Peter Boockvar: Russia is no small matter for markets

My friend Peter Boockvar put a note out on the Russia situation this morning, I’ve excerpted what I believe to be the key portion for investors…

Russia joined the WTO in August 2012, is a major exporter of energy to the European region and the Ukraine is a major exporter of corn and wheat. All three commodities are up sharply this morning. From a trade perspective, the US did $38b in two way trade with Russia in 2013 according to the Census Bureau. According to the European Commission, Russia’s two way trade with the EU in both goods and services was about $280b as of 2012 (latest full yr data they have). Russia is the 3rd largest trading partner of the EU and the EU is the largest trading partner of Russia. Also, up to 75% of Foreign Direct Investment in Russia comes from EU member states. With the world in total, Russia had two way trade of goods and services totaling about $665b in 2012. Thus, the problem with sanctions is that it may hurt the sanctioning countries as much as it damages Russia. In order to try to stem capital outflows, the Russian central bank hiked interest rates 150 bps to 7%. The Russian Micex index is down 11% and the ruble is down by 2% vs the US$ and 1.5% vs the euro.


Peter Boockvar
Managing Director, Chief Market Analyst
The Lindsey Group

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