this spring and all the houses we looked at were about the same price as building a new one. So why put up with someone else’s problems when I can have new and not worry about anything for at least 10 years? Maybe that’s why new home sales are way up over existing homes.”
That’s a good point. The home builders basically weren’t building anything at all for a period of a few years. Now they are bringing more product to market, and it’s providing some attractive competition for buyers.
Passions were running hot on the genetically modified/organic vs. non-organic food front.
Reader Bookworm said: “A reader stated that organic food has the same nutritional value as pesticide grown food. The difference, in my mind, is the chemicals used on the regular food. I can’t help but wonder about all the cancer, and other diseases that can be linked to pesticides and herbicides. Farm workers linked to those chemicals have very high cancer rates, skin problems, etc.”
Reader Rich added: “The latent residual chemicals are an issue. Of greater concern are the hormones and antibiotics from non-organic meat, eggs and dairy. Then there are the genetic modifications that do not agree with our bodies.
“Modern medicine is failing us because it makes the assumption that the American diet is sufficient to allow our immune systems to take care of us. Unfortunately, that is not the case. Do some research and find out more.”
Finally, Reader Don J. said: “Most food and seed companies would grind up babies and sell them if they could make money at it. It isn’t politically correct at this time.
“What kind of studies have been done on long-term effects on people from GMOs? The only one I read that has been conducted without the food industry’s money showed that people would exponentially die of cancer and tumors from eating a diet of GMO food. Since GMOs have been around for 15 years, we will see numbers increase from cancers in this country. Just waiting on those actuaries to tell us.”
Powerful words — and if you want to add your two cents, do so at the comment section below.
|Other Developments of the Day|
- We reportedly managed to kill one leader of the Khorasan terrorist group in Syria that has been linked to al Qaeda. But it’s unclear how far along they were in plotting or carrying out attacks in the U.S., Europe, or overseas.
- The U.S. domestic energy boom is manna from heaven for a lot of companies, and that includes fertilizer makers. Why? Because natural gas is a key input in nitrogen-based fertilizers! Abundant, reliable, cheap supplies of it are bolstering the fortunes of companies like CF Industries (CF, Weiss Ratings: A-), which is why Norway’s Yara International is looking to tie up with the company.
- Attorney General Eric Holder is resigning, though he won’t actually leave office until a successor steps in. That may not happen until later this year or early 2015. His reign has been marred by controversy over civil rights, 9/11-plotter prosecutions, and legislative relations.
- There’s been no shortage of people criticizing NFL Commissioner Roger Goodell and his handling of the scandals involving Ray Rice, Adrian Peterson and other NFL players. But if you work for an NFL-dependent network like ESPN, apparently it’s a no-no.The sports network just suspended commentator Bill Simmons for three weeks after he teed off on Goodell in a podcast online. Pesky thing, that whole freedom of speech issue, eh ESPN?
Reminder: You can let me know what you think by putting your comments below.
Until next time,