EDITORIAL: The Russian Market back in Freefall

EDITORIAL

The Russian Market back in Freefall

The Russian RTS stock index

The Russian RTS stock index

Last Thursday by 5 pm Moscow time the dollar-denominated RTS stock index had lost nearly 4% of its value and fallen back below the critical 1,000-point psychological barrier which it had broken back above at the end of May. The market hadn’t seen 1,000 since October 2008.  The decline put the RTS index down almost 15% for the month of June, and the MICEX ruble-denominated index was down even more for the month, almost 17%, and itself was flirting with crashing through the 1,000-point barrier. 

Russian “president” Dima Medvedev was humiliated as the world learned while he was attending a BRIC summit the dollar=denominated bonds were vigorously out-performing the bonds of Brazil, Russia, India and China. Financial analysts were mocking Medvedev’s goofy statements about Russia’s ruble becoming an international reserve currency: “It’s not up to politicians to determine which currency will be the world reserve currency,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “In the end the market decides it.”  In fact, they were suggesting that Russia is the black sheep of the BRIC group itself and doesn’t belong there.

The reason for all this Russia failure and humiliation was quite simple.

The soaring dollar was depressing the price of oil, and the falling crude was crushing the life out of the Russian stock market, which in turn undermined the value of the ruble, exposing its fundamental dependence on crude oil markets over which Russia has absolutely no control.  The US recession has proven four times milder that what Russia has experienced, highlighting the essential dynamism and resiliance of the American economy as compared with the resource-dependence of its Russian counterpart.

We’ve long believed that the single most terrifying fact about the Russian economy since the crisis began last August has been the shocking manner in which the Russian equities markets have moved into lock step with the international price of oil, indicicating that the last vestiges of diversification have been stripped out of the Russian stock exchange, leaving it nothing but a pathetic vehicle for betting on oil prices, totally at the mercy of American oil demand.  A country with a stock market this feeble and helpless cannot lay claim to G-8 membership, nor even compatibility with the highly diversified economies of the BRIC group.  This Russia belongs in Africa or Central America.

48 responses to “EDITORIAL: The Russian Market back in Freefall

  1. this is a tragedy. by theway, coulf you stop calling putin a proud KGB spy (which I believe he is) and start calling him an arrogant KGB Spy, which iswhat you think he is.
    proud= good
    arrogant= bad

  2. You than нибудь are engaged besides as write all day and night on this site???? Take a walk in the street, follow a city, on the nature, breathe fresh air, smile to the sun! After all the life is fine!

  3. andrey,
    it’s their job, that’s how they make their living.

  4. I am glad that the US economy and the economies of countries other than Russia are doing better than ever. :-)

    And with the gasoline prices going through the roof again, Russia is once again going to be neck-deep in oil profits. Poor, poor Russia. :-)

    With the rest of the world in depression, where can Russia invest its profits? Certainly not in US bonds anymore, because USA is bankrupt and will default as soon as China cashes in its US bonds.

    Want to buy any AIG, GM, Chrystler or Bear Sterns stocks from me? I will gladly exchange them for Lukoil and Gasprom stocks. Any takers?

  5. Russian RTS index:

    Novemeber 2008 – around 500
    June 2009 – around 1000

    It has doubled in 6 months.

    > A country with a stock market this
    > feeble and helpless cannot lay claim
    > to G-8 membership

    You are talking about USA, right?

    Or is Russia’s doubling in 6 months is not good enough for you?

    Hilarious!

  6. > Russia is the black sheep of the BRIC
    > group itself and doesn’t belong there.

    Let’s see:

    http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

    List of countries by GDP (PPP) per capita

    CIA World Factbook

    57 Russia $15,800
    81 Brazil $10,100
    106 China $6,000
    136 India $2,800

    BRIC per capita average – about $4,500

    This would imply that Russia is way too developed to be in BRIC. But the purpose of BRIC is not to compare sizes (“mine is bigger!”) but to form a world-wide core of stability in view of the meltdown of the American economy, and to revive the authority of the UN and of the international law, so brutally violated by USA and NATO in 1999 (Kosovo) and 2003 (Iraq).

