Over the weekend, I had written briefly about a condition known as Anticipatory Anxiety. As the name would suggest, this is a condition wherein one is feeling high levels of anxiety concerning a possible future event, and would pretty well seem to sum up how much of the world, markets included, are viewing the situation between Ukraine and Russia right now. What will happen next? Needless to say, no one knows how this will unfold, but we do know for certain that the West is beginning to rachet up the sanctions against Russia. Over the weekend, they have blocked some Russian banks from using the SWIFT messaging system, and this morning, the US has announced a ban on transactions with the Russian Central Bank and implemented new sanctions on the Russian Direct Investment Fund. Russian aircraft is no longer allowed to fly to the EU or the United Kingdom, and France has announced it will begin to seize Russian oligarchs’ property, yachts, and cars. Some people mistakenly still view Russia as a communist nation, but it is as capitalistic as they come; it is just that the money and power are concentrated into the hands of a very few. While it is easy to question why harsher measures have not been enacted sooner, as technically every dollar of commerce with that nation right now is, in essence, another dollar that helps them fund their aggression, it is essential that this is a unified effort. Sometimes that takes a bit longer than you would hope.
Regardless, the sanctions have begun to take effect. Interest rates at the Central Bank have pushed up to over 20%, the cost to purchase derivatives to insure against Russian debt default have skyrocketed, their stock markets have suspended trade as share prices have plummeted, and the Ruble has dropped to a record low. While such things may not sway the intentions of an egotistical nationalist with a Napoleonic complex who appears determined to take Russia to his own version of a former position, i.e., Vladimir Putin, it could bring enough financial pain to change the attitude of some of his cronies. At least, that is the desired outcome.
Of course, all of this just ratchets up the level of Anticipatory Anxiety in all markets, and for the time being, we most likely have extreme levels of volatility to look forward to. I have not heard any reports coming from the Ukraine and Russian delegations that are meeting today, but at least some communication should be considered a positive step. In every sense of the word, we are currently sailing in uncharted waters with no point of reference, so even the Sextant is providing little help. For now, there is little one can do but remain patient and watch history unfold before our eyes.