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Is Russia Preparing For US Sanctions?

  • Written by Syndicated Publisher No Comments Comments
    March 18, 2014

    Sometimes, actually all the time, it doesn’t pay to reveal your poker hand too soon.

    It looks like the U.S. may have done that by threatening sanctions against Russia on the Ukraine/Crimea situation.

    Freezing Russian assets in the U.S. would presumably be one of the options.

    But it looks like Russia may have taken preemptive action after the warning.

    No one knows at this point. But something suspicious happened this week. There was more than a $100 billion decline in the Federal Reserve’s custody holdings for foreign central banks.

    Chart courtesy of Business Insider/Mathew Boesler (data from Bloomberg).

    Fed custody holdings of USTs for foreign accounts

    Observers note that Russia would not have to sell their holdings in U.S. treasuries, but could simply remove them from U.S. control by transferring them from the U.S. Fed to a custodian bank outside of the U.S.

    If that is what happened, it could have ominous undertones, perhaps indicating Russia expects to be taking actions that will result in sanctions being imposed.

    But as I say, at this point no one knows how the decline took place.

    Meanwhile, in the other direction, investors don’t seem to be willing to leave assets tied up in Russia’s stock market, which has now plunged 33% since that head and shoulders top in October.

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    A look at a few other troubling global markets.

     

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    Other Voices:

    Jeremy Grantham, founder GMO Money Management: “U.S. Stocks are over-priced by 65%, but they’re not in a true bubble. If they go up another 30%, stocks would be similar to the 2000 bubble, more than double their fair value.”

    Comstock Partners hedge fund (yesterday): “Geopolitical events such as the Ukrainian crisis come and go, but the economic and financial problems in China have far wider market and financial implications. Today, China officially released a slew of disappointing economic results that confirm our previous suspicions about that nation’s increasingly fragile foundations. . . . . . . . . . . . . In sum, we think that the economic and financial situation in China is negative not just for them, but for the rest of the world as well.  Although the consensus seems to believe that the U.S. is decoupled from these problems, we have heard that argument before, and it has never been valid.  At current levels, the U.S. stock market is priced for something close to perfection, and not for the problems we see ahead.”

    To read my weekend newspaper column click here: Can U.S Market Avoid A Serious Correction Again-

    Subscribers to Street Smart Report:

    In addition to the charts and signals in the ‘premium content’ area of this blog, the new issue of the newsletter is in your secure area of the Street Smart Report website from Wednesday.

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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