U.S. Markets close in 5 hrs 10 mins

U.S. could catch Russia’s cold: Shilling

Will Russia’s economic meltdown spark another global financial crisis similar to what the world experienced in 1998? That’s the question investors are wrestling with. The Market Vectors Russia ETF (RSX) swung between positive and negative territory before closing higher Tuesday, while the S&P 500 Index (^GSPC) followed a similar pattern ending the session 0.85% lower. “The markets are telling us there is something else there,” cautions Gary Shilling, founder, of A. Gary Shilling.

[Get the Latest Market Data and News with the Yahoo Finance App]

There are plenty of reasons Russia is in trouble, including the fallout from the Federal Reserve and OPEC, notes Shilling. “The Fed is no longer pumping money out there, and on top of that the Saudis basically decided not to cut production and that left Russia high and dry.”

Russia derives nearly 70% of its export revenue from oil and gas which is why the 41% drop in WTI crude since January has become so perilous. The ruble has fallen more than 50% against the U.S. dollar while Russian stocks, as tracked by the SPDR S&P Russia ETF (RBL), have fallen by the same amount. 

Related: Russia in chaos! Ghost of '98 crash haunting stocks

In an attempt to calm the chaos, President Putin and his central bankers raised interest rates to 17% Tuesday. It's still unclear whether those moves will prevent a contagion effect. “Does this cause real financial problems that simply spill over, do we get a big selloff in U.S. stocks? So far I don’t think that is completely clear but it certainly is possible.” said Shilling.

U.S. Secretary of State John Kerry also weighed in on Russia’s fiscal problems while speaking to reporters in London Tuesday. “It goes without saying that the purpose of the European-U.S.-et al effort with respect to sanctions was to make it clear to Russia, to President Putin, that there are costs attached to the unilateral annexation of Crimea and the continued support for separatists within Ukraine.”  

More From Yahoo Finance:
Opportunities in oil as crude careens: Jon Najarian
The Christmas Tree: 7 fun facts
Sonic's sweet recipe for investors