There is a cloud on the horizon that we should keep our eyes on. It is the end of the Russian experiment in democracy at the hands of Vladimir Putin.
I track the major economic and financial storm systems in the Storm Watch section of our website. They identify situations where policy change has opened a gap between returns on different assets, which attract the attention of global investors. My weather map today is tracking storm systems dealing with Iraq, telecom, China, tax policy, and business lending. Each one poses a risk. Each creates an investment opportunity.
I recommend that you read Gasparov’s op-ed piece, Putin’s Appeasers, in the European edition of Thursday’s WSJ, which takes western governments to task for not objecting to recent Russian events:
Under the direction of Mr. Putin, Russia is well into its transition into an authoritarian state. The costs of this change for the Russian people and the world are high and getting higher.
We have grown used to seeing Russia as poor and powerless. That is going to change. Just as commodity deflation in the 1980’s dried up Russian revenues, last year’s commodity inflation has turned Russia into a money machine. Russian oil and gas reserves are the only real alternative to the Arabian Gulf in the next decade. And they still own all those nuclear warheads.
Ten years ago I asked a friend and former cabinet member in the first Bush administration why they did not simply purchase Russia’s stock of nuclear weapons in 1989-1992 in exchange for food during the first long winters after the fall of the USSR. He said they couldn’t afford it; the budget deficit would have been too big. I think it would have been our best bargain of all time.