Downing of jet could be a market game changer
The incident set in motion events that could cause more pain in the weeks ahead.
The market initially got it wrong. That's how I feel in retrospect about the downing of MH17 over Ukraine. That July 17 event I now think set into motion a lot of what caused last week's sell-off and could cause more pain the weeks ahead.
It didn't hit me until I read last week that Ben van Beurden, the charismatic CEO of Royal Dutch Shell (RDS.A), described the crash as the event that could be a "bit of a game changer" from "a trade and investment perspective."
First, it was on the conference call of a terrific earnings report and the stock went higher, which threw me off. Initially I dismissed it. But then, when I mentioned it to BP (BP) CEO Bob Dudley, he was pretty matter of fact that it's a big deal. Considering that BP's partner Rosneft pumps roughly a million barrels of oil a day from Russia, much more than any other company, the game-change comment seems far more than just a throwaway.
In reality it represented a change of sentiment along so many measures of business. First, because Vladimir Putin apologized for nothing and seemed hardened by the incident, one has to presume that it would mean nothing to him to turn off the natural gas spigot to Europe.
It is inconceivable to me that the continent wouldn't almost immediately be thrown back into a recession if that happened. It's one thing to be cold. You can put on a sweater. It's another thing to have shut-down plants that use natural gas, and given how it is the fuel for much of industrial Europe these days, shutdowns would seem likely. Europe cannot sustain a business interruption. It would either have to come to the peace table and say to Russia you can have Ukraine, something that at least in our president's eyes seems to have a real historical parallel to the appeasement of Germany when it came to the Sudetenland of Czechoslovakia, or it would put through sanctions that at another time would mean -- let's just say it -- war. You have any other answers? I know I don't.
There was another impact that I didn't think about until I read a poll commissioned by TheStreet.com that said 36 percent of people are now afraid to fly internationally since MH17. We have had these scares before, as planes have been bombed or have been hijacked and used as bombs, and they have led to a temporary cessation in flying.
Normally the airline stocks are so horrible that few investors bothered with them anyway. That's no longer the case. They have become market leaders. They rallied after MH-17, no doubt in conjunction with good earnings reports. Now they are rolling over, and I think that's because of fear of flying, however temporary it might be, coupled with a commensurate increase in insurance costs. Cutting numbers on airlines.
Finally, the stock market got it wrong because of the pundits' endless obsession with the Fed. There's plenty of money sloshing around that's betting the Fed is behind the curve so stocks will go down. But stocks go down because of profit peaks, and I think the combination of worries about Ukraine and Israel coupled with a potential slowdown in Europe will be the real drivers. The dollar has been a rocket ship all month, and it only strengthened after MH17. A strong dollar is no friend of American business. Nor has it been a friend of oil, which is plummeting.
Who is obsessed with the Fed? It's the same cottage industry as always, the Free Marketeers and the people who make a craft of Fed watching.
Sorry, but these ideologues and professional Fed watchers better cast their eyes a little more toward Europe, because that's where the profit erosion is. I think MH17 won't be a "bit of a game changer." Rather, it's the Rubicon that no one wanted crossed but certainly looks like it has been.
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no one cares about the plane being shot down.
while it's a crime and a tragedy to the families, from an investment point of view, no one cares
Little Jimmy Cramer sat on a wall,
Little Jimmy Cramer profits from all
Tell us to sell, then tells us to buy
Now it’s a plane crash making him cry
Oh for the loss of innocent souls?
Lament for Washington’s fiendish goals?
No….not our Jimmy his time thus to kill
Little Jimmy Cramer, the shameless market shill
But Cramer said that it didn't matter last week -- aaaaaaaaaand he changes his mind again. I know he needs topics to be able to write about daily, but come on! It's as if he just throws crap out there that has a kernel of truth, and then says the opposite several days later, all so he'll just have something to post.
Cramer is like junk food: you know he's not really good for you, but it's difficult to stop going back to it. I'm working on weening myself off of this clown.
It wasn't the MH17 downing, it's the total amount of uncertainty that keeps accumulating including the FED rate increases, foreign crisis, political bickering, upcoming elections and on and on. Markets like to see into the future with some amount of clarity and this isn't going to be possible until we get through the November elections and 3-5 more months of economic data points. In the meantime, dog days of summer will cause this market to go under.
I think Jim's comments have a lot of validity, but if Russia sells the natural gas to Europe, then if they stop they also stop making money from it. Sort of cutting off your nose to spite your face. Income is after all income.
eventually you will have some loyal followers who think you are a genius
Why would Russia shoot down or want a commercial airliner shot down? If you are talking about
the fact that Russia gave or sold weapons, don't we do it all the time? McCain wanted us to go into
Syria and give the rebels ( that we can't even validate) weapons and the sad part is a lot of innocent people get hurt with these conflicts. People that have nothing to do with the power struggle, control struggle and who makes what dollars.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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