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%.