Background: I have been warning for weeks now that the situation in Ukraine could end badly for both sides, US/West/EU and the Russians. The reason I cited is that Russia has considered Ukraine it’s property for more than 300-years and despite cutting it some autonomous slack in 1954 by letting it form some local governance, the ties to Russia were firmly held.
The US however (shades of Benghazi), has an acute ability to misjudge the obvious. This is especially clear this week in stories like “The Endless Benghazi Cover-Up” in the Wall St. Journal op-ed by Karl Rove. Yeah, I know…Depends who you want to listen to, I suppose. But it would be intensely interesting to here what retired General Carter Ham has to say about Ukraine…
From the Western perspective the Crimea, being Russia’s warm water, year-round port, it would seem a simple task to foment uprising in Ukraine and (bonus time) pick up Sevastopol and pick off the Russian port facilities. Their ability to project power into Africa and the Middle East would suffer greatly.
You’ll recall I suggested that Russia would NOT take this laying down and with the arrival of unmarked gunmen in the Crimea, and this morning’s report of “unmarked soldiers” [possibly Russian] securing airports in the Crimea, we are convinced our paradigm framing been right on. Still, a few reports call the soldiers “unknown” (as in this USA Today report) so time will tell who has put “first boots” on the ground; Ukraine, US/EU, or Russia.
Breaking Today: That said, the Ukrainians are accusing Russia of an ‘armed invasion’ following the airport takeovers. Game on for WW-III? War is a historical tool to cover-up economic calamity and misfeasance….
The Russians are reassuring the US that their “readiness drills” are not linked to Ukraine, but you’d have to be an idiot not to draw that conclusion. Action speaks louder than….
Looking Ahead: The next move, if things stick to our scripting, should be the US calling for emergency talks and perhaps a presidential news conference along the lines of the Cuban Missile Crisis back in ‘62.
This will play exactly as the Russians have been planning. They have been holding preparatory “readiness exercises” but another way of thinking of this is as “rehearsals” for a real, overwhelming, show of force in coming weeks. They need two more weeks to move up “overwhelming” resources to the front.
In the meantime, Vlad Putin is promising aid for Ukraine, but is also backing the ousted president who is due in a Russia town near the Crimea for a press conference today.
For now, we don’t expect the markets to tank just yet. However, since “cash is a position” I may lighten up on a long position later today despite the fact the markets have touched some marginal new highs. If the market closes down, say 50-Dow points, and there’s a decline in the S&P, we could simply put in a “double top” formation and those can be followed by violent down moves. That could depend on the Ukraine (and Venezuela) news flows next week.
Alternatively: On the other hand, a peaceful resolution to present events, however unlikely it may seem, could light the markets off like a skyrocket…so patience and judgment are key. Is war good for markets? Well, of course….and they cover up so much other stuff….
US Spillover: Flash Mobs to Revolutions/Digilutions
Background: As I expressed in yesterday’s column, there is a fine line between the digital technology that allows for a gangstah posse in Chicago to form a “flash mob” at a local merchant and the scaled up kind of thing that has gone on in Ukraine, a super-sized flash mob to take a country. But this has also been played as part of Arab Spring, and may also be in place in Venezuela, as well.
Today: Could it spill over into America? Well, reports one reader in Vancouver, Washington, maybe it’s already spilling…
Since you are a native of NW you are probably aware of the demographic makeup down here in Vancouver, WA with a huge Russian and Ukrainian makeup, they are not overly fond of each other but lately things have been real bad, I work with 4 Ukrainians and 2 Russians and have been really offended at comments made by some Russians such as “Ukrainians are cowards” “They are sign-toting monkeys” the same one who called them monkeys moments later called them “Slavic brothers” so the relationship is a bit bi-polar but overall I get the impression the Russians think of Ukraine as belonging to them and Ukrainians as second class compared to them, very similar to how the 19th century English viewed us Scots.
I have no doubt EU is thrilled about this with Ukraine being one of the worlds three great bread baskets and a industrially a giant, 6th largest arms exporter, technologically advanced enough to launch multiple satellites yearly and the largest army wholly within Europe, its a real prize, but 78% of the country is ethnically Ukrainian and they have a long painful history with Russia (and with corruption) and they want a fresh start, considering how bad Yanukovich was eventually they would have rebelled over some other spark if not the EU.
Outlook: If our tracking continues accurate, we may see a simmering for 2-4 weeks (new market highs in the US markets in the meantime) and then an overwhelming Russian response to ensure they don’t lose their warm water port that allows them to project naval power into the Middle East.
Or, the escalation path could be much quicker, which is why an astute investor will need to weigh that three-way decision fork: short, cash, or stay long?
GDP Out, Up
New Gross Domestic Product numbers may help, but only a bit. Just out today from the Bureau of Economic Analysis is this:
“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.4 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the “second” estimate released by the Bureau of Economic Analysis.
In the third quarter, real GDP increased 4.1 percent. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.
In the advance estimate, the increase in real GDP was 3.2 percent. With this second estimate for the fourth quarter, an increase in personal consumption expenditures (PCE) was smaller than previously estimated (see “Revisions” on page 3).
The increase in real GDP in the fourth quarter primarily reflected positive contributions from PCE, exports, nonresidential fixed investment, and private inventory investment that were partly offset by negative contributions from federal government spending, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP growth in the fourth quarter reflected a deceleration in private inventory investment, a larger decrease in federal government spending, and downturns in residential fixed investment and in state and local government spending that were partly offset by accelerations in exports, in PCE, and in nonresidential fixed investment and a deceleration in imports.
Going into this morning’s open, the Dow is set to open about flat after closing up nearly 75 yesterday with record for the S&P and NASDAQ, but not the Dow which continues to lag.
Firsthand: A Farmer Goes Organic
Response to yesterday’s rant: In his own words, reader Lloyd, who farms up in Tennessee tells it like it is:
Interesting piece on GMO food. I farm in Tennessee and have moved away from GMO crops to conventional for two reasons.
First, I find that the GMO crops are fast becoming the “pest” instead of the solution to weed and insect control problems.
Secondly, I noticed on my farm that as I was making the transition back to conventional crops versus GMO, that the animals that browse on the small plants (no problem, everything needs to eat as long as they don’t get greedy) would ignore the GMO and eat the conventional crops. These were planted in fields separated by a drainage ditch (large) and tree line buffer. Normally, both sides of this ditch were browsed equally by wildlife in the past when GMO was not used at all in my region. Something tells me that the groundhogs and deer are smarter than most of we humans, because they sense something basically wrong with these crops.
That alone has convinced me to get away from GMO and stick with conventional crops. Added benefit for me is that the conventional seems to yield better. Even had a field agronomist from a major seed company tell me that the “older” conventional seed varieties would out yield his companies GMO product. Of course that was off the record and just he and I in the field talking.
And we repeat the warnings of the past many months: Grow Food Or Die could be the mantra sooner than later.
Reader Recommendation: (From Debbie M:)
Great points about the new proposed labeling. When I saw the news piece my first thoughts were about how GMO was conveniently not mentioned as being part of the new label. Since I’ve been fighting a mild flu-like illness (no flu vaccine here) for a few days, I’ve been getting a lot of use out of my Amazon Prime account. Last night I found and watched David vs. Monsanto. If you haven’t seen it, it’s worth an hour of TV time.
Drought is in the mix, too: After a good rain year in 2013, we note that year to date the Amarillo area is at 0.38” which is about an inch below normal, so those feed lot operations up along I-40 are likely to be hurting again….
On Average, Though, It Will Rain
Still, into every life (including the life forms in Los Angeles) a little rain must fall. And there’s talk about finally L.A. getting some. In fact, it might be a bit too much.
However, if you’re eyeing the future and wondering how big a deal the rains pending will be, just remember when we were out in Burbank in 2004-2005, that was the record for winter storms with more than 15-inches of rain.
It will all come down to how the El Nino / La Nina work out their tracks.
But for now, the good news is that rains are coming in for the weekend and while some flooding is (usual/expected) the good news is that farmers in danger of losing their livelihood may have another year to scratch a living off the land.
Minimum Wage Eye Opener
Political Health Notes
Welcome to the Security State
Got to wonder if this will change their views on the ubiquity of surveillance, perhaps? What good for the geese, and all that….