Image You Awaken to Foreign Goods Costing Twice what it did Six Months Ago

If you can imagine waking up this week only to discover anything that has an international origin or making costs TWICE what is cost just six months ago.

This from the BBC:

Technology giant Apple says it cannot sell products online in Russia because the rouble’s value is too volatile for it to set prices.

The company stopped sales of its iPhones, iPads and other products in the country after a day in which the currency went into free-fall.

The rouble has lost more than 20% this week, despite a dramatic decision to raise interest rates from 10.5% to 17%.

You Would Be Waking Up in Russia

Russia Rouble Devalued

Devoured by fellow currency markets may be more descriptive. On Tuesday morning USA time, Russia increased their benchmark short-term rate by over 6% (recall we are watching for .25% moves here in the USA) in order to stop their home currency, the Rouble,  from falling. Ahhh… it did not work!

An upward sloping line in this chart (US$/Rouble) would mean your currency is losing value (devoured).

US to Rub 12-15-14

 

The scare here is Putin’s reactions, none of which are easy.

  • Leave Ukraine and stop sanctions (doubtful, too much pride loss)
  • Wait it out (look out recession and social unrest)
  • Slap a neighbor to distract (sure hope not, but possible)
  • Throw Putin out (yikes…ugly and disruptive, maybe)

Putin on Horse

This photo recently surfaced (purposely of course) and is not the face of a fearful 62-year-old leader.

We are not calling for a Russian conflict of any kind, this would be absurd and illogical. We are open to a possible drag on global economies due to Putin’s no easy/save face way out!

And on that note Happy Holidays…. being silly here, but wanting to acknowledge what is going on!

John Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

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