Putin Ends Military Exercises in Western Russia Says Interfax; Micex Jumps
Another day, another crisis seemingly resolved for the market. Up, up, and away goes the market after falling, falling, and falling yesterday. And why is this happening?
It would appear an economy and a stock market can join forces to become quite the heroic tandem. Together, they can convince even despots to back off. The market sends the message loudly and immediately and the economy follows up with more subtle threats.
- The economic fallout for Russia was being intensely felt. Russia’s stock market dropped about 10 percent Monday and its currency fell to its lowest point ever against the dollar.
So Putin backs off, but is there any guarantee he will not go back to his forceful ways once the market settles down, which it has begun to do?
- Russia’s Micex stock index, which yesterday plunged 11 percent, reversed some of those losses and rose 5.2 percent today.
This is where economy comes in to play. It actually has more clout because it has greater influence on Russian citizens than does the stock market. Russia is highly dependent on the export of natural gas for its economic well-being, and since it built its pipeline to Europe through Ukraine, it also has great leverage with its exports, as Europe is highly dependent on the flow of natural gas through the Ukrainian pipeline.
- Russia, the world’s second-largest producer of natural gas after the U.S., has twice since 2006 cut supplies of the fuel to Ukraine, a conduit for energy to Europe. Greater access to U.S. supplies would blunt the ability of Russia to use energy as a weapon, according to supporters of lifting export curbs.
Obviously, the US has leverage in this area, since it is the top dog, and it can exert quiet pressure and if Putin des not respond appropriately, it can respond more vigorously.
- American companies need the U.S. Energy Department’s permission to export liquefied natural gas to countries that lack a free-trade agreement with the U.S., such as those in the European Union.
Thus, the US threatens to ease the red tape on exporting natural gas to Europe, which threatens Russia’s economic control over the flow of the gas to Europe, which threatens its economy, which would upset an already upset Russian citizenry and boom – Putin’s bellicosity ends, just like that, and the US stock market lets it all go.
- Russia’s military intervention in Ukraine bolsters the case for easing restrictions on exports of the U.S.’s booming natural gas production, according to energy analysts and industry groups.
To save face, though, Putin has reserved the right to attack Ukraine, and you never know what an egoist such as he might do, but, so far, the economic and market forces have belayed any military action on his part.
Writing about natural gas leads me to an interesting statistic on US oil consumption and production, one which should make market players take a look at the alternative energy sectors of the market.
- Consider that U.S. oil demand fell to a 16-year low in 2012 despite energy-hungry gadgets and the addition of some 40 million people to the total population … while domestic output surged the most in more than 150 years, the American Petroleum Institute said.
I am not sure what the above means in terms of the individual oil markets, but of this I am sure – the world of energy production is changing fast. Natural gas is making a huge dent in the energy market still dominated by oil, but how long that hegemony will last is open to question. Solar, wind, geothermal, wave generation, and fuel cells are coming on fast to add to the pressure.
Of the above, fuel-cell stocks are quite appealing. Yesterday and today fuel-cell stocks have gone crazy. They are on a humongous tear right now and I am not sure why, but I can speculate.
Fuel-cell technology is fast becoming the affordable clean-energy alternative to oil and as some of these small companies begin to get big orders from the likes of Walmart, investors want to get in on the ground floor.
The run up has been huge, but they will all pull back, and that is where the opening will be. Take advantage of it.
Trade in the day; Invest in your life …
