Gyroscopic Investing

I heard Jim Rogers touting investing in Russia. He cited their recent sound fiscal policies and Putin's transformation. I know that they have been hoarding gold, have vast natural resources, and are not trillions of dollars in debt. What do you feel about an ETF such as RSX? 

I used to own RSX. Overall Russian market is not diversified with a heavy tilt towards energy and materials, so the commodity prices have strong impact on the index. If you want a pure exposure to Russia then RSX is the way to go. A more diversified approach would be DEM, which is recently increased it's allocation to Russia to 13%.

Being born and raised in Russia I know a thing or two about how things work there. It's getting better compared to the wild 90s, but the corruption is still adamant (although nowhere as bad as in India and Latin America). In a move to shift away from resources-oriented economy they are trying to evolve the hi-tech industry, but it's not happening as fast as they would like to. Being oil-rich they keep a pretty low income tax rate of just 13% regardless of income level ( surely sounds good  ), however some economists are already voicing concerns whether they can afford low tax rate given aging population and low birth rates. Not sure what "transformation" of Putin you referred to, I think he's still the same ex-KGB tough guy. The elections are rigged, the opposition is suppressed, all major media networks are controlled by the government, and many middle class citizens are leaving the country.

Anyways, from the investing standpoint RSX is a good choice for a VP. Just understand that it is very volatile and non-diversified. In spite of Russia's being the biggest country in the world 60% of assets are in just 10 companies, of which 8 are oil/gas/metals, 1 state-owned bank and 1 wireless operator. However the local consumer market is growing fast, so the share of financial and real estate sectors should become more visible in the index.

foglifter wrote: It's getting better compared to the wild 90s, but the corruption is still adamant

I think you mean rampant although I love the image that 'adamant' conjures up. I'm picturing a gov't official saying, "I must insist that you bribe me."  Actually, that pretty much happened to me in Moscow's airport in the 90s.

I don't think a purely Russian pp would work and, for the reasons laid out by foglifter above (paragraph 2), I am not ready to invest in Russia even in my vp.  I did once buy Vimpel comm. for my family when it was recommended by a newsletter. It services Russia but I think its headquarters are in western Europe.
--- Where did our E Othodox forum member go, by the way? ad orientam?

Reub wrote: I heard Jim Rogers touting investing in Russia. He cited their recent sound fiscal policies and Putin's transformation. I know that they have been hoarding gold, have vast natural resources, and are not trillions of dollars in debt. What do you feel about an ETF such as RSX?

Yandex.  It is the Google of Eastern Europe.

MachineGhost wrote:

Reub wrote: I heard Jim Rogers touting investing in Russia. He cited their recent sound fiscal policies and Putin's transformation. I know that they have been hoarding gold, have vast natural resources, and are not trillions of dollars in debt. What do you feel about an ETF such as RSX?

Yandex.  It is the Google of Eastern Europe.

That's right, Yandex is the largest search engine in Russia. Interestingly, they opened a modest office in Palo Alto. Perhaps to be closer to their competitor. 

I'm going to take a more serious look at RSX. Russia has many advantages and few direct enemies or financial threats. Their vast gold reserves, natural resources, and more conservative spending habits bode well. They were up 1.39% today and 15% for the past 3 months.

http://seekingalpha.com/article/1156851 ... oogle_news

Reub wrote: I'm going to take a more serious look at RSX. Russia has many advantages and few direct enemies or financial threats. Their vast gold reserves, natural resources, and more conservative spending habits bode well. They were up 1.39% today and 15% for the past 3 months.

http://seekingalpha.com/article/1156851 ... oogle_news

RSX is fairly new, it was started in 2007. Before that I used CEE, which is heavily tilted to Russia. It's a closed end fund currently trading at an average discount of -9.73% over the last 3 years.

RSXJ is a small-cap sibling of RSX, probably too new and too volatile. The spread is huge and only 10 mln in assets. But it's less tilted towards energy, with ~17% in real estate. Mortgage industry is growing fast as people jump on the credit bandwagon.

There are also ERUS, RBL, RUSL, TRF, but I didn't play with any of them.

When I think Russia I think corrupt kleptocracy that is being slowly consumed by crony capitalists and their opportunistic former communist thug enablers.

As far as I can tell, Vladimir Putin has been a Soviet/Russian civil servant/politician his entire professional life, and yet he is a billionaire.  How did that happen?  Is he like a communist Warren Buffett or has he maybe been skimming a little of the cream off of everything he has touched in public life for years?

It doesn't sound like a very appealing place for a foreigner to invest his money.

MediumTex wrote: When I think Russia I think corrupt kleptocracy that is being slowly consumed by crony capitalists and their opportunistic former communist thug enablers.

As far as I can tell, Vladimir Putin has been a Soviet/Russian civil servant/politician his entire professional life, and yet he is a billionaire.  How did that happen?  Is he like a communist Warren Buffett or has he maybe been skimming a little of the cream off of everything he has touched in public life for years?

It doesn't sound like a very appealing place for a foreigner to invest his money.

You omitted the most telling title from his career track: a head of KGB field office in East Germany in the 90s. The guy served 16 years in KGB, that means a lot!

So far Western-style democracy doesn't work well in Russia. Interestingly, many people actually prefer "tough rulers" like Putin, who can jail a couple of businessmen to amuse the crowd, give handouts before the election and create a sense of "order" and "fairness" in the country. For example, the last parliamentary elections were rigged of course, but the sad truth is while Putin's party United Russia got less votes in big cities, the small towns and rural areas voted overwhelmingly for Putin.

Here's an old set of PBS Frontline interviews with various reporters and politicians about Putin:
http://www.pbs.org/wgbh/pages/frontline ... putin.html

foglifter wrote: So far Western-style democracy doesn't work well in Russia. Interestingly, many people actually prefer "tough rulers" like Putin, who can jail a couple of businessmen to amuse the crowd, give handouts before the election and create a sense of "order" and "fairness" in the country.

I saw this in Africa, too. There are a lot of places that really seem to appreciate or at least intrinsically accept tough, powerful leaders, even if they're brutal or corrupt.

None of those places are where I'd be comfortable investing my money.

Pointedstick wrote:

foglifter wrote: So far Western-style democracy doesn't work well in Russia. Interestingly, many people actually prefer "tough rulers" like Putin, who can jail a couple of businessmen to amuse the crowd, give handouts before the election and create a sense of "order" and "fairness" in the country.

I saw this in Africa, too. There are a lot of places that really seem to appreciate or at least intrinsically accept tough, powerful leaders, even if they're brutal or corrupt.

One of the early prototypes.

Idi Amin Dada was not just corrupt, he was crazy, too.