The Ukraine-Russia row over natural gas has escalated to a new high. Now, state-owned Gazprom has completely cut off supplies to Europe through the Ukrainian transit route. It still remains unclear what the ultimate aim of the Russians are in bringing the issue to this critical state. Nevertheless, it is generally believed that Russia is making as much a political statement about NATO expansion, the disregard of Russia’s sphere of influence, and the dependency of the European Union on Russia for its energy needs. One should expect a political response from the EU shortly.

As an article in my links yesterday suggested, for many in the west, Russia’s behavior of late has lurched toward the unpredictable, volatile and aggressive. After Russia’s moves against Georgia in South Ossetia, wariness in the west has increased, sometimes bordering on hostility.

I have generally taken a more pro-Russian view of events, seeing the reactions by Russia as predictable responses to a Super Power provoked by repeated slights. That is neither here nor there as the latest controversy heats up, this time over natural gas.

This is the time of year when everyone tends to look back and sum up the year in one way or another. I have been doing much of the same.

In keeping with that theme, I have taken a good look through my nearly 1400 posts to get a better sense of what I got right and what I got wrong and how knowing that can help me going forward. Call it an exercise in intellectual honesty. This exercise has given me a good understanding of where things went wrong in the past year and why.

It may also give me some thoughts as to where we need to go in 2009. Let me share a little of what I learned with you. This is a long but thoughtful post, so take a few minutes. It should be worth it.

On the whole my predictive powers were working pretty well this year. But, I made a few lousy calls and some controversial ones along the way. Below is my view of how the year went, on some of those calls and links to the relevant posts. At the end, I’ll wrap it up with a few thoughts about where that leaves my thinking for 2009.

With oil prices having plummeted, one should expect Middle Eastern oil exporters’ budgets to implode. What were budget surpluses will quickly turn to deficits, stoking civil unrest amongst the burgeoning masses. Very high population growth rates mean that many oil exporters must use government monies to support the domestic economy. However this becomes harder to do with revenue from oil decreasing.

Recently, an enormous 33% premium has developed for Brent. To me, this gap is utterly inexplicable except by technical factors. Translation: some players have a huge long position of WTI and they are getting squeezed.

Russia is one country that we do not want to see fall on hard times. It has great geo-strategic power, but a weak economy, declining oil output and revenues and increasingly autocratic rule? Now it is being roiled by the global financial crisis as hot money is fleeing the country causing its currency to plummet and its stock market to swoon. Russia has used up a quarter of its massive foreign currency reserves to stabilize the situation — to no avail. Is Russia about to become a problem?

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Last week, I posted an article on why the recent rally did not look anything like a bull market titled “An amazing market rally. What’s next?“o, it seems like I was bullish for all of two weeks. Yet, the truth is I was never bullish on the market as a whole. But, I [...]

For the second day in a row we are basking in the glow of an up market (update: or at least we were until the last 12 minutes). Everyone’s happy. But, some people are happier than others. And the happiest amongst the bunch are those people who are long commodities.

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A while back, as I scanned the wreckage of the market meltdown, the energy sector caught my attention. In particular, I noticed the refining and oil services sectors because they are not as beholden to falling prices as the Exploration and Production sectors are. My feeling was that while earnings were going to [...]

I don’t think that the market as a whole is going to go up rapidly or that another bull market will soon be underway (In fact, I think we are in a secular bear market and the inflation-adjusted lows are even further down). However, I do expect a bear market rally during which new cyclical leaders may emerge. Two sectors I am watching are energy and consumer staples.