  7. My god, the leaches, who run USA at the expense of the average taxpayers, are scared of BRIC like vampires – of crosses and silver stakes. Even the hysterical and hysterically funny WSJ piece acknowledges this:

    The BRIC term was first coined by Goldman Sachs economist Jim O’Neill in 2001 to reflect the increasing heft of emerging market economies. The global recession has reinforced their importance, Mr. O’Neill says: the four countries’ economies are “dominating the world growth picture even more than when the world was booming,” he said in a note to clients this week.

    Goldman is forecasting 4.8% GDP growth for the BRIC group this year while the world economy as a whole contracts -1.1%.

    The group is increasingly flexing its political muscles, too. This week leaders of all BRIC countries met in the Russian city of Yekaterinburg for their first summit, and demanded more of a say in the way the global financial system is run.

  8. What has the US hawks running scared like chickens is the suggesation made by BRIC that, given the pyramid scheme that the US economy is today, maybe there should be more than one major internationall currency, not just dollar.

    But this will crash the entire US economical pyramid to the point that Mozambique and Cuba will look filthy rich compared to what USA will look like after its complete and global default.

  9. Ostap Bender: Useful Idiot

    Hey Ostap, what did Vlad do with the 600 Billion in oil revenue?

    • Who the hell is Vlad? Count Dracula, maybe? The short form of Vladimir is completely different.

      • What does this have to do with the facts that

        A. Russia is surviving the US-caused world-wide depression much better than USA itself?

        B. Russia may be 10 times smaller than China and India each, population-wise; but it is the most advanced and developed member of BRIC.

  10. Correct, the shortest ‘form’ of Vladimir is the poisonous midget himself!

  11. 2:43 am June 22, 2009
    Ostap Bender wrote:
    http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_per_capita_growth_rate

    Rank of countries by GDP (real) per capita growth rate (latest year: 2006)

    13 China 10.1%
    24 India 7.7%
    27 Russian Federation 7.2%
    .
    .
    .

    118 Brazil 2.4%
    127 United Kingdom 2.2%
    133 United States 1.9%

    of course, that was in 2006. In 2007 and 2008, when the oil prices went through the roof, I bet Russian GDP grew faster than China’s and India’s.

  12. > This Russia belongs in Africa or Central America.

    Methinks that you are confusing Russia with Ukraine, Gerogia or Moldova:

    http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

    57 Russia 15,800

    73 Belarus 11,800
    85 Cuba 9,500
    89 Suriname 8,900
    90 Angola 8,800

    100 Ukraine 6,900

    107 Bhutan 5,600
    109 Namibia 5,400
    110 Guatemala 5,200

    117 Georgia 4,700

    141 Moldova 2,500

    ——————

    No, wait, you can’t be confusing Georgia with Africa or Central America: Georgia is much poorer.

    • Hands off Georgia, don’t even try to smear its immaculate image! They’ve got a democratic and peaceful president, prospering economy and yet they despise Stalin the Russian beast!

  13. Despite his excellent English and some American colloquial expressions, dittohead seems to be Russian indeed. In hundred or so of his posts, I am yet to find half-dozen where he makes a point. Most of them (if not all) are like the one above – silly bite-back. So, short of Vladimir is indeed Vova… happy now? Did he miss that the question was about missing 600 billion? of course not! But by emphasizing irrelevant he can be both verbose (to the point of speech diarrhea) and not say anything at the same time.

    Why is it typical Russian (Russian as a country; not as a people)? By concentrating on trivial you can come across as a fighter, while not rising above minor mischief… enough to annoy the neighbors, but not enough to call the police.

    Seems like Russian policies in action. And whoever he thinks he is “ditto”-ing – to me he sounds like election commission chair Vladimir Churov: elaborate discussions about the beard, while ensuring Medvedev’s election in the meantime.

