Except in oil, markets are reacting to the spread of new violence in the Middle East with a distinct lack of concern. We cover this today on CNBC.
1. Yemen is a small piece of desert.
2. Bahrain is a very small country despite its strategic value.
3. Aside from oil production, Libya is still struggling to get noticed.
4. Unless this type of political upheaval spreads to Pakistan — where there are nuclear weapons — the larger markets will not react.
Overall, I am more concerned by the economic fallout. Every $1 that oil rises means $120 billion less that U.S. consumers have to spend.
Even though the Chinese have 18% more spending power thank to the yuan’s rise, rising oil still acts as a drag on the global economy.
But how do you play this?
The major energy importers will feel the drag: India, China, USA, Turkey, Germany. Buy the weakness — whether it comes from fear of political contagion or fear of an oil crash in the wings.
Turkey, for example, has been heavily sold despite its non-reliance on North African oil. Remember, Turkey is on the Russian supply line, so that is where it gets it energy. Buy this weakness via the iShares MSCI Turkey Invest Mkt Index ETF (NYSE:TUR).
Speaking of Russia, in the last three meaningful supply disruptions of the last decade, Moscow stocks have outperformed global emerging stocks. Given the strong weighting of oil in the Market Vectors Russia ETF (NYSE:RSX), this is another natural play.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.