NEW YORK (Real Money) -- Not going to minimize it. There are three huge land mines out there and we know at least one of them will most likely be triggered at this pace in the oil decline, let along all three. Oil's testing the low $50s this week and I don't know if it can hold. So let's go over the three bears:
The first is the Russian bear. We in the West are having a huge, some would say suicidal, fight with Russia. We have no idea what Vladimir Putin will do. We know that their rates are sky-high at 17%, a 650 basis point 1 a.m. central bank desperation move, and they have a real capital flight problem. We know that they need to pump a huge amount of oil to make up for the price decline, and they can't.
So, this is worry one. It has been worry one ever since the Sochi Olympics. The Russia-Ukraine police action -- to use the term we used for the Korean War -- can easily get out of hand. The decline in this country basically started when things went awry and we decided to confront the dictator.
I am not clairvoyant enough to think about what happens here, but it is clear it will be bad for stocks. A big bank collapse pretty much has to be imminent, doesn't it? You can't have that level of rate elevation with something disastrous NOT occurring.
At that point, I suspect we will discover that European institutions have exposure to the bank or banks that collapse, and their markets will be hammered. Austrian banks. Italian banks. I am sure they were lulled into doing business with Russia. I imagine there is some large American bank that always wanted to keep its hands in Russia in case there is a turn and when that banks loss leaks out, others will own up or get shot down anyway. If it is one of the big ones, the Fed will demand another scrub down before any capital returns.
There is simply no way that Russia doesn't have tentacles. The country was too close to the fold just 11 months ago. Everyone wanted that Russian market at the time of the Olympics. Disentangling financially in this short a period isn't possible. Plus, we know the hot money from the ridiculous, relentlessly pushed global funds, is out there investing in Russia and, of course, Ukraine. A well-known Templeton fund has made a big bet on Ukraine. Let's see how that pans out.