The Black Swan Beats Up the Bear

The oil boom of the 1970s was a great financial help to the Soviet Union. It helped fund their strategic acquisition, meaning Afghanistan, which didn’t go quite so well. Perhaps the invasion of Afghanistan was a sell signal for commodities since gold peaked a few days later.
The invasion of Georgia may be playing the same roll. Money has poured out of Russia and oil has plunged over $50 a barrel. The Russian market plunged 17% today and the stock exchange was shut down.

“It’s panic,” said Oleg Vorotnitsky, head of equity trading at Uralsib Financial Corp. in Moscow. “There are problems with liquidity on the market. People are having difficulties with refinancing their positions so they started selling. Concern about AIG” is adding to the panic, he said.
The dollar-denominated RTS Index lost 11 percent to 1,131.12, marking a 55 percent retreat from its highest close of 2,487.92, on May 19. The gauge has fallen 51 percent so far this quarter, the worst performance of major world equities indexes.

Posted by on September 16th, 2008 at 10:07 pm


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