Translation Services

Ever eager to help, the Ruminator is branching out in to translation services.  His first non-literal translation, is provided below and is from IB to english via an unknown meta language (that last bit was for next gen machine translation geeks – of whom the Ruminator is surprisingly one)

Six-year presidential term – the biggest surprise: Unlike previous presidential speeches, Mr. Medvedev’s first address was focused not on describing problems, but on making concrete proposals. One surprise was the proposal of a six-year presidential and five-year parliamentary term, justified by the huge reform agenda to be implemented. We also think that extending the presidential term will be a good way to stabilize the political situation by 2010-2012, when economic growth may slow considerably.

Translation – given the extended period of the coming economic slowdown and the fact that we can blame it on no one but ourselves we will delay asking the voters their opinion until things are a bit rosier.

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.

The Schadenfreude Post

I have been mentally planning the
schadenfreude post for a couple of weeks.  This is my nth Russian crisis (were n is the product of moronically stupid and venal government and business) but this contribution in the Moscow Times today has somewhat stolen my thunder.  The opening paragraph is good but there are some other choice lines which I have copied below for your edification. I particularly love the final one – in fact I think that I will have it inscribed on my business card.

Oh and there will be a Schadenfreude Post – most likely in January (call me Captain Lemon Peel – bitter and twisted.)

Look around at your Russian colleagues, business partners, clients, bosses and employees. Remember how self-assured and optimistic they were just this summer. Remember their grandiose business plans and strategies. It was as if Russia had forever lost the need for the thousands of expat managers, analysts and consultants who were working in the country. It seemed that Russia’s business elite had mastered Western management and finance skills so well that they would begin giving their U.S. and European counterparts a run for their money not only in Russia, but throughout the world…….

Now is the time for expats to teach their Russian colleagues a few
simple lessons based on the West’s long experience of developing its
market economy.

Russian managers need to understand that their ambitious dreams of
career advancement and success do not always correspond to their
qualifications and professional experience. They were able to get away
with being underqualified only because the country’s overheated economy
created a shortage of managers on the labor market.

Deeply Confused About Value

Back in the day – no before that day – back in the day when we were all new here; the foreigners and the Russians and the immigrants, now known as chernys – that day.

Everything was cheap, and the stock market was cheaper still (ha): and there was a reason – it was only cheap if you valued the asset and not the cashflow.  Strike any cords as the global market unwinds a global mispricing of assets – and Russia’s unwinding is particularly brutal.

Back in that day I built two models for Slavneft, one for internal use and one for me – on both models it showed that if cashflow was what you cared about then it was expensive.  The public one did not have cf/bbl multiples nor was it possible to discern real cashflow.  And then we bought a chunk and sold it to the next fool for a huge (should really be capitalised and bolded (sic)) mark-up.

A decade later these globally-known businesses are trading at 30% of their “value” of pre-South Ossetia (not that that has anything to do with anything other than as a date marker) and try to determine what the real value is. 

That the market, as and when it is allowed to open, is beyond cheap is beyond doubt – the real upside is less easy to discern. 

And my view is that there is no concept of value; which is why the Government’s take (official and unofficial) has no relation to value – and never will do.

Remember There is No Crisis

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A Test for the Readership

Juxtapose these four statements:

1.  No crisis in Russia
2.  Inflation edges higher in Russia
3.  Capital flight gaining momentum in Russia
4.  Finance Minister predicts a stable ruble

Statements 1 & 4 are from the Canutian school of economic management, albeit that is a little unkind to the old Dane who understood the limits of his power. 

Statements 2 & 3 are statements of fact.  They might also have added that the Ruble (against the $ not against the $/Euro basket) has already fallen out of bed.  Rubles for 1 month delivery are already trading at 27.5/$.

Better that the powers that be admit to the problems and manage expectations down rather than being caught by the lie.

It would appear that the “wasted era” has passed and we are in to the payback era.

As an aside there was another wasted era which ended abruptly in August 1998 – but that is just rose-tinted glasses.

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Zero Sum Reporting – But Juicy Statistics

It’s not been a good time for those United States of America (images of West Wing drift gently by); apparently they spawned this slow-motion financial train wreck, have been having their collective ass kicked all over the world (not least of which in the Caucuses) and George W. is still in office, if not in power (see President Ponzi-scheme Paulson).

So with the oil price on its inexorable slide from $140/bbl to $70/bbl before bouncing back to between $80-100/bbl (though the aforementioned ponzi-scheme makes predictions only marginally more productive than those with my 16 month daughter) now is the time to get out and kick Russia.  I can’t commend to you the article from the Washington Post Behind the Bluster, Russia Is Collapsing, but some of the statistics make juicy, if disturbing, reading.  For those of you who don’t really care about the analysis here they are;

• Three times as many Russians die from heart-related illnesses as do Americans or Europeans, per each 100,000 people. (ed – 3 times as many people die per1,000, 100 and 139 people as well)
• Tuberculosis deaths in Russia are about triple the World Health Organization’s definition of an epidemic, which is based on a new-case rate of 50 cases per 100,000 people.
• Average alcohol consumption per capita is double the rate the WHO considers dangerous to one’s health. (Only double seems very low to me – given that the great nation of Scotland is reportedly at 2.5x)
• About 1 million people in Russia have been diagnosed with HIV or AIDS, according to WHO estimates. (And diagnosing AIDS is not officially encouraged) Using mid-year figures, it’s estimated that 25 percent more new HIV/AIDS cases will be recorded this year than were logged in 2007.

My comments in italics

All this has been going on for some time now and has had a marginal impact on growth to date.  I’ll take on board the argument that you can only kill off so much of the population before it starts to impact growth, but using the non-empirical Ruminator employment measurement theorem, I believe that if 50% of building guard staff were forced to work (i.e. actually do something) for a living then the Moscow-based employment pool would increase by about 50%.  Put another way, there is full-employment and there is guard-based full-employment; where excess uselessness is mopped-up by increasing the number of people wearing uniforms and picking their collective noses.

The point the article is trying to make, but dares not explicitly, is that the government just does not care.  And that’s pretty difficult to argue against.  There is however, a view that if you focus on the wealth of the country its health will follow, and the government has been focused on growth  I believe more in the latter than the former, except that there is a strong likelihood that the trickle down effect will trickle offshore before it trickles in to hospitals and health.

There has been much talk in the UK about the Governments failure to save for a rainy day, or more appositely, fix the roof whilst the sun is shining. Same problem in Russia. Add in some pretty staggering inflation and some stagflation and a bunch of the gains will just disappear – leaving only sick people.

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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.