With the renewal of the Cold War by Russia, bad possibilities are now considered possible, such a nuclear war.  (If that happens, your portfolio may be one of the least important things to you.)  A ground war with Russia is equally unlikely.  But, if Russia invades eastern Ukraine next week, as I expect it will, another Cold War is certain.  The last one lasted over 30 years.

This uncertainty is already weighing on the stock markets worldwide, as uncertainty always does.  Analysts refer to this as “headline risk.”  The stock market ignores traditional indicators, such as corporate earnings and GDP growth, and reacts to the headlines instead.  Headlines containing the word “Russia” are seldom good for stocks!

However, the difference between Cold War I and Cold War II is that there is a capital market to punish the Russians this time.  Their stock market and their currency have both plummeted terribly.  How much financial loss will rich Russians sustain before pressuring Putin?  Soon afterwards, the Russian people will begin complaining about inflation from rising import prices.  Some analysts suspect Putin is among the top ten richest men in the world.  If so, he has already sustained huge personal financial losses.  Cold War II will NOT last 30 years.  Finding a face-saving way for Putin-the-egomaniac to exit will determine the length of Cold War II.

I’ve been hoping for a 10% correction, as that is good for the stock market in the long run, but I never expected to thank Russia for it.