Like many people, I grew up with a vague sense that the Crimea was an obscure piece of land somewhere in eastern Europe, and that is was most famous for being the occasion for the “Charge of the Light Brigade” that Tennyson immortalized in his poem. The point of the poem, as I recall, was that hundreds of lives were wasted in a dramatic military action because “someone had blundered.”
Now it looks like a repeat is taking form. The Ukrainians ousted their President, who was sympathetic to the Kremlin, and the ethnic Russians in the Crimea rebelled against the new Ukrainian government. Russia wants to secure its naval base in the Crimean port-city of Sevastopol. Russia is staging military exercises on Ukraine’s border, and there is talk that the US and other countries may apply some kind of economic sanctions to Russia.
Global markets have been roiled, first down, then up, then mixed. Russian markets have traded down dramatically. I feel vaguely unpatriotic for thinking about investing in Russian stocks like Lukoil or Gazprom because they’re so cheap—price-earnings ratios less than half that of the rest of the world.
The first Crimean War began in 1853 and was the result of slow-motion blundering by inept statesmen and their leaders’ search for prestige and strategic advantage. It didn’t have much impact on the US—we were preoccupied with our own inept blundering in the run-up to the Civil War. It resulted in over half a million casualties. The only bright spot was that it forced Russia to sell Alaska to the US to help pay off its war debt.
Most Americans are skeptical of a new conflict in an obscure location fought for vague, strategic goals Twain famously quipped, “History doesn’t repeat itself, but it does rhyme.” Let’s hope it doesn’t rhyme this time.
Douglas R. Tengdin, CFA
Chief Investment Officer