    • A Russian? I didn’t even want to conceal that. Is it a problem for you? You doesn’t seem to be a WASP either, so what is this all about?
      Merely bitebacks? Sure, during my first visit on this site, I was really shocked by the overall degree of zoological Russophobia and blog’s owner irreverence towards those who don’t join the Russia-bashing claque (pea-sized brain, idiot etc.), so I couldn’t refrain from responding, even being largely unsatisfied with the situation in Russia itself. You’re right, that’s why I’m here.
      Still, I’m ready for a calm discussion when a counterpart is able to listen to others and shows his willingeness to argue without ad hominem attacks. In fact, I hate brawls.

    • And I’ve got nothing to say about those 600 bn, that’s not my point at all. I had written what I just wanted to write, nothing more. I simply don’t like obvious factographic errors like this (think of, say, Jack Bush or Shack Obama) and corrected it without any further pretensions.

      • And I’ve got nothing to say about those 600 bn, that’s not my point at all.

        That’s exactly what I am pointing out – you have nothing to say and have no point except for dwelling on the inconsequential. While you congratulate yourself on willingeness to argue without ad hominem attacks – brawls is the only thing that you engage in.

        And unlike you – I don’t ask people to stop responding to my posts… I ignore them. This is my one and only post addressed to you. I promise!

  14. Who cares about GDP when living in your country is a nightmare for the majority?

    Get your priorities right!

    • “Nowadays most of the people in Russia are better off than ever before. Maybe for the first time in several centuries the majority of the population in Russia lives as normal human beings, and they’re not afraid that they won’t have anything to give to their kids for supper. All sociological opinion polls agree that the Russian people see their situation more positively then before. I would not call the situation all rosy, but neither do I like the black and white division. I claim that in last ten years the situation in Russia has changed for the better, and that in general it is heading in the right direction.

      We can name a number of problems, for instance that Russia lacks an independent television station, but it does not mean that there is the need to destroy everything. I believe that it is better to stay positive, to look for what can be made better, rather then destroying things. I understand that there are still problems in Russia, for instance corruption and a certain violation of human rights. This has to be solved. But for me the most important thing is the life quality of ordinary people. Politics and politicians are not a priority to me. Instead of getting involved with their party arguments, questions concerning elections of governors or questions of presidential authority, the most important one is the everyday life of Russians and how the lives of ordinary people are developing. And ninety percent people have been better off for the last few years, which proves to me that things are not as bad as Garry presents them.”

      From an interview with Vladimir Kramnik (World Chess Champion 2000 – 2007).

      http://www.kramnik.com/eng/interviews/getinterview.aspx?id=178

      • Really?
        Is that why the large majority of Russian workers face wage arrears, layoffs, and unemployment as the potemkin village of russian industry collapses under the weight of corruption and mismanagement?

        http://www.forbes.com/2009/06/11/russia-putin-monotowns-business-oxford.html

        • That’s not the main point. The main point is that most Russians are better off today than they have ever been.

          • Well, I know quite a few Russians who would beg to differ, though if you are talking about people in St.Petersburg and Moscow, they are better off.
            Outside those two cities, much worse off in my experience.

            • I’d actually rather say that people in all big cities are better off.

              Is their situation really worse than in Yeltsin’s era? Soviet era? Civil war? or Tsarist Russia? Really? I don’t think so.

              • Well compared to even the standard of living in the late soviet period, many are much worse off outside the “big two”, particularly in siberia and regions east.

                The rural poor have a collapsing infrastructure, combined with the collapse of industry etc means that they are effectively on subsitance farming.

  15. hmmm… I put a link to lenta dot ru (to point who is Churov), and wordpress didn’t let my comment through. Anybody knows what triggers wordpress’s wrath?

  16. felix-we countru you born?

