Why We're Running The Risk Of A '1998-Style' Global Financial Panic

This piece contains the opinions of Marketfy Maven Ron Insana that do not reflect the opinions of Benzinga.com.

Russian Rublette

Russia's emergency rate hike overnight has done little to stabilize the Russian ruble, which has fallen to another record low against the dollar, despite Russia's official interest rate being lifted from 10.5 percent to a whopping 17 percent!

The ruble crisis is the worst since 1998, when Russian devalued its currency and defaulted on its external debt.

We are running the risk of a 1998-style global financial panic that could further depress stock prices, commodities and global interest rates.

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While US stocks remain in a secular bull market, much like the 1990s, there could be a "market interruptus" moment where equity investors panic over the implications of crashing oil prices, a crisis in emerging market currencies and the prospects for the Federal Reserve to signal (tomorrow) a shorter time horizon to its first rate hike in over five years.

The Prudent Man

Prudent portfolio management would dictate some caution here, as the risk of instability in global markets grows.

That fear is already reflected in global interest rates, which continue to plunge. Japanese 10-year bond yields are approaching 0.3 percent!

German 1-year yields have fallen to .62 percent while comparable Swiss rates are now below one-quarter percent! Let that sink in for a moment. Interest rates in three of the world's significant economies are at, or below, about half a percent ... for 10-year money! That is a warning sign if ever there was one.

Is Cash King?

In the very short run, cash may be king. The markets are showing increasing signs of strain that, sometimes, precede an adverse market event. It may not be of the 1987 variety, but more like 1998, when Russia's troubles helped cause the meltdown of Long-Term Capital Management.

The ensuing panic was swift, and severe, but ultimately led to further support from the Fed and an extension of the market rally that took the major averages to new all-time highs.

That scenario could play out again. In the meantime, raising cash and having dry powder on hand. It may be the right thing to do in order to catch that falling knife when it finally plants itself in the table.