Is the Real Bear yet to Come?

I'm starting to get the rhythm of it. The markets ebb and flow go in and come out, kinda like the tide of the oceans, in somewhat less predictable patterns. Oil goes up and so does the entire energy sector. Also, other industries that depend so much on the price of oil and it's byproducts go down.

But then there's something else. The big bad bear known as Russia that has been causing some little problems over in Europe. I've still been hearing things about it politically, but tonight when I clicked into MarketWatch.com, I saw an article that confirmed the sneaking suspicion that I've had that this could become more of an issue.

A major fault has opened up in relations between East and West that threatens not just global securities markets, but the economic health of Europe and the foreign policies of the major industrialized countries.

Fourteen days ago, relations with Russia were on nobody's short-list of major issues for the U.S. presidential candidates. Now they threaten to overshadow the political conventions in the next two weeks, and the rest of the campaign. They've breathed new life into the McCain camp, and vaulted foreign policy into much more than a discussion of how soon we can bring the Iraq troops home.

The story continues, but the author's point is that these concerns have not been alleviated much yet and Russia still poses a threat to world markets.

If Russia does continue as it has threatened to use "more that diplomacy" as it deals with it's European neighbors, how will our markets respond? There are of course different possibilities. Investors could move out of Europe as it destabilizes and put more investments here in the U.S.. That is very much positive thinking. I'd say that the strongest companies to invest in at this time would be those in the energy sector which stands to gain if there is another "cold war" stand-off between the U.S. and Russia. Of course defense spending would be influenced as well.

As David Callaway says, "for now, it's a war of words, blusters and veiled threats. If Russia decides to play its energy card, and threaten Europe's oil, it becomes much more."

Investors should prepare for the worst though as a "rude awakening" to a potentially huge conflict which like a festering wound only grows more infected when no action is taken. Things may not be looking so bullish after all.