Most psychologists believe that a healthy male ego is good for a man.  It makes them more confident, competitive, and committed to doing a good job.  Most women believe a little may be good but too much is awful.  At some point, a healthy male ego can morph into egotism, which is characterized by an exaggerated self-worth.  Sometimes, egomaniacs can also be egocentric egomaniacs, which is characterized by an exaggerated self-worth combined with insensitivity to others.  The world revolves around them, or so they think.

Vladimir Putin is an egocentric egomaniac, which makes him very dangerous.  If you think a cornered rat can become vicious, just imagine how a cornered egocentric egomaniac would react, especially one with nuclear weapons.

Russia is in terrible shape and getting worse.  Just last week, I gave a lecture and talked about the 20-20-20 problem of Russia.  The Russian ruble was down 20%, their stock market was down 20%, and their unofficial unemployment rate was 20%.  I lectured that no leader can survive in the long term in such a bad economy.

Since then, it has gotten worse.  The ruble is now down 30% and still dropping.  This is inflationary for the Russian people, as the price of imports has risen 30%.  It is called “importing inflation.”  To control this descent, the Russian central bank has started spending their precious national reserves to buy rubles.  It is estimated they spent $10.5 billion last month alone and only have $428 billion left.  That $428 billion amount is meager, as it is used to pay for all their imports.  They simply cannot afford to support the ruble very long.

Another means of supporting your currency is to increase interest rates in your country, which keeps more money from leaving the country and hopefully attracts money from outside the country.  Russia has already done this, increasing 1.5% last month without slowing the descent of the ruble.  Russian borrowers cannot be happy about paying higher interest.

Although it cannot be documented, it is widely believed much of those selling rubles and buying dollars, driving down the price of the ruble in the process, are Putin’s “friends” who are deserting him due to his inevitable downfall.  Sometimes, economic sanctions work, and sometimes they don’t.  They have worked very well in this case.

To keep the Russian people from focusing on their economic misery, Putin has undertaken military adventurism to dominate the headlines and cause the Russian people to “rally behind the flag.”  He sent tanks into the Ukraine last week.  He sent Russian fighter jets on unauthorized over-flights of western allies.  Norway has been searching for what they believe is a Russian submarine in their waters.  The margin for error increases with military adventurism.

From an investment approach, one could increase the share of their portfolio allocated to defense companies.  It is not prudent to sell the S&P short without “insider information” from Putin himself.  The only other defense is to sell and sell quickly to hide in cash.

But, don’t forget the old admonition from the Napoleonic wars — to sell on the rumors of war and buy on the sound of cannon-fire.

Just be glad you don’t have the problems of Putin!  Of course, egocentric egomaniacs believe they can handle any problems.  Too bad that’s not true . . .