Watching the wild gyrations in the market I couldn't help but think of Shakespeare's “Macbeth.”

She should have died hereafter.
There would have been a time for such a word.
Tomorrow, and tomorrow, and tomorrow,
Creeps in this petty pace from day to day
To the last syllable of recorded time,
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life’s but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

-William Shakespeare

The Dow was down 99 points, rallied up 249 points, and then it fell to earth, back into the abyss, finishing the session down 111 points.

The only constant was volatility as techs were hammered; even airlines and retailers took it on the chin despite the fact they are supposed to be the perfect counter-investment to crumbling oil. More than likely, Wall Street is freaking out for nothing or using a smoke screen to take profits, but it is really odd and hard to dismiss that it is out of hand.

Something is eating the market. There are obvious angles that make sense like infrastructure and financial issues. Could all this turmoil be something else hidden by the headlines? I am not sure. I think the pullback is full of sound and fury, but I am not sure who the idiots are at the moment- those panic selling or those holding as losses mount.

My focus is on value, the preservation of assets, and the swiftness of declines in certain areas like energy and tech, which have been amazing and hard to catch.

Putin Blinks...Now What?

What is happening in Russia could be karma, after the way they have bullied themselves around; first in Georgia and most recently in Ukraine. That being said, a wounded Putin is probably more dangerous than one barking about old borders and the west.

On that note, some are wondering if this is like the Russian Flu, the crisis in 1998 that saw a series of political issues and global economic woes push the country into a debt default- even after a financial package from the International Monetary Fund (IMF).

This time, Russia's debt is relatively low and they have large foreign assets, including $108 billion in US Treasuries. However, instead of an economic contagion, the question is should the west worry about military retaliation? It will not happen now, but Putin has begun an aggressive campaign to modernize Russia's military capabilities by focusing on combat readiness.

The move has the approval of the Russians, (even 44% are okay with the buildup at the expense of a hit to the economy, versus 41% who oppose).

By 2020:

• 1,000,000    Active soldiers
• 2,300            New tanks
• 1,200            New helicopters and fighter jets
• 50                 New surface ships
• 28                 New submarines
• 400               New intercontinental ballistic missiles

I will say, however, Putin seemed to have blinked, allowing the central bank to go to a 17% benchmark rate; he has never been shy of overplaying his military cards.

The 1998 Russia Debt Crisis was actually aided by a series of events that included massive changes in government, a bailout, and interest rate hikes; (try 150%).  This was all in vain, as Russia plunged into a debt default.

Good Old-Fashioned Common Sense

When I think about the Federal Reserve, I often think about one of my favorite television series of all- time…The Beverly Hillbillies and the episode that still ranks as one of the highest rated ever.

In this particular episode, the greedy banker rushes to his doctor’s office only to hear the only cure for his common cold was to eat sensibly, get lots of rest, and to drink plenty of fluids, and a week to ten days later he would be cured.

Later in, we learn that Granny had developed a cure for the common cold that set-off frenzy where the banker sees nothing but dollar signs. He set Granny up in a big office to practice medicine, even though she was not licensed. It was a good thing, too, because Granny and her family were offended that those fancy “city doctors” did not take her seriously; one even called her a witch doctor.

Toward the end of the show, we learn Granny perfected the formula 45 years earlier with a bunch of ingredients that included her homemade moonshine.

Once someone took the potion all they had to do was to eat sensibly, get lots of rest, and to drink plenty of fluids, and a week to ten days later they would be cured.

The point is, all these intervention schemes from bailouts to printing phantom money, at best, gets the economy to where it was going anyway, except with more risk and a nasty hangover.

Which one has the cure to our economic ills?

Today’s Session

Lower gas prices and dips in certain core subcomponents resulted in consumer price index (CPI) declining during the month of November. Month over month, CPI declined by -0.3% following a 0.0% change in October. Year-over-year CPI saw a deceleration at 1.3% compared to 1.7% in the previous month.

Indexes for medical care, airline fares, and alcoholic beverages rose within the core while those for apparel, used cars and trucks, recreation, household furnishings and operations, personal care, and new vehicles declined, resulting in the shelter index rising 0.3%. As much as we love when things become less expensive, the prices for staple goods may be dropping too fast.

All in all, the CPI report demonstrates that the Fed still has wiggle room, but it is still a mystery as to when they will move rates.

The Russian ruble is showing signs of improvement, having declined from lows yesterday. Still, this is a flashing red flag. Many companies are trying to hedge against the ruble crisis. Apple has stopped online-sales in Russia completely. Other companies with large exposure to the country are attempting to raise prices in the region.

Comments

Russia is hurting badly from sanctions. Saudie Arabia is playing games with the world to keep their market share. White America is doing fine, it is being torn appart. Europe doesn't know what do anymore. We have no leadership, Pakistan is going to blow up and we don't think there is a worldwide implosion coming, give me a break! One mistake and we have WW3... God help us all tom wayne on 12/17/2014 10:07:20 AM

love the BH's show...still watch reruns...need a good laugh in this world we live in today RLB on 12/17/2014 12:16:37 PM

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