27 May 2014, 5:35pm
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  • Hello Mr Putin, fancy meeting you here?

    It’s not an experience you get that much in the UK with its short distances, but when air travel was dearer, in the 1970s, it was worth travelling by train in Europe. You’d get off the boat at Ostende, and after some interminable shuffling, end up at the railway station, where you had trains that went to different countries, which looked really exciting to a young ermine. Sometimes the train would have a destination of two countries, depending on which end of the train you boarded.

    Unlike air travel, the train stops at many places, and different people would embark and disembark at the waystations. As you approached your destination you’d get a sense of the place you were going to by your fellow-travellers.

    1505_putin

    So in my ISA I found myself waking up next to this fellow with hard gimlet eyes. You get the feeling he’s not a chap who is unused to seeing a dead body that was alive not so long ago. It’s not a friendly face, eh? And you get the feeling the old boy’s known some troubled times. Here’s a fantastic album of Vlad doing all sorts of derring-do –  not bad pecs for a geezer who’s getting on a bit.

    Vlad, a word in your shell-like. If you don't like what's on TV you can switch the darn thing off. Chill, bro'.

    Vlad, a word in your shell-like. If you don’t like what’s on TV you can switch the darn thing off, particularly if you’re Prez, they ain’t gonna stop you. Chill, bro’.

    Exactly why he’s so bothered by the existence of Conchita Wurst is presumably something that’s between Vlad and his shrink, if they indulge is such effete decadence in between all the huntin’ and fishin’.

    However, it’s not so much Vlad himself but Russia in general I’m interested in.

    A lot of people have lost a shitload of money in Russia. It’s a different country – they do things differently there. The term ‘ownership’ and the general rule of law has a more fluid meaning, as the odd oligarch has found out to their cost. Smarter people than me indeed have had Russia cost them dear – the rocket scientists of Long Term Capital Management who believe that risk could be abstractly quanitified discovered to their cost that

    In times of stress, the correlations rise. People in a panic sell stocks — all stocks. Lenders who are under pressure tighten credit to all

    Crikey. No shit, Sherlock? That’s the trouble with being a rocket scientist, you haven’t spent enough time with people to realise that scared humans (or dogs, or wildebeeste, or pretty much any living thing) do not scatter preserving their individual independent calm assessment of the situation. They run like hell. Mostly in the same direction as everyone else. Dunno what the maths of that are, but it buggers up your kurtosis and fattens your tails. And drains your wallet.

    So why do I want some of this? Well, I’m not going to go stockpicking in Russia. But I’ve been toying with the idea of getting some exposure to Vlad’s country despite his sabre-rattling and raising the uncomfortable topic formerly known as ‘living space’ in a previous context. After all, that nice man Tony Blair wasn’t averse to making other people live as he wanted them to live, though it’s still not an attractive characteristic in a world leader. Like it or not, Europe is going to have to cut deals with Russian companies, unless a large part of Europe would like to freeze its rocks off this coming winter. Even if they do, the Chinese might like some too.

    Unlike the traditional view of investing for retirement, where you liquidate on retirement to buy an annuity, I will use the income from my ISA over the coming years, and that terminal horizon is still several decades off possibly. I expect the financial and political power of the West to decline relative to other regions of the world for a range of macro reasons, as well as the Spenglerian thesis that cultures grow old and tired as they become more distant from the shared values that invigorated them. That isn’t to say that I believe Russia will stand towering above the early/mid 21st century like a Colossus. This long-range section of my ISA is small, and it includes a bit of  Asia, a little bit of Africa and now a little bit of Vlad’s domain in the form of HRUB 1 . I can take a long time over buying these areas, because the aim is to hold these for many years. So I try and pay as little as possible. The pound is relatively high at the moment, so it’s probably a year for looking for foreign assets, and Vlad’s been pissing a lot of people off which also seems to scare the horses a bit. The index is a funny old thing, too, being the MCSI Capped Russia index – basically Russia is about Gazprom, energy, oil, Sberbank, energy, more oil, mobile, commodities. And the chart looks fantastic – full of absolutely everything you don’t want in a stock chart – nose-dive-tastic, if this was an aircraft and you’d lost 30% heading for the ground hail Marys wouldn’t really be enough to give you hope.

    Crashing nosedive - all-time low. Time to buy?

    Crashing nosedive – all-time low. Time to buy?

    So I couldn’t resist – a P/E of about 5 and a yield of of a gnat’s under 3% I figured I’d have some of what my old mate Vlad is having. It was the devil’s own job to get data on HRUB – I had to sneak in to HSBC and pretend I was a professional and then look for HRUD and switch currency to GBP. I favoured it over the db-x trackers flavour of the same thing (XMRC) which seems much more popular (or heavily advertised) because that is a derivative with Deutsche Bank as counterparty, whereas HSBC was physical replication.  Physical replication isn’t all it says on the tin, though, because they still lend stuff out, turning physical into synthetic-lite.

    But to be honest, if you’re going to invest in Russia then you’re not of the most nervous disposition, and you gotta be prepared to let it all go. This isn’t a huge part of my ISA ;)

    Actually buying it on TD was no fun either. They swore blind they didn’t have any of it, I have to look up HSBC, page through pages of cruft, click on the HRUB link, upon which they still said they still didn’t do it, but a crafty Ermine observed that they could run a realtime quote 2 and were actually prepared to sell me some. Which they did.

    TD. We don't do this, but since you're a crafty bastard we do.

    TD. We don’t do this, but since you’re a crafty bastard we do.

    Now if a company was on a P/E of 5 and a yield of 3% I’d pass. but most of Russia’s stock market is companies doing real stuff with Real Men digging crap out of the ground. OTOH my mate Vlad could say he owns the lot and the Ermine is unlikely to launch ICBMs to get my stuff back. It’s gonna be a case of back away quietly from the hard man, eyes to the ground and then beat it ASAP. Indexes don’t usually go bust but the Russian stock market does have form on that, I hear 1917  was a pretty rough year on the St Petersburg stock exchange…

    But in the meantime, the Ermine will ride with Vlad, though still looking nervously at those gimlet eyes…

    Notes:

    1. HRUB is the GBP denominated version of HRUD, but it’s easier to find charts for HRUD (dollar flavour) so I’ve used HRUD, so there’s a forex shift
    2. when the market was open, it wasn’t when I went back to get a screenshot of the crappiness of their interface
    29 May 2014, 2:35pm
    by Neverland


    May be tempted to follow your lead on this one

    Nice thing about emerging markets at these values is that there is always scope for corporate governance to get better

    I’m also rather cynical about whether western quoted companies are really run in the best interests of their shareholders or their senior management

    The TER is a bit ugly at 0.6%, but then this is Russia ;)

    […] the pound, I have looked towards building out – in emerging markets, Asian smaller companies, Russia, and Africa. I could use some of the mayhem in the stock markets trumpeted by the Torygraph to get […]

    […] response to real shifts too, but nevertheless CAPE has something to be said for it. So I went and got me some HRUB to go ride with the madcap nutcase Putin. Somewhere you have to try to make sense of the twisted […]

     

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