The Week That Was

What’s this week’s big story for investors?

Candidate #1: RadioShack (NYSE: RSH) said it will close up to 1,100 of its nearly 5,200 US stores amid widening losses. The company also announced that revenue in the fourth quarter of 2013 fell 20 percent from year-earlier levels.

It doesn’t matter whether the latest announcement is in addition to or merely an expansion of the company’s Feb. 5 statement that it would close 500 stores. That, in turn, shortly followed the beleaguered company’s $4 million expenditure for a widely praised but clearly ill-timed 30-second ad during the Super Bowl.

Also this week, Radio Shack agreed to pay its top executives “retention” bonuses, saying their skills are critical to the company's comeback plan. CEO Joe Magnacca will get a $500,000 payment, while other executives will receive $187,500 to $275,000.

The stock currently trades around $2, down from its 1999 peak of $61.

No, that’s not the week’s big story. But it was too good to ignore.

Candidate #2: The current bull market celebrates its fifth birthday this week, with the Standard & Poor’s 500 delivering a total return of about 175 percent during that time.

Since 1921, the median bull market has been 50 months long and has delivered 115 percent in price appreciation. So this market is older and better than most. Still, the conditions aren’t yet present to suggest the end is near. Indeed, Wednesday’s advance, the best of the year to date, was exceptional for both its breadth and heavy volume.

The five-year anniversary also means that stocks, mutual funds, exchange-traded funds, closed-end funds and so on will boast very good five-year returns. Don’t be overly impressed. Reason: Almost everybody will be a winner. (Other than Radio Shack.) But you should dig deeper: Comparisons will be useful to sort out ! leaders and laggards for potential investment.

But of course the big story is candidate #3: Russia, Crimea and the Ukraine.

Given the extensive coverage and commentary in other places, a detailed discussion isn’t necessary here. However, the current situation epitomizes how interrelated the world has become, both politically and economically.

For example, Russia supplies some 31 percent of Europe’s natural gas and 27 percent of crude oil. All told, Europe and Russia are major trading partners. And the Russian economy, both despite and because of its top-heavy wealth of oil and gas, is notably weak (with high inflation).

So are Russia’s currency and its stock market, which tumbled 11 percent on Monday. “Vladimir Putin surely must realize that a crumbling economy leads to the downfall of politicians,” as one commentator put it.

Therefore, economic sanctions would be mutually destructive, with possibly surprising geopolitical consequences, even elsewhere in the world, such as the Middle East and wherever else the US, Europe and Russia have different interests.

It has been suggested that the best way to weaken Russia would be for the now energy-rich US to accelerate its plans to export natural gas and reverse its virtual ban on oil exports. Naturally, the US could start by becoming a major supplier to Europe.

That may or may not occur, for various reasons. But the point is that the US has plenty of power other than military, despite Vladimir Putin’s fiery rhetoric. Still, as we understated the case in this space last week, the timing of announced plans to cut the federal defense budget was “unfortunate.”

We hope that all of the parties involved in the Ukraine situation will stay calm. But hope alone isn’t enough. So we stress the importance of maintaining a strong defense in your investment portfolio, in addition to following our recommendations for growth in Personal Finance if you’re a subsc! riber.
Part of that defense is to continue to go easy on emerging-markets investments. Yes, they’re cheap, but for good reason, as has been the case for quite a while now.

Ukraine is just one example of the many unstable situations in emerging markets. Russia is another. Others include Turkey, South Africa, Argentina, Venezuela, Thailand and Nigeria. Brazil and India have many problems. And there’s a credit bubble in China, the world’s second-largest economy, with negative implications for Hong Kong, Singapore and more.

Speaking of global interconnections, the turmoil in emerging markets has been causing problems for numerous multinational companies that have aggressively expanded their businesses there.

Among the most affected have been the global consumer-staples companies, such as Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO), and PF Growth Portfolio recommendations Diageo (NYSE: DEO) and Unilever NV (NYSE: UN). Some big technology companies, notably International Business Machines (NYSE: IBM) and Cisco Systems (NSDQ: CSCO), also have blamed weak earnings results on the developing world.