Today I want to tell you a story about the steak bandit. Just stay with me here. This is a story about energy – especially crude oil.
Last Saturday at the grocery store, a fellow shoved some steaks down his pants and made a dash for it. Aside from a possible commentary on the plight of some people in the current economy, the episode with the "steak bandit" brought back a memory, along with a broader implication for the energy sector.
Here's the memory and how it relates to energy...
Stock market trends today, August 1, 2014: U.S. markets plummeted Thursday in a broad decline. The DJIA shed 317 points in a heavy sell-off. The S&P 500 fell below its 50-day moving average, erasing all of July's gains as concerns across global markets hammered stocks. The Chicago Board Options Exchange Volatility Index (VIX) jumped more than 27% to an intraday high of 17.11, its highest level since April.
This morning (Friday), the dollar hit a 10-month high against other global currencies while stocks around the world slumped. However, the U.S. unemployment rate rose to 6.2% on news that the economy gained only 209,000 jobs – falling under economist estimates of 230,000 new jobs during July and an unemployment rate of 6.0%.
Vladimir Putin had a chance to back down from his aggression in the Ukraine after Russian separatists shot down a Malaysian passenger jet.
Unfortunately, he didn't.
With no answer to the charge that the Malaysian jet would not have been shot down but for the course of events he set in motion, Mr. Putin has also shown no indication that he plans to change course.
Left with little choice, the United States and European Union imposed a new series of economic sanctions on Russia to express their disapproval. The new sanctions include restrictions on Russian state banks from financing themselves on a long-term basis in European capital markets. It also imposes an embargo on trading weapons and dual-use technology on Russian companies, and restricts exports of energy-related equipment and technology to Russia.
For the moment, the West hopes that economic weapons will create enough domestic political pressure on Mr. Putin to change his behavior. This may be an optimistic scenario.
If recent history is any indication, it will require far more severe steps to put an end to Mr. Putin's hegemonic dreams.
Mr. Putin is playing a very long game, one in which he's prepared to see the Russian economy pay a very high price. That will mean consequences for investors the world over… Full Story
