Yes, the S&P 500 shed four and a half percent today. Yes, the Dow dropped three and a quarter percent. Yes, the bailout index dropped almost eleven and a half percent. But this feels like a walk in the park compared to Russia’s trubs. Consider:
Russian stocks fell the most in three months, triggering trading halts in the two largest bourses, as the country cut its economic forecast and oil prices declined.
OAO Surgutneftegaz, Russia’s fourth-biggest oil producer, tumbled 15 percent. OAO Sberbank, the biggest lender, slumped 14 percent, while VTB Group, the second-biggest bank, dropped to a record low.
The 30-stock Micex Index lost 9.4 percent to 645.18 at the close in Moscow, the most since November. The RTS Index also dropped 9.4 percent, to 552.03. Both the Micex Stock Exchange and RTS halted trading for an hour today. The ruble weakened more than 3 percent versus the dollar.
It wasn’t twelve months ago when Russia’s Putin was flying Bears into U.S