World (& Markets) (& Davy) Gone Mad

Most readers (at least the stock-watchers among you) should be aware of the conflict in Georgia by now. Inexplicably, news of Russia opening a 2nd front has not prevented oil from falling 2% and gold 4% on the day. Perhaps I don’t pay enough respect to the power of technicals to move markets (sentiment is obviously a major factor as well). Most gold stocks are selling at prices matched when gold was at $600/oz. The oil stocks are also being marked down, though most not as drastically (some exceptions include TLM & CHK). I honestly can’t fathom what people are thinking.

The conflict in Georgia has the fingerprints of inept US foreign policy all over it. Undoubtedly, the Bush administration’s plans to install missile shields in the Czech Republic and Poland, the West’s backing of Kosovo against Serbia and W’s explicit support for Georgia’s stated desire to join NATO has straightened up Russia’s back. We are now witnessing the emphatic response. Georgia contains the vital Baku-Tbilisi-Ceyhan Pipeline, the only energy supply source from central Asia to the EU not under Russian control (for the moment). Maybe the markets are betting that once Russia takes control of Georgia, they’ll benevolently manage the energy resources to the EU.

What is also clear is that Russia has absorbed the message that markets so far have failed to register: the US, in many ways, is all talk, no walk. While Bernanke and Paulson are still able to jabber to responsive audiences (i.e. they still move markets sometimes), Putin is basically telling Bush/Cheney and the EU to go f*ck ourselves.

For all his cheap talk about Obama being an appeaser, Bush now comes off as an impotent fool — appeaser-in-chief, if you will. Here’s his response from a Wall Street Journal article:

“I’ve expressed my grave concern about the disproportionate response of Russia and that we strongly condemn the bombing outside of South Ossetia,” Mr. Bush said in an interview with NBC Sports.

NBC-f*cking-Sports. Anyone who plays chess knows that some positions can’t be played out of — i.e. some bad positions can only be avoided and once you are trapped, it is too late. The truth is , as the FT points out, the West is powerless to stop it or else, risk a dramatic escalation. Furthermore, the Bush administration and its utter incompetency across all areas, from domestic disaster relief to economic management to foreign affairs, has mightily exacerbated a slide that Byron Wien, in the FT,writes was already in progress and as such, we as of now do not have the ability or flexibility to respond to such geopolitical gamesmanship.

Please forgive my semi-rant. I’m young enough to expect to live through the fall-out of W’s administration for decades and it pisses me off. Bringing it all back home, the commodities pullback is frightening, not least because of its sharpness. You even have respected folks like Dr. Marc Faber predicting weakness in the hard assets sector for the back half of 2008. But that’s not the long-term view. The world is hardly getting safer and most fundamentals point to higher commodity prices (or a global depression). I am acting accordingly.

As always, YMMV.

One Response to “World (& Markets) (& Davy) Gone Mad”

  1. The Enlightened American » Amidst the Handwringing, The Naked Truth Says:

    [...] World (& Markets) (& Davy) Gone Mad [...]

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