Many market participants continue to bury their head in the sand and ignore the events unfolding in Eastern Europe. Putin continues to build his military forces along the Russian border and they consist of the exact formations one would have to launch a full scale invasion. It is the exact formation that NATO was created to counter. The head of NATO and the Chairman of the House Intelligence committee have both said the scenario for Russia to take over southern and then eastern Ukraine and Transnitia and more parts of Georgia to form a complete land bridge and then possibly link further with Iran, is a very real scenario which is highly likely to happen. The fact that Putin called Obama is ominous in that he called out of strength not weakness. He possibly said let these areas vote to join Russia as Crimea did or I will continue to build my forces and I will act if there is a threat to the well being of Russians in these areas. Obama keep talking about international law as though Putin gives a damn, which he clearly does not. Obama and Western Europe have demonstrated they will fold and do nothing other than meaningless sanctions. Obama prefers to not allow drilling and gas and oil production than he cares about providing fuel products to Europe to not be dependent on Russia. For Putin he sees no reason to stop and he will push and intimidate Europe and Obama will continue to say a lot of nothing and do nothing meaningful.

So what does all this mean to US real estate investors. Potentially a lot. We are reentering a new form of the cold war. Obama can claim Russia is only a regional power, but Europe and NATO today are hollow and not even a regional military power. Russia will proceed and this will disrupt the European economy. Investments that seem to hold great promise in Europe today are at risk. Not of a Russian invasion of Europe, but of economic disruption and a requirement for ramped up defense spending by NATO once Putin makes it clear he is not stopping because of some wimpy sanctions. The price of gas in Europe is already twice that in the US, and Putin can make it even higher, thereby making German manufacturing too costly. Many months ago I said the risk reward for investing in Europe could prove too high vs investing in the US, and here we have a black swan event that clearly shows the possible level of risk that really exists.

If the Russians do as is predicted by Mike Rogers, the Chair of the Intelligence Committee, and they do take control of major parts of Ukraine and surrounding areas of other countries, then the US economy will be heavily impacted to the negative as the world becomes destabilized and trade is potentially restricted. Since Obama did not allow LNG export facilities to be built all these years, will prevent the US from what could have been a huge boost to the US economy by exporting billions worth of gas to Europe. The situation will lead to even more uncertainty by corporations which will inhibit investment in new facilities and in hiring. It will eventually crimp growth in GDP, it will inhibit gains in the stock market and in the ability of companies to do new capital raises.