Russia 02 (Aug 10 - Sep 15)

Re: Russia 02 (Aug 10 - Dec 15)

Postby behappyalways » Fri Jan 02, 2015 4:55 pm

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Re: Russia 02 (Aug 10 - Dec 15)

Postby behappyalways » Sat Jan 03, 2015 12:29 pm

(There will be a lot of US Denominated bad debts with rising US dollars and falling local currencies...)

Russia throws lifeline to companies starved for cash by sanctions
http://money.cnn.com/2015/01/02/news/ec ... l?iid=Lead
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Re: Russia 02 (Aug 10 - Dec 15)

Postby winston » Mon Jan 05, 2015 9:13 pm

Why I'm Still NOT Buying the World's Cheapest Market By Kim Iskyan

Russian stocks are cheap… but I'm still not buying today.

Last month, my colleague Steve Sjuggerud told you why he was NOT buying Russian stocks… yet. In short, Russia had not quite reached the point of "maximum pessimism"… the point when an investment becomes so cheap and hated that it can only go up.

And that's still true today. Let me explain…

As I told my Global Contrarian readers last month, the Russian economy is likely to shrink by at least 4% this year… Russia's ruble was the world's worst-performing currency last year… And Russia's stock market was down 45% in 2014.

Around a quarter of Russia's economic output is connected to the energy sector. So the decline in the price of oil in recent months has hurt the economy. Sanctions imposed by the U.S. and the European Union on Russia over the conflict in Ukraine have also squeezed Russia's economy. And the perception of higher political risk in Russia is discouraging investment.

Now, the country's banking sector is also in the early stages of what could become a big crisis.

Two weeks ago, Russia's central bank had to step in with around $540 million to support Russia's 32nd largest bank, Trust Bank.

With the ruble depreciating so fast, the bank experienced a sharp increase in withdrawals… and the central bank had to step in to prevent the institution's bankruptcy.

Five days later, the size of the bailout was increased more than four times. That means things were looking very dark… for Trust Bank and for Russia's banking sector in general.

You see, after one bank fails, the risk increases that others will too. When banks stop trusting each other, the interbank lending system – where banks extend short-term financing to each other – freezes. The interbank lending system is like the oil of the engine of the entire banking sector. So when it breaks down, it sparks more defaults.

Then the central bank has to step in with more money to ward off a total meltdown of the banking system. This is what happened during the last two big financial crises in Russia in 1998 and in 2008-2009. I was living in Moscow during those times… and what's happening to the banking sector right now is all too familiar.

Despite the bad news coming out of its banking sector, the Russian stock market bounced 31% in dollar terms a couple weeks ago – though it's still down 17% from early December levels.

Markets usually lead the economy. Share prices move based on anticipation of what will happen and not on what is actually happening. So a market recovery usually happens well before an economic recovery.

That's why we're still not investing in Russia today. Things could get a lot worse before they get better.

As I told my readers last month, I'll be waiting for a few signs to tell us we've reached the point of maximum pessimism – a big corporate default or a large government bailout to prevent default and when foreign investors are no longer interested in Russia.

Today, I'm adding another one. A big banking failure or a systematic collapse of Russia's banking sector will also be a sign that we're seeing the point of maximum pessimism.

As Steve told you last month, investors will be able to make triple-digit profits once the Russian market bottoms. But it's still too early. We'll be keeping an eye on the situation and let you know when it's time to invest.

Source: Daily Wealth
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Re: Russia 02 (Aug 10 - Dec 15)

Postby winston » Tue Jan 06, 2015 2:30 pm

TOL:-

Which bank has been lending to the Russians ?
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Re: Russia 02 (Aug 10 - Dec 15)

Postby winston » Tue Jan 06, 2015 2:30 pm

TOL:-

Which bank has been lending to the Russians ?
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Re: Russia 02 (Aug 10 - Dec 15)

Postby behappyalways » Wed Jan 07, 2015 12:19 pm

Russia faces 'perfect storm' as reserves vanish and derivatives flash default warnings
http://www.telegraph.co.uk/finance/econ ... nings.html
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Re: Russia 02 (Aug 10 - Dec 15)

Postby winston » Sat Jan 10, 2015 6:16 am

Russia is on the verge of a massive crisis by Sean Goldsmith

It has been a while since we’ve heard from Global Contrarian editor Kim Iskyan. Today, he shares the latest going on with Russia’s economy…

Let’s say you lose your job. Your 401(k) is in the dumps. You’re spending your nest egg on groceries. Then your credit-card company tells you that since your financial situation has gone downhill, it’s going to increase the interest rates on your credit card… And then your mortgage rate gets boosted for the same reason. That’s kind of what’s happening with Russia just now.

Russia’s economy is in trouble. It’s probably going to shrink more than 4% next year. One big bank went bust a few weeks ago. The whole bank sector is looking sick. The country’s currency, the ruble, has weakened 18% versus the U.S. dollar over the past two weeks (and was weakened by 46% last year). Russia’s stock market was the world’s worst performing last year, falling 42%.

Around one-quarter of Russia’s economic output is connected to the energy sector. So the 56% decline in the price of Brent oil (the international benchmark) in recent months has hurt the economy.

Sanctions imposed by the U.S. and the European Union on Russia over the conflict in Ukraine have also squeezed Russia’s economy. And the perception of higher political risk in Russia is discouraging investment. And the worsening situation is causing people to lose what little faith they had in Russia. More from Kim…

In December, ratings agency Standard & Poor’s said it would likely cut Russia’s credit rating from “investment grade” to “junk” within three months and is scheduled to announce a next step in mid-January. Ratings agency Fitch has Russia two notches above junk right now. It files its newest rating tomorrow.

A country’s sovereign credit rating reflects its creditworthiness, or its risk of default. With $389 billion in foreign reserves (cash and other assets held by its central bank), Russia has a lot of cash on its balance sheet. But it blew through $88 billion in reserves last year trying to slow the depreciation of the ruble. The Russian government will need help keeping its banking sector afloat. It’s also going to have to help heavily indebted state-controlled companies. Meanwhile, because of the decline in the price of oil, Russia’s cash flows have collapsed.

As Kim explained, it’s normally a big deal to cut a country’s sovereign credit rating… especially when it’s going from investment grade to junk…

That makes it more expensive to borrow in international markets. But Russia’s borrowing costs have already been rising. Because of sanctions from the U.S. and Europe, Russian companies have been locked out of global capital markets for months… so they haven’t been able to borrow at any price.

Yesterday, Bloomberg reported that the cost of investors insuring Russian bonds against default nearly hit a six-year high. The cost of this insurance (called credit-default swaps) is higher than only four other countries – including Venezuela, Ukraine, and Greece, three poster children of macroeconomic disaster.

The big question on everyone’s mind is whether Russia will default like it did in 1998.

Financial expert Jim Rickards thinks so. He has seen this situation before. In fact, he was responsible for negotiating the bailout of Long Term Capital Management (LTCM) – a hugely leveraged hedge fund that collapsed in the midst of the Russian crisis – as the firm’s general counsel.

Because LTCM had so much exposure to derivatives, it was viewed as a systemic risk. So Jim sat down with 14 of the world’s biggest banks (like JPMorgan, Merrill Lynch, and Goldman Sachs) to arrange a $3.6 billion bailout for the hedge fund. The Federal Reserve supervised the entire deal.

Jim recently sent us an e-mail expressing his concerns over the current situation in Russia… and the similarities between what’s happening today versus the late ’90s.

In short, he thinks we’ll see contagion. He’s not worried about a sovereign default, because Russia has enough money to cover its dollar-denominated sovereign debt. But he says Russian corporations only have enough money to pay their debt until the end of this year.

Meanwhile, the largest European banks and emerging-market funds all hold loads of Russian corporate debt. So if you’re invested in mutual funds or have a 401(k), your assets could be at risk. But when the banks start writing down the value of that debt, the problem will magnify.

Jim also noted that the Russian crisis actually started in Thailand, then spread to Indonesia and Korea before striking in Russia. LTCM’s collapse took more than a year to play out. He thinks we’re facing a similar timeline today.

But Jim isn’t the only one who thinks we could see a replay of 1998. David Tepper, one of the wealthiest hedge-fund managers in the world, recently told CNBC, “This year rhymes with 1998. Russia goes bad. Easing [is] coming from Europe. Sets up 1999… I mean 2015.”

Tepper wasn’t calling the top. He was just warning people that things look similar to the Russian crisis… and that we should be prepared.


Source: The Stansberry Digest
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Re: Russia 02 (Aug 10 - Dec 15)

Postby behappyalways » Sat Jan 10, 2015 10:46 am

Russia 'has deteriorated significantly' as Fitch cuts credit rating
http://www.telegraph.co.uk/finance/econ ... ating.html
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Re: Russia 02 (Aug 10 - Dec 15)

Postby behappyalways » Tue Jan 13, 2015 1:40 pm

Russia faces wave of bankruptcies if interest rates don't fall
http://money.cnn.com/2015/01/12/news/ec ... ?iid=HP_LN
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Re: Russia 02 (Aug 10 - Dec 15)

Postby winston » Tue Jan 20, 2015 9:38 am

This Is How You Can Tell Russia’s Economic Crisis Has Officially Arrived

Source: Business Insider

http://www.thetradingreport.com/2015/01 ... y-arrived/
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