  17. Hey dittohead, since you quote the “source” of wikipedia, did you know that Russia is dying from old age and lack of births (the “day of conception” in some small back water town doesn’t count. Look at that downward slope):

    http://en.wikipedia.org/wiki/Demographics_of_Russia

    And last time I checked, having an economy rely on a natural resource for continued growth is never a good thing in the long term:

    http://en.wikipedia.org/wiki/Dutch_disease

    http://en.wikipedia.org/wiki/Resource_curse

    And you can’t forget the fact that Russia isn’t a great place, especially if you don’t look Slavic:

    http://en.wikipedia.org/wiki/Racism_in_Russia

    Russia should also do something to protect its women from the “yellow threat” on the Siberian Border and getting imported to Dubai, you don’t want the Slavic bloodline tainted:

    http://vn.vladnews.ru/Arch/2000/iss239/text/news1.html
    http://russiatoday.ru/Top_News/2008-01-27/Russian_girls_trapped_in_sex-slave_nightmare.html

    There you have it, “all eggs in one basket” economy, declining birthrate, a government that doesn’t care about their people getting abducted.

    This is not a recipe for long term growth. BRIC countries have nothing in common, China wants cheaper commodities, while Brazil and Russia want higher. Chinese have a major manufacturing base and Russia doesn’t. India and China are competing militarily for influence on neighboring regions. Eastern Russia and Western China will always be contested, and Siberian Russians don’t like seeing Chinese guys take their women or jobs. The only thing they have in common is that all BRIC countries have large dollar holdings and would commit suicide by trying to devalue the dollar or sell it all off.

  18. “Hands off Georgia, it is not necessary even to try dab its faultless image! They are democratic and peace the president, prospering economy and while they despise Stalin Rossijskoj an anima”
    I trusted your site but after has read these words have ceased to trust earlier. Will tell lies once will say lies constantly.
    грузия has attacked on осетию and it recognised all Europe. You live in the world, in a matrix.
    p.s Stalin the person who has killed so much was the Georgian

  19. la russofobe Why you are afraid to answer in what country you were born?

  20. andrey –
    try links for answers… great thing! And as I said before, generally I ignore your post because your babelfish-generated gibberish is not worth deciphering!

  21. What’s the obsession with these pathetic trolls with proper names, places of birth and addresses?

    It’s the card that they always throw out eventually.

    Even more amusing is that they themselves won’t reveal their real names and try to game everyone with guessing where they are from, are they really Russian or not.

    It’s all such a stupid predictable drill in responding to them.

  22. So strange that none of the trolls jumped on this La Russophobe post…

    https://larussophobe.wordpress.com/2009/06/19/editorial-a-true-russian-patriot-speaks/

  23. I have yet to see ONE troll counter the economic figures with actual CURRENT, documented economic data of their own. Pathetic. La Russophobe isn’t making this up. LR is simply reporting what is all over the place right now. The numbers are dismal-
    Dear Trolls- Go to Google News, type in ‘Russian Economy’ and read about it you twits! It’s not a so-called anti-Russia blog thing. That’s your little fantasy. It’s a world financial market thing! What part of that do you not get?

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aNVAJ8fu0aaY

    Russian media is reporting the same thing!

  24. What the Russian media is reporting is that while badly hurt by the world-wide depression, the Russian economy is currently not hurt as badly as those of USA and many other countries.

  25. Istap, that is.

    • Yes, the bender is an excellent example of the retardation of Homo Sovieticus, though he is the proud product of several generations of breeding to be stupid.

  26. Ostap,

    The USA has been growing at 2-3 percent since WWII. Thats why your 2006 numbers don’t matter to us.

    Plus, our system of government and constitution have been around for 230+ years.

    Are you surprised that we are unimpressed with you and Putin?
    He is still trying to defeat the US, as if it is 1963. We don’t care!

    Why don’t you liars try a little honesty. First, get honest with yourselves, then finally, present yourselves again on the world stage.

    You are very ugly people.

    • Actually, this is an interesting point, Shane. It does sometimes seem as if Russians think they’ll only ‘win’ if they can somehow ‘beat America’. Their curious desire to show that they’re ‘better than America’ (as if it would mean much), as if the only alternative would be to be a failure… There are other models out there, not based on gigantism. Why don’t you try to be better than Sweden for a while? Wouldn’t do Russia any harm to try, and it might cure Russians of this strange fascination they have with America. As if America were the only country in the world.

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