On Tuesday, the major Russian stock market indices, the RTS and MICEX, sank by a whopping 12% and 17%, respectively. Even for the notoriously volatile Russian markets, such a move is noteworthy. It represented the largest one day decline since 1998, during the crash in the Ruble's value. The government suspended trading early, in order to stem the decline. On Wednesday, amid a further drop, trading was suspended again, and the Russian markets are now not expected to resume trading until Friday.
Of course, this really isn't that surprising. First of all, Russia's economic system in recent years has resembled what I would call "frontier capitalism." Great wealth has been created, within an ethically ambiguous environment. According to Forbes, Moscow now boasts more billionaires than any other city in the world, with 74. New York City is second, with 71. As a nation, Russia claims 87 billionaires. While that's still a far cry from the 469 U.S.-based billionaires, it still ranks Russia as #2 on the list. Not bad for a country that was operating under a socialist economy less than 20 years ago. Interestingly, the average age of the Russian billionaires is only 46. Also interesting, and rather troubling, is the fact that 12 of the aforementioned Russian billionaires are members of Parliament. Hmmm. Perhaps it really is all about "who you know," not "what you know" in the former Soviet Union.
Fueled by all of that new-found wealth, Moscow now ranks as the most expensive city in the world, according to a study which looks at everything from average housing prices to the cost of a taxi. Unfortunately for the average Yuri and Svetlana on the street, however, this has not been one of those a-rising-tide-lifts-all-boats types of growth stories. For every "have," there are millions of "have nots."
Any time you have rapid wealth creation, where that wealth is concentrated in relatively few hands, with the always-looming specter of capricious government intervention, you're bound to get volatility in your financial markets.
Another factor which makes financial crises in Russia more apt to be large is the fact that these people make a big deal about everything.
The phrase "over the top" doesn't translate into Russian. This clearly manifests itself in Moscow, which undoubtedly has more statues per square foot than any other major city on Earth. If you're Russian, and you've ever done so much as written a limerick, there's probably a statue of you somewhere in Moscow.
Russian architecture is another example of how these people do things. With the exception of the 70 or so years during which the Communists were in control, and erected these massive, plain, utilitarian buildings, everything the Russians build seems to be way overdone. There's so much ornamentation and detail. Everything, it seems, is built on a grand scale.
Well, not exactly everything. On my first (and hopefully last) visit to Moscow, a few years back, I found myself in a decent-looking building, and in need of the rest room. Looking around, I noticed a sign, which included that familiar stick figure, denoting the men's room. Relieved that I wouldn't have to try to actually get directions from a Russian, I went inside.
Big mistake.
See, in most of the world, that stick figure means that the adjacent room is a men's room. It's really a universal symbol. Unfortunately, unbeknownst to me, in Russia that symbol apparently means "the gates of Hell." Words cannot accurately describe the horrifyingly disgusting state of that place. Let me just say that if I were a CIA operative, and had been captured by the KGB, and they took me to that room for interrogation, within 5 minutes I'd have given them the names, addresses, home phone numbers, cell phone numbers, fax numbers and e-mail addresses of every single U.S. government employee I knew. I'd even have downloaded Mapquest directions to their homes. And their vacation homes, in case they might be away. Heck, I'd do what I could to get them Super Bowl tickets. Just don't make me go back in there.
That's the way it works here in Blogadishu. We share. My deep, emotional scars are your deep, emotional scars. Enjoy.
So listen here, Alexei. How about you and your nouveau riche buddies get together and spend a few rubles sprucing up the public bathrooms a bit? Maybe then, I'd start to take you all a bit more seriously.
For now, I think that investing in Russia should be left to the locals, or to those entities who are large enough to diversify their risk across dozens of countries while still investing with scale. As far as the rest of us are concerned, I'd avise steering clear of the Russian stock market
...and their public bathrooms.
No comments:
Post a Comment