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Yesterday Russia Essentially Told Ukraine to Go Pound Sand.

About fifteen years ago the common mantra on Wall Street was that the business cycle is dead partially predicated by the mutlipolarity and interconnecting business relationships.  Why would ABC go to war against XYZ for ABC owns businesses/lent money to XYZ.  Economic interests would reign supreme.

Yesterday Bloomberg reported Ukraine asked Russia to restructure $3 billion, part of a planned $15 billion rescue package negotiated between the two countries in December 2013.  Russia essentially told Ukraine to go pound sand.

I would argue Russia’s response was to be expected.

If one takes a step back, the economic notion is a fool’s belief as nationalism historically trumps everything.  If I was Russia I would demand payment of this $3 billion for is not the West attempting to change Russia’s behavior via economic force?

I am relatively certain the IMF will rescue Ukraine; however this is not my point.  My point is that times or behavior are rarely different.   There are just different people.

Speaking of which, I have commented many times there have been five oil declines since 1990, a decline averaging about 48%.  In each case, oil was around 52% higher in six months after crude bottomed.  Before yesterday’s nominal selloff, oil has rebounded about 28% from its January nadir.

Many are posturizing oil will soon resume its decline to perhaps a $20 handle.  I ask is this realistic given the geostrategic issues at hand?  Nationalism has been around forever and in my view some event will cause prices to rise nor fall given costs of productions.

Speaking of rising, equities rallied about 1% as some are speculating Greece will reach an agreement with its creditors even as Germany signaled little willingness to compromise.  Oil fell.

Last night the foreign markets were down.  London was down 0.38%, Paris down 0.45% and Frankfurt down 0.16%.  Japan was down 0.33% and Hang Sang down 0.87%.

The Dow should open nominally lower ahead of the meeting between Greece and its creditors.  The 10-year is up 3/32 to yield 1.98%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.