Chicken Kiev

The Crimean peninsula is again in the headlines as Russia has invaded in force. This is not the first time that this territory has been fought over.

Cannon to right of them,
Cannon to left of them,
Cannon behind them
  Volley’d and thunder’d;
Storm’d at with shot and shell,
While horse and hero fell,
They that had fought so well
Came thro’ the jaws of Death,
Back from the mouth of Hell,
All that was left of them,
  Left of six hundred.

— Alfred Lord Tennyson, The Charge Of The Light Brigade

I am amazed at the equanimity with which this invasion has been received by the financial markets. It is a total game changer, everything that has been taken as given about Russia as a modern, civilized participant in the global economy has been swept way, literally overnight. A new version of The Great Game is now in progress. Russia is a major energy supplier, which is a two-edged sword because, while she can use her control over Europe’s energy supply as a threat, her economy is heavily dependent on those energy revenues. The Russian central bank abruptly raised interest rates to defend the ruble, while the Russian stock market crashed 11%.

But here in the US, after some selling this morning, the charts show the classic straight line as robo-traders are busily pumping the indices back to near-unchanged as I write.

I have no idea how this will play out. But the world got a whole lot scarier over the weekend and the gap between reality and the market’s illusion became an abyss.

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