The Russian Bear Awakens… Part 2
EDITOR’S NOTE: As you know Russia is a hotbed of activity right now and our friend Kevin is in the thick of it. This is the second part of his three part series… you can find the first installment of “The Russian Bear Awakens” here. Here’s Kevin…
By Kevin Kerr, Special Contributor to the Dynamic Wealth Report
(TARTU, Estonia) It’s been about two weeks since I first wrote to you from the border of Russia in my tiny home country of Estonia. Much has happened in that short period of time, as Mr. Putin amasses troops on the Ukrainian border, up to invasion strength according to NATO, tensions to say the least are high.
In fact Russian bombers and spy planes, some capable of carrying nuclear ordinance, have violated US airspace over Alaska sixteen times in just ten days. One wrong move by either side could easily be misinterpreted, and disaster could follow.
Think how close we came during the Kennedy administration to all out nuclear war, probably closer then any of us really even know. The one thing that saved us was that Kennedy was no lightweight and knew how to deal with the Russians, it was still extremely risky and could have gone either way, but in the end, he went head to head with Khrushchev and got what he wanted.
Problem is Putin is certainly no Khrushchev and Obama is absolutely no J.F.K., Also, the global image of the US and its leadership ability and behavior is down the tubes. It’s a new era indeed.
Noisy Neighbors
Here in Estonia, we’re literally on the front line , we’re NATO’s key strategic foothold and entry to Russia by land and sea, and we have the US and EU soldiers and equipment here to prove it.
Many “experts” say Estonia and the other Baltic nations are a far cry from Ukraine, it’s true in theory, basically because Estonia, Latvia, and Lithuania are all EU and NATO countries and therefore and act against any of those nations is an act of war on the United States and the EU. It all sounds good, but in reality I think that promises from the EU and .50 cents will get you an ok cup of coffee.
I’m under no illusion that if Mr. Putin wants to move further into Ukraine or maybe even move on portions of the Baltics at some point, of course he would disguise it as a “humanitarian necessity”. In that scenario I do not see that NATO and the EU would not go to war over it.
Heck it’s just Estonia and Ukraine, not Berlin after all.
Many “experts” disagree with me, saying that we would immediately defend our allies. I live here in this region with my wife and two young daughters, so I sure hope so, but again, I’m not convinced.
In fact I had this discussion with Neil Cavuto and retired Lt. Col. Bill Cowan on Fox News when all this started, please listen to my views but then listen to the Colonel, give his chilling confirmation of my scenario.
Watch it here. https://vimeo.com/92944880
Putin: Hand on the Trigger
Sanctions are the weapon of choice right now, and that is a knife that can cut both ways. The US has imposed somewhat strict economic sanctions on Russia, and then recently ratcheted them up a notch.
Now Putin has now responded in a very calculated and painful way, he knows exactly what he is doing.
Remember, Putin did not get to where he is because he is stupid or weak, or without ambition.
It’s no secret that he wants to “rebuild” the empire and he is making a lot key strategic moves to make that happen. NATO has gotten a little too close for comfort in the region, and Putin is drawing a big red line in the sand as of right now.
To respond to the sanctions form the West, Putin has banned all dairy and meat imports from the EU and US, and any Western nation supporting the sanctions against Mother Russia.
Trucks loaded with meat and dairy have already been turned away at the border in Lithuania, and this is just the beginning of what could be a long drawn out game of cat and mouse.
Every country in the Baltic Region, Northern Europe and the rest of the EU, stand to lose big time because of these sanctions. Finland for example relies heavily on trade with Russia, tourism, and agriculture and seafood purchases.
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Lithuania, Latvia, and Estonia, also depend on visitors and money from Russian tourists and business.
Western Europe and the US are not immune either, with up to 30% of Russian poultry supplies currently coming form the US alone, and the EU has much higher exposure.
But there is a much, much bigger problem looming. One that in August is not as apparent as it will be in October.
Fuel and natural gas, this is the trump card Mr. Putin is holding. The worst I fear for this scenario is yet to come unfortunately.
The Winter of Europe’s Discontent
Now let me tell you, living this far North of the equator gets very cold in the Winter, with ungodly amounts of snow and constant darkness. And that assessment is coming from someone who grew up in Minnesota and enjoyed the horrible Winters there, and this is far worse.
Cold and snow in this region is no joke, and heating fuels aren’t either.
Estonia, Finland, Latvia, Lithuania are all almost 100% dependent on fuel and natural gas from Russia, Ukraine too. But something you may not know is that Germany for example imports about 40% of its heating fuels from Russia, other European countries import a lot too, the situation is a powder keg ready to blow.
Mr. Putin can always just shut off or significantly slow down the flow of natural gas and oil by the turn of the spigot. He has done it in the past, like back in January of 2009 when he turned off the spigot to the pipeline running through the Ukraine, much of Western Europe was in panic mode, and rightly so.
While sanctions on agricultural products is a substantial disaster for the EU, an energy embargo or complete cutoff would be catastrophic, Putin knows this. Would it hurt Russia, sure it would hurt them too, but Putin will most likely not cut supplies completely off, all he has to do is put a crimp in supplies to bring the EU to its knees, take away 30% of the natural gas flow and heating fuels and you are talking about an explosion in prices.
All the tough talk your hearing from EU leaders like Merkel would be muted, if they want to save their own political career, because the people will oust them otherwise.
Do you really think some guy living in Munich wants to pay 70% more for his petrol because Putin wants the Ukraine, no. Do you think they will have the resolve to maintain sanctions when they can’t even heat their own homes, no.
The US is not as sensitive to these energy concerns with Russia, and therefore the EU and US have very different resolve on this matter, it could fracture NATO, and Putin knows it.
This could be a very, very long Winter for Europe. So the bleak scenario I have outlined is certainly not a very positive one I know, but as investors we need to trade with the ebb and flow of the geopolitical landscape and take action when others are fearful.
So what if anything is an investor and/or trader to do with all this turmoil going on? My answer. Plenty!
Where the Smart Money Is Headed!
Now setting aside the bigger issues of who is actually right and wrong in this conflict is hard, and knowing the amount of human suffering that is going on in the region, and the loss of life that has already taken place is devastating.
However as investors we must all act accordingly, survival mode must kick in and all hands must be on deck. You must protect your portfolio and your assets and at the very least hedge yourself against the inevitable hyperinflation we are already beginning to see.
The boiling frog syndrome, as we discussed in the first part of this three part series (in case you missed it you can read it here).
The boiling frog syndrome is when we see inflation and therefore extreme pain slowly creep in from all sides, until the water is boiling and there no longer is any chance of escape. The water is getting very warm right now and our frog looks very red.
What three sectors do I feel will most benefit from this ongoing clash between the West and Mr. Putin?
Action or Reaction!
The Choice is Up To You As An Investor
Clearly precious metals, primarily silver and gold will benefit far more then anyone is saying. Sure prices have gotten beat down off their highs, that’s a fact, and that just means that this is an even better opportunity because we have corrected so far.
Talk of global gold backed currencies, a Russian/Chinese gold-based petro currency, even a gold backed UAE Dinar, you name it, it’s being considered seriously. Numerous ways to get around the US Dollar are being discussed far and wide, as the once mighty “reserve currency” fades in value on a daily basis.
So even if you have never purchased gold or silver or key strategic mining companies that stand to benefit, then now is the time to add even a portion of the space in your investment allocation to gold and silver, you will be in good company.
I want to encourage everyone to at least consider owning some exposure to gold and silver and the key mining stocks I suggest.
These mining stock recommendations are available in a special offer to Dynamic Wealth Report Readers, the report is only $9 and can be accessed using this special link – Click here now to access your special report.
Needless to say, gold and silver are not the only sector that will benefit big from this crisis, the energy market will explode, this is a game changer.
Energy production, exploration, transport, equipment, you name it, this sector stands to gain big as this unfolds, we can expect energy prices to ratchet up solidly the longer this goes on, that means share prices of key energy companies will too.
In addition to precious metals and energy, agriculture and soft commodities too will benefit big. Next to energy deposits and transport Ukraine is known for some of the most fertile soil in the World, Mr. Putin’s objectives there go well beyond just energy.
The agriculture sector offers a harvest of profits and many ways to play these markets.
Now how will all this actually unfold and how fast, nobody really knows.
The fact of the matter is though that it is unfolding and nobody can put the genie back in the bottle, the die has been cast and a new form of cold war is upon us. As the snow begins to fly in Berlin and Paris, we could hear a much softer voice of the likes of Germany and France, The EU is in between a rock and a hard place and there are no easy answers.
In part 3 of our 3 part series I am going to tie it all this together for you as I report to you from the border of the Ivangorod castle in Russia, and if I have time, and the tensions aren’t too high, I’ll give you a handful of trades I like for the rest of the year…
Remember, the Russian Bear is wide awake and on the move, and so are we. Please be on the lookout for my final article in this 3 part series exclusively here at the Dynamic Wealth Report somewhere near the end of August
Until next time, On the border of Russia, I’m Kevin Kerr.
Kevin Kerr,
The Resource Renegade
Exclusively for the Dynamic Wealth Report
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Category: Commodities
