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This came from a conversation with my friend AP. Very interesting. Ukraine is becoming an associate member of the EU? Well, that message is already spreading in the market. Producers must be happy they can now tap into the 46 million consumers with lower import taxes. Retail goods that have been having a terrible year in the midst of the European debt crisis now have an exit. Stocks of producer goods in Europe are up in countries like the Czech Republic, Hungary and Poland. Great to have bullish views on these companies, but like most of the other “false” buy signals, this one is also not what it seems to be.

This all winds down to how the Ukrainian government does things. To counter unemployment, the Ukrainian government would have to enact some sort of monetary and/or fiscal policy to stimulate the economy. And, given that paying for spending plans is now the new cool thing to do in government, Ukraine has to find some sort of revenue.

I’ve always loved the concept of the Russian winter. It strikes me as something rather poetic and subtle. It is cold, but it stopped Napoleon and Hitler in their paths. It brings the nation to a rebirth when the skies once again brighten up, and the gray winter clouds dissipate.

And of course, for the country bordering Russia, the harsh winter is a great time to increase gas prices. The government could exploit political influence and monopoly power to make up for the hole in their pockets caused by stimulating the economy. Ironic that gas consumption is a major part of the average Russian household, and this price increase will in fact decrease their ability to consume.

Thank god, like in America, the upper-class can just clean up for the rest of us……

until you realize they are rich because they can work the system. One of the major criticisms of a rich tax is that rich people are good at tax evasion (I will not evaluate the validity of this claim as I see myself as politically bipartisan to the extreme. well, this is for another posting). And imagine how good these rich people will be at exploiting government loopholes in a nation formerly behind the iron curtain. Big business will be able to get ridiculous cuts in gas prices. Although the policy is debatable in America, it looks like it won’t be working in Ukraine.

There goes all the positive projections about the new Ukrainian market.

Credit to my friend AP, who is rather exceptional at analyzing East European markets