Russia – The Farewell Post

There has been a significant amount of silence emanating from these pages over the past few months.  I have been waiting for an apposite moment to announce that the Ruminator has left Russia.  Never say never; but for now there will be no business return to Russia, or the FSU (sic), ever.  The Ruminator has returned to the UK, where ‘returned’ is an odd concept given that I have lived and worked in Russia longer than anywhere else in the world.  Indeed, my life in west London as is strange as the early days in Moscow.  I considered finishing this blog with a series of posts on being an expat in your own country; but the fire and the ire are unoriginal and interesting only to a few people. Turn left at the Porshe garage on your way in from Heathrow and drink a reasonably priced bottle of wine for further discussion.

Since I was outed by the FT at the time of the Rosneft IPO, I have maintained a figleaf of anonymity.  For the sake of friends and business colleagues who continue the unequal struggle with hubris and corruption, this farewell post will not out me or them.  I shall reserve the truly gruesome stories of corruption for my memoirs; the hubris you can find here.

It was October 1994 that the Ruminator first set foot in Russia.  Five days holed up in the Metropole Hotel trying to run a schedule that started a meeting every hour, in a country which had no idea which hour the meeting was supposed to start.  The trip ended with dinner in Santa Fe, a restaurant with many memories and no cuisine.  The talk was of hope and of business trips to privatisation auctions, with bags of cash, to places that were to become household names (well in our house anyway).  After a night sampling  (vodka and beer – oh the things that you learn) the hope that was then pervasive I was hooked.  It took fifteen years to wean me from that drug.

By the time that living in a hotel in Moscow turned in to living in an apartment in Moscow we had made some fairly iconic investments.  One of my last acts on leaving Moscow with my family was to change my contract with Beeline, for no discernible reason; a Company whose early financing was built on our cash.  There are plenty of others interesting and profitable investments but this is not a post where boasting is much appreciated.  There have also been lean years – few of us have managed to make it through a decase and a half unscathed.

Along the way I met some more or less reputable characters; with the exception of Leonid Dordonovich, they are no longer in favour – oh and the incompetent idiot who runs Rosneft.  I would like to say that the least pleasant was a meeting with Khordokovsky about some boats (may he rest in Chita) but I think that it was with Yakovlev about some porcelain.

Along the way Moscow ceased to be a pleasuredome and became the city in which I lived with my family.  It also became a city fueled by the price of natural resources with no concept of value, values or ingredients.  In my forecast for 2007 I began to rant about the impact of inflation on the narod. What was obvious back then was denied by the great and the good right up to the month in which we took our leave.  Moscow was never beautiful, but in thinking itself so, flew too close to mamon and melted.  I no longer possess the drive to fight my way through another crisis – yes there is money to be made but alongside what kind of thief.

My first krysha was a Colonel in the KGB who was made persona non grata from a NATO country for activities not compatible with his status.  Ten years later he accepted an interview with MI6 (the price for a UK visa for this gentleman was a glass of whiskey at Heathrow) and until earlier last year sat on the board of a UK company.  How much better that brand of barely-sophisticate spy than their thug-like fifth directorate successors; too slow to understand the mess for which they were responsible but clever (khitry) enough to scam their way back to the top again.  And once again they are facing a Brezhnevian mess; this time though globalisation will ensure that there will be no lost decade and the result will be worse for Russia, if not for them.  They had a window of opportunity and have missed it – I believe that is how history will judge them.

Comparative crapness is as much subjective as objective.  To say that Russia is in a worse state today than at any time over the past 15 years is abject nonsense.  But on the day that Obama was elected President of Hope, I have less hope for Russia than at anytime in the past. 

And so, with a glass too many of whiskey inside me, this is the end of Ruminations on Russia.  The archive has a lot to be proud of, maybe not if you believe that grammar is important.  I have reread  most of it; mostly pithy, often wry and mostly right.  That will do for an epitaph.

Back to the Way It Was

It seems likely that “to have been Bernied” will enter the lexicon. 

I would like to say that I am more bemused than amused – but I am not.  More often than not when I told counterparties over the past year or so (when there was still a debt market) that long term relationships are worth more than a few basis points I am met by a confused agreement that “we are relationship driven.”  Which meant; if we can steal this piece of business for a few basis points we will but when times are harder dont’ expect us to be around.”  Or the definition of a banker (see umbrella and rain.)

The constant search for brilliance where only luck existed (see any number of soon to be defunct hedge funds) obscured the reality that only the very brilliant outperform consistently; and almost none beyond their public recognition.

I wish it were sad.  It is not. It is how life is.  We will return to a form of normality which I knew when I started in this business; most are not very good, and by the time you get to hear of the rest it is too late already.

Plunging Necklines

HT to FT Alphaville for linking to this crisis comparative graph.  Unfortunately the log scale was unable to accommodate the RTS.

 

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11 11 11

A little late but better than a poppy at the Cenotaph

The Fureys – Green Fields of France – WW1 Memorial

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Two Notes

On reading Medvedev’s speach and listening to Sergei Markov on this morning’s Today Programme on the threat of posting short-range ballistic missiles in Europe two posts came to mind. 

Post one is the sensible one.

Post two follows:

[small Russian boy* (played expertly by the very tall Medvedev) stamping foot shouting at adult who is talking to someone else.] Respect me, me, me, me

* a post will follow on a cultural dissection of spoilt Russian boys

The Politics of Hope

I am struck by the enthusiasm and hope that Obama’s victory has generated. 

By way of comparison, the day after Medvedev was elected was the same as the day before – the same corruption, the same cynicism towards the very government that they had just elected.

I appreciate the hope, but tend to believe that Russia’s cynicism is closer to reality.

Mistress Markets

The Ruminator’s household (ex-SWMBO#2 – though frankly who knows what she babbles about) has been in deep discussion over the impact of the crisis currently impacting Russia and soon to be recognised by the narod.  Hint – you can tell the news channels not to report the crisis but you can’t hide the exchange rate.  It’s everywhere on the streets.  Anyway this is not a post on Canutian economics – it’s about mistresses.

Ms. R, blogged some time ago on the Great Mistress Firesale in the UK.  But the UK and Russian markets are not the same.  The UK mistress-market is very thin (unlike the population) and mostly limited, on the buyside, to people with a certain job status.  Thus when a crisis hits, mistresses are very rapidly identified as a discretionary spend and dropped from the weekly shopping list.  All very dismal science.

In Russia however, the mistress-dyev market is much more developed and deeper.  This is not the time to differentiate between sponsorship-dyeving and mistress-dyeving, its the same thing as far as this post is  concerned (it’s a  semantic difference for marketing and sales purposes.)  Furthermore, the mistress -dyev market is, and here I am relying upon reportage from inside the FT, a little more hard-nosed.  It (as a collective description of a market) has already secured a number of assets (cars and flats) which will preclude lonely evenings on the MKAD and on Leningradsky Prospect (do those line-ups exist any longer??)  I struggle to find an adequate Mistress analog to a pre-nup.  How about a pre-now-if-you-want-me-to-do-that-it’s-going-to-cost agreement sound?  Works for me. 

So there is going to be some price adjustment and the benefits of lying on your back and thinking of (do they think?) are going to be fewer.  It may even be that it becomes acceptable to turn up to (insert the name of most recently fashionable restaurant) in only some of this seasons fashion.  Though I doubt it , some investment advice follows here; investment in crank diets that make it seem that cigarettes, lettuce and the occasional spoonful of smetana should pay back well.  Mistress-dyevs will be clad, inappropriately, in this seasons fashion for some time to come (sic).

There will, of course, be some unemployed Mistress-dyevs – margin calls can be brutal.  However, Mistress-dyevs are an essential expenditure if one’s over-developed ego is to be maintained and a little down-scaling should see everyone maintain an element of the status quo ante.

I would like to think that this will mean more seats and more restaurants that serve  good food, and I am not being churlish and requiring reasonable-to-good price. Unfortunately, this may be the case in Milan etc and itd but Moscow does not have anywhere that serves good food to which the price filter can be applied.

You can add this to the Schadenfreude post; no self-respecting Russian alpha male has detsky ploshadka weathering.

Remember There is No Crisis

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Capitulation

Just in case you were asleep at the wheel a quick list of banks (and brokers) who are no longer (in no order other than which they occur to me):

Washington Mutual
Wachovia (look on the wires – Citi just acquired it)
Northern Rock
Bradford and Bingley
Halifax Bank of Scotland (though there is a v. good chance that Lloyd’s shareholders will vote it down)
Fortis (though it’s name exists still)
Lehman
Merrill
ABN Amro!!
PIK Bank
Renaissance Capital

I haven’t checked the wires in 5 minutes but that should be about it for now.

At the day’s habitual low point in London (12.05 UK) the Royal Bank of Scotland was down 15%.

Thank goodness the Paulson plan bailed us all out.

Is that it? Or will it get worse.  I’m for worse.  There aren’t that many banks left to go bust, a few in Germany when they mtm, but no one will mourn them anyway.  House prices still have a way to go, especially in the UK, maybe here as well.

I was completely thrown by core Russian inflation (effectively food, services, electronics etc, but ex-the deflators of decreasing electronics etc) at 40% ytd.  Real Moscow salaries were -4.5% to end 1H 2008.  The slowdown in Russian consumer spending has yet to happen but it will, just as inflation becomes less of an issue, and spending will take a while to pick-up again.

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