Knowledge Center

Direct. Calculated. Personalized

April 29 2014

Newton’s third law says for every action there is an equal and opposite reaction. Since things became tense between Ukraine and Russia, we’ve been getting a primer on the relative strength of diplomatic, economic, financial, and military actions and reactions.

Taking things over isn’t anything new for Russian President Vladimir Putin. A decade ago, he nationalized Yukos (a large publicly held Russian oil company) after jailing its founder for tax evasion and fraud. The financial repercussions of the takeover are still rippling through the global economy. In 2012, Russia lost a lawsuit filed by foreign shareholders of Yukos Oil and was ordered to pay damages.

Not long after the Yukos debacle, Putin lamented the demise of the Soviet Union was the greatest geopolitical catastrophe of the century. In 2014, he annexed Crimea – the first time a European nation has taken territory from another European nation since World War II – justifying the action in many ways, including by saying the Crimean peninsula should have been returned to Russia in 1991 when the Soviet Union dissolved. The West responded by imposing sanctions.

Today, Russia’s economy is in distress in part because of sanctions, according to Bloomberg BusinessWeek. Just last week, Standard & Poor’s knocked the country’s debt rating down to one level above junk, and Russia’s central bank raised rates for the second time since March significantly increasing the cost of borrowing for businesses and individuals. Inflation is high in Russia – above seven percent – although, as one economist pointed out, raising rates had little to do with inflation and much to do with supporting the ruble and discouraging the flight of capital from Russia. During the first quarter of 2014, $50 billion was pulled out of Russia, and estimates suggest that amount could rise to $200 billion by year-end depending on what happens in Ukraine.

The Russian central bank wasn’t the only one taking action last week. On Thursday, despite threats of further economic sanctions, Russia placed thousands of troops along the Ukrainian border for military exercises. Additional sanctions are likely to be imposed on Russia this week. We’ll soon have more insight into which actions speak the loudest.

Escalating tensions affected stock markets around the world last week, and many indices finished the week lower than they started.

  • Data as of 4/25/141- WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)-0.0010.8%17.5%0.11816.8%5.1%
  • 10-year Treasury Note (Yield Only)2.7N/A1.73.42.94.4
  • Gold (per ounce) 0.28.3-10.3-4.67.512.6
  • DJ-UBS Commodity Index0.39.84.1-7.54.9-0.6
  • DJ Equity All REIT TR Index0.310.80.310.023.110.0

Free Consultation

Enter your email address to receive an email from us to schedule your consultation.

*Don’t worry, you will not be spammed.

info logo

Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

BrokerCheck

Investment advisory services are offered by Optivest, Inc. and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC. Securities are not FDIC-Insured, are not bank-guaranteed and may lose value. This website is provided solely for Optivest, Inc. clients and does not intend to provide investment, tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. All references to Optivest on this website refer to Optivest, Inc. (a California Incorporated company) and all references to Optivest Properties refer to Optivest Properties, LLC. Optivest, Inc. does not represent that the securities, products, or services discussed in this website are suitable or appropriate for all investors. Information herein is taken from sources deemed reliable and neither Optivest, Inc. nor Gramercy Securities, Inc. is responsible for any errors that might occur. Optivest, Inc. may only transact business in those states and international jurisdictions where we are registered/filed notice or otherwise excluded or exempted from registration requirements. The information on this website is not intended for distribution to, or use by, any entity or person in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject Optivest, Inc. or Gramercy Securities to any registration requirement within such jurisdiction or country. The opinions expressed by vendors or third parties are those of the author(s) and are not necessarily those of Optivest, Gramercy or their affiliates. All links to other Internet websites (“hyperlinks”) are included as a convenience for our visitors and Optivest, Inc. assumes no liability for the content or the presentation of such linked sites. No part of this website may be reproduced in any form, or referred to in any other print or electronic publication without the express consent of Optivest, Inc. The material has been prepared and is distributed solely for information purposes and is not a solicitation or an offer to buy or sell any security or instrument or to participate in any trading strategy. No representation or warranty is provided for any software that may be downloaded from this website. Copyright © 2016 Optivest, Inc.

Securities offered through Gramercy Securities, Inc., 3949 Old Post Road, Charlestown, RI 02813, 1-800-333-7450

Market Watch - Last Closing Prices


Market Quotes are powered by Investing.com

Get a Free Second Opinion