There are no words which can adequately capture the nature of the fraud that is daily being carried out at behind the scenes at the Russian stock market these days. Fortunately, one doesn’t need words to do so, but can rely on the RTSI charts.
Just look at that line! Twice in the past 30 days we have witnessed the RTS index slide into freefall. Twice we have seen the Kremlin shut down the market and bludgeon it the way a bunch of mafia hoods beat up a recalcitrant grocer who doesn’t want to pay protection. Twice we have seen the RTSI chart flatline, first on September 17th and then yesterday, October 8th, producing a cute little brother. Twice we have seen the market, terrorized and wild-eyed, leap radically upward as soon as the floodgates are opened. Twice in response, we have seen the market shut down to prevent overheating. After the first such incident, it took less than two weeks for the market to slide back into freefall. How long will it take before Thursday’s 11% gain on the RTSI to be reversed?
We can only gape slack-jawed and ask: Who do these people think they are fooling? This is not comedy, this is now broad farce, total dysfunction, one which threatens the survival of Russia as a serious nation.
If you have $100 and lose 30% of it, you now have $70. If you then gain 30%, you rise back to $91, 9% below where you were when you started. Keep that up for a little while, and soon you’re wearing a burlap sack and begging for pennies. This phenomenon is now in the process of gutting the Russian markets, driving them into oblivion, as the Kremlin pours truckloads of cash from the nation’s savings into the markets, hoping to create the illusion of revival only to see their efforts fall apart in short order.
Thursday’s rise was due largely to a stunning 27% hike in the price of LUKOil shares, inducing a 16% jump in the RTS oil index. State controlled entities Gazprom and Sberbank was up, 14% and 9% respectively, the same thing that happened on Tuesday when the Kremlin sought to staunch Monday’s record-setting bloodletting. The financials index was up 2%, but the other five RTS sectoral indices barely budged or were down substantially (mining leading the way, down over 5%). The RTS-2 index, which excludes the major Kremlin players, was down over 2% on the day. So once again, the Kremlin’s actions only served to confirm how utterly dependent the market is on the oil industry and how absurdly subject to Kremlin manipulation the market remains.
The Moscow Times reports that the Kremlin is suppressing information about the market collapse from the public, using newpapers and television as weapons of propaganda just as in Soviet times. Russians are as ignorant of their government’s performance as they ever were in Soviet times, and they will surely take the same consequences.