BUZ LIVINGSTON: Eastern European hotspot could cool 30a prices

Published: Thursday, March 13, 2014 at 16:57 PM.

Blue Mountain Beach ’s Raconteur-in-Residence, Tom Smith, recently pointed out a local, perhaps national, transgression. Franko “Washboard” Jackson should be on a postage stamp. Give Franko 24s and he can conjure a band for any occasion. Washboard can be a band’s front man but it’s not mandatory. While the man is a musical genius, his creativity has expanded into art and yes, even comedy. Locals and tourists may neglect their current events, but not Franko. Only a brilliant mind can turn a geopolitical statement into comedic song, “Cry Me A (brief pause) River.”

I have no clue if the tensions in Ukraine and the Black Sea will boil over or if a peaceful resolution can be reached. Unlike Congressional blowhards I confess my Eastern European naiveté. Natural gas sales earn Russia $100 million per day and many Gazprom , Russia ’s national oil company, pipelines stretch westward across Ukraine . Initiating a major conflict would put oil transport infrastructure at risk and alienate major markets. At first glance the specter of a circular firing squad looms, but Vlad Putin does not play with a full deck.  Franklin Roosevelt’s Secretary of State, Cordell Hull, once wrote, “Where trade crosses borders armies do not.”  Hopefully sanity prevails.

Germany relies heavily on Russian natural gas. Any disruption would cause turmoil for Europe ’s leading economy.  Sanctions, often touted magic elixir, would affect Russia but American companies with substantial business interests in Russia would feel the pressure. A slumping European economy could affect the US and perhaps this bubbling Eastern Europe conflict triggers a worldwide recession. During recessions, demand for vacation properties and/or second homes slump.   

We live in an interconnected economic environment.  While the US only imports about 5 percent of our energy needs from Russia , if those supplies are restricted, prices rise. With rising prices, the clamor for Gulf Coast drilling increases, another blowout preventer doesn’t work and we have black oil on the beaches again. The “Mutually Assured Destruction” mantra we came of age with has morphed into “Mutually Assured Economic Destruction.” 

Investors should not overreact. In fact ignore most of what sadly passes for news in America . We live in an Age of Communication, not Information. Investors should maintain, as always, a degree of safety in their portfolio. When Russian troops entered Crimea , the demand for US Treasury bills, notes and bonds soared. Anytime geopolitical fever breaks out the worldwide cure is the greenback dollar; it is still the safest currency in the world, a truism unmentioned at CPAC. AA rated municipal bonds have similar credit quality and their default rate is a rounding error. The return of your money is more important than the return on your money.  

Google “stock market climbs a wall of worry.” You will see nothing but old news. Market timing means you have to be right twice, when to exit and when to reenter. Some can do it occasionally but no one does consistently. Emerging markets are always volatile and often undervalued alongside developed markets. Two hundred years ago the United States economy was an emerging market and was more precarious than developed markets, but we got our ducks in a row. Will we keep them is the question.

Buz Livingston, CFP has a Blue Mountain Beach based fee-only, hourly financial planning and investment management firm. For more information, visit www.livingstonfinancial.net or come by our office at 2050 Scenic 30A, M1-Unit 230, Redfish Village .



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