Of Russia and Black Swans

| About: VanEck Vectors (RSX)

By now you know quite a bit about what is happening between Georgia and Russia. You probably also know that the Russian stock market and the currency have both been hit pretty hard and Konstantin Igropulo (number 35) on the Russian Handball team looks pretty worked up about the whole thing as his team went down to Iceland 33-31in the Olympics.

The Market Vectors Russia (NYSEARCA:RSX) dropped almost 10% this past week. The dollar went up about 3/4 of a ruble, which is a big move, during the same time period.

This will be a great example to learn from. This is a panic caused by what might be a black swan (anyone know if tensions between Georgia and Russia have been an ongoing thing making this conflict inevitable? if so, then no black swan).

This sort of thing has happened countless times before. Some sort of military something or other that catches the market by surprise causing a swift decline followed by the inevitable snapback.

The reason why this is a great example to learn from is the most people are not going to chase heat in Russia. It is not the ideal destination for most volatility tolerances and so, since jumping into something that is not right for you as an investment destination is not smart, you can pay close attention and watch it unfold.

This sort of thing, albeit with different particulars, has happened countless times and the result seems to always be the same; big, fast decline followed by a snapback. While any single episode could be different, different doesn't happen very often. This kind of event is likely to happen with something that is suitable for you, it has before, and even if chasing it with more money is the wrong trade for you, knowing that you have seen this movie before might prevent you from a panic sale.

If so, mission accomplished.

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Tagged: Russia
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