It is just tremendous watching what is happening right now in the old world. These times will be sung of (not that we do much singing anymore, not like that, but you understand it’s a figure of speech).
What we are witnessing is nothing short of the third major collapse of the Russian experiment in our lifetimes. The first was the fall of the Soviet Union. The second the fall of the fledgling government that followed in the same decade. And now, we are watching the nationalist pride regime of Putin cave into nothingness.
With these unprecedented times comes certain certitudes, namely that Western finances other than those most speculative in nature have no business meddling in Russian affairs right now. Even in the shadow of the oil markets being torn down destroying a trillion dollars in assets globally, I feel more comfortable there than I do playing political “Russian” roulette.
Take CTCM – a company I recently highlighted in the Income Investment Report – which quite abruptly found itself forced into non-ownership of such a sizable portion of its Russian media assets. Literally one vote, overnight, and the damage was done. I could hardly publish the issue quickly enough, to keep up with the damage of that one legislative act on the part of Russia. I had to add an update as the issue was being finalized, my concerns came to fruition so quickly.
Which brings us to the good chaps on CNBC today. Who decided it was a good idea to openly advocate Russian investments at the expense of Apple?
One is a decidedly corrupt, nationalist wasteland of two failed states, bereft of legal protections for foreigners and undergoing a massive economic downtown (partly targeted, partly bad luck), and literally in the process of bailing out its banking system. And the other is to date the greatest capitalist company the world has ever known.
Not specific enough for you? Just look at the cash numbers. Russia the country has currency reserves of about $500 billion (about half of which are in US dollars). AAPL the company by itself has currency reserves worth $159 billion. A handful of the largest US companies easily match the currency reserves of this nuclear state.
And unlike the former, the later (AAPL included) don’t have a notorious penchant for screwing over their fiduciaries and abandoning their obligations.
The trouble here is that much of the danger to investing in Russia right now is more CTCM, less oil prices. I have no doubt Russian companies will subsist (if they are allowed to), for that is human nature. Endurance,…capitalism,…, adaptation,…these concepts are intricate to who we are and what we do.
But how can you balance that to the threat of a third of your investment being wiped out with the stroke of a pen? Or all of it, even?
The oil collapse was something that could hardly have been seen coming. If you did, you had some very select information. And even if you saw it coming, as some of us did, did you see it going this far? You had to guess both the timing and the magnitude to be right. But still the forces were at least somewhat random; or if not random, then at least uncontrollable by any one party. Yes the Saudi’s, it at least appears, are trying to destroy their competitors (or at least claim they caused the oil collapse for their reputations). Still there are many other players trying to get the price higher again. The game is active.
Not so with Russia. We know that Russian leadership is irrational and capable of extensive damage, with the whims of a spurned temper and a pen stroke. Within the borders of Russia, there are no major opposing players to bet on. There’s no reason to tempt that tempest by pretending it is random.