Ukraine, Time to be Careful

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Stock futures tumble as Ukraine crisis escalates (Gold, oil, dollar, bonds in favor for jittery investors)

Gold bugs need to remember that ‘gold as a crisis hedge’ is never a winning strategy beyond the flashpoint.  Similarly, ‘stocks down on XYZ crisis fears’ is never a winning strategy either, beyond the flash point.

Gold bugs should not be seeking to find glory (and profits) on geopolitical misery.  Rather, they should simply stay focused on whether or not the economy is accelerating or decelerating (ISM coming shortly) and likely policy responses.

gold

Stock players should be focused on whether or not these ‘jitters’ are likely to refresh the budding stock mania with a cleansing bout of negativity.  Again, ISM and a raft of other data are coming this week.

The Fed is tapering long-term bond buys but guess what, T bonds have looked like they are bottoming for another upturn (rates drop), and that would do the Fed’s job on the long end of the curve.  I bought TLT last week for the prospect of a bottom and renewed upturn.  Yet, I wonder if I’ll need to sell it as the jitters ease?

As long as they manipulate the market (and the economy) by keeping firm on Fed Funds (ZIRP), which they can do as long as they want with bonds strong, the market’s primary fundamental underpinning (i.e. the bubble making machinery) is intact.

Bottom Line

If gold is going to go up, it will be because of fundamentals other than Ukraine.  The effects of the conflict will be fleeting.

If stocks are going to go down, it will be because of fundamentals other than Ukraine.  The effects of the conflict will be fleeting.

Not that these things cannot coincide, but it is time to be careful and make sure your mental ducks are lined up in a row.  If anybody lists Ukraine as a fundamental driver of gold on one of the gold sites well, I am not going to tell you what to do but I am going to tune it out.  And then remember who wrote it to make sure I never take that person seriously in the future.

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