Ruminating on Things

Russia – The Farewell Post

The Ruminator — Wed, 21 Jan 2009 19:55:37 +0000

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

The Ruminator — Sun, 21 Dec 2008 19:26:01 +0000

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.

Canutian Economics

The Ruminator — Wed, 26 Nov 2008 06:26:31 +0000

Martin Wolf writing in the FT of 26 November has defined Canutian economics;

“Policymakers around the world – particularly in the inordinately complacent surplus countries – do not begin to understand what this may mean.”

I don’t really care what the psychologically of the complacency is, it exists and will cause further pain.

It is instructive to see Martin Wolf turn less bearish, but as all liquidity has deserted the markets getting in and more importantly out is difficult. I will await the New Year to dip my toe back in the water.

Why fairly valued stock markets are an opportunity

More From The Tranlation Bureau

The Ruminator — Tue, 25 Nov 2008 17:35:21 +0000

From an extract from the FT on peace breaking out in Norilsk:

“It has also been a disappointment to the Russian government, which has put the creation of a Russian metals giant on its list of priorities.

“The state didn’t interfere, but it was obvious that it was irritated by our feud,” Mr Potanin told reporters on Tuesday.”

Translation:

Several senior guys in the government have PA punted Norilsk quite seriously and are facing some serious margin calls. They think that if we announce this peace agreement that the stock will see a big run-up tomorrow reducing the margin call.

As a translation bureau we would like to point out that we cannot vouch for Mr. Potanin’s statement but suspect that it is more likely than not to be true. It was not the State per se, but individuals who were threatening to throw the “law” at the ~~murdering, tax avoiding~~ oligarchs.

Norilsk-Rusal merger put on hold

What Is It With The Frog?

The Ruminator — Thu, 20 Nov 2008 13:32:06 +0000

Three times today the frog has been boiled by analogy. The last is the only one I can find the link for, which is probably just lazy journalism. But the frog is being unfairly boiled, it’s the tide we should be worried about.

The good news is that today the VVP’s (our great leader etc etc grovel, genuflect imitate the Duma) expensive winklepickers are suffering from salt ingress, as the inevitable rises and he has finally acknowledged that all may not be well in the world beyond his traffic jam free trip to and from the ~~thieving~~ White House.

Plunging Necklines

The Ruminator — Thu, 20 Nov 2008 13:05:20 +0000

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

More Schadenfreude

The Ruminator — Wed, 19 Nov 2008 13:20:43 +0000

These are difficult days for the Ruminator; the veins are positively coursing with schadenfreude and there are enough tales of daily woe over once high-flying geniuses to keep a smile on my face. All of that despite the low grey skies and sub-zero temperatures. The difficulty is knowing where to start.

The more obvious pick for today would have been the tale of woe which is the electricity sector. However, it’s the once mighty GAZP who caused today’s cynical smile. Once touted as the world’s largest company the mighty G is struggling to make 1 + 1 = a stealable amount. And thus it is having to turn to the great Satan for assistance. At the beginning of the year US companies were allowed nowhere near Shtockman and now they are being invited in as potential saviours.

Elsewhere, there is yet more chat regarding NordStream or non-NordStream as is more likely. Energy security is, as it has always been, a financial contract between neighbours. Political pipelines are non-starters at current prices.

Gazprom Considers U.S. Help
19 November 2008Gazprom is considering U.S. majors ExxonMobil and ConocoPhillips for its liquefied natural gas projects in the Arctic Yamal Peninsula, Alexander Medvedev, the firm’s deputy chairman, said Tuesday.

That Was a Bottom

The Ruminator — Mon, 17 Nov 2008 15:05:54 +0000

Those who have been out for a beer or several with the Ruminator are aware of my predilection for the appreciation of the arse – indeed I like to think of myself as bit of connoisseur.

Ben’s excellent BNE (subscription required) is calling the bottom

“Russia passes the bottom….”

Given my self-proclaimed expertise I think I will take the other side of that trade. We may have passed through the worst of the Moscow liquidity crisis but I am afraid that we are still a long way from a well-rounded derriere and have way too many of those flat featureless backsides wondering around.

Oil is still below economic for both the government and the oil companies, inflation may be abating but right up until 2-3 weeks ago was still raging. Many are still calling for USD/RUR to go to 1:32 (I believe 30) and that will spook the narod in to stuffing the cash under pillows, which will mean that banks have even less to lend, which means that there is less capital investment, which means…..

The Chinovniki are looting the national mattress in a whirlwind of destructive venality which will make the 1998 re-direction of IMF funds look like a bit of genteel shop-lifting. Holidays are being cancelled, dyevchunki are themselves looting hard (aka getting married) and the Millionaires Fair at the end of the month may have a couple of ex-billionaires in it.

In case I have not been clear the bottom is someway off; more akin to exposed porcine British flesh than the tauter husband-seeking or new-dyev-defying Russian variety.

[In fairness to Ben I started this post an age ago but got side-tracked, and then could not finish it; but the better sentences are today's and you are all better off as a result.]

11 11 11

The Ruminator — Thu, 13 Nov 2008 14:53:54 +0000

A little late but better than a poppy at the Cenotaph

The Fureys – Green Fields of France – WW1 Memorial

That Was the Rouble Then

The Ruminator — Thu, 13 Nov 2008 05:25:31 +0000

Just in time, in my case, the CBR has let the RUR go. Off goes the stability which the government had done nothing to earn and believed was its right.

If you are educated in Cantutian economics then high commodity prices make you brilliant and requires no further action – other than of course making sure that the militsia ready to ensure that anyone who disagrees with your view of economic brilliance is brutally beaten.

Seems more probable that the militsia will be more effective at the beating than the politicians at the economics.