| MARKET ROUNDUP |
| Dow |
-42.44 to 17,079.57 |
| S&P 500 |
-3.38 to 1,996.74 |
| Nasdaq |
-11.93 to 4,557.69 |
| 10-YR Yield |
-0.03 to 2.33% |
| Gold |
+$6.90 to $1,290.30 |
| Crude Oil |
+$0.70 to $94.58 |
Amid all the handwringing over the U.S. economy, a funny thing happened. It actually BOOMED in the second quarter!
Revised figures show that Gross Domestic Product expanded at a 4.2 percent rate in the most recent three-month period. That was up from an initial estimate of 4 percent ... better than forecasts of 3.8 percent ... a huge rebound from the 2.1 percent contraction in the first quarter ... and the third-strongest reading since the Great Recession ended five years ago.
Business investment rose at the fastest rate in more than two years, while pre-tax corporate profits jumped 8 percent. That was the biggest rise since late-2010. A measure of money earned by consumers, businesses, and the government – called gross domestic income – rose at a 4.7 percent rate. That was the biggest gain since 2012.
So the markets rejoiced in response, right? Not at all! That's because Ukraine and Russia are rapidly heading toward all-out war!
In just the past 48 hours ...
* A summit in Belarus on Tuesday between Russian President Vladimir Putin and Ukrainian President Petro Poroshenko was an utter failure. We heard a few brief comments about seeking peace, but absolutely no action. Then soon thereafter ...
* Ukraine said it's now fully engaged in battle against both separatists and regular Russian soldiers – calling the action a "full-scale invasion."
* NATO officials accused Russia of sending "well over a thousand" troops into Ukraine, and warned that a "very aggressive Russia" was providing everything from weapons and ammunition to special forces training and intelligence to the rebels. That reportedly includes advanced Grad rockets, SA-22 surface-to-air missile and gun systems, tanks, and armored personnel carriers.
 |
| The U.S. GDP grew at a rate of 4.2 percent in the recent quarter, but worries about Russia and Ukraine stymied any big gains in the market. |
* Not only is fighting continuing in Donetsk and Luhansk, but now it's breaking out in southern Ukraine around the border town of Novoazovsk. That could lead to Russia overrunning the territory separating it from Crimea, essentially linking up with its forces there.
* Ukraine asked for "large scale" military help or intervention from the U.S. and Europe. It also demanded the U.N. Security Council convene to discuss the crisis.
Russian officials denied in multiple venues that its forces were operating over the border, adding that "Russia is not taking part in this armed conflict." But reporters on the ground continue to see Russian military hardware, helicopters, and troops pushing deeper into Ukrainian territory.
This is deadly serious. While the West only bloviated and shuffled its collective feet when Putin annexed Crimea, the invasion of Ukraine proper is a much bigger gambit. The sanctions we've seen to date clearly haven't deterred Putin, so it stands to reason they'll be ramped up substantially if southern Ukraine is overrun.
|
"The sanctions we've seen to date clearly haven't deterred Putin."
|
NATO is also talking about re-positioning more military hardware in Eastern Europe as a deterrent, with new bases potentially opening up in Poland and the Baltic states. And Russia has responded that such a move would naturally result in IT taking more aggressive steps, too.
As an investor, these developments have several implications ...
First, they show why you absolutely needsome exposure to gold and gold miners in today's uncertain world. They are great "insurance" plays for a world gone mad.
Second, they underscore the very real global threat to the world's energy supply chain. Putin wields a huge cudgel in the form of oil and gas supplies! If he chooses to cut Europe off in retaliation for sanctions, there's no telling how much energy prices could jump.
Throw in the loss of production in Libya, and the burgeoning ISIS threat to major oil producer Iraq, and you can see why I'm expecting energy prices to rise over time. And now more than ever, it's abundantly clear that the U.S. needs to step into the breach and build up its own domestic energy industry.
Third, sanctions will hit Europe much harder than the U.S. given Europe's greater geographic and economic ties. So European stocks and the euro will likely come under even more pressure if things go pear-shaped in Ukraine. So my simple rule remains: "Invest here, not there!"
So what are your thoughts about the latest developments in Europe? Is Putin turning up the heat? Or is Ukraine just making things up to try to draw the global community in on its side? What is the chaos in Europe ... and the ongoing turmoil in the Middle East ... doing to your investment strategy? Are you factoring it in, and if so, how? Let me know at the Money and Markets websitehere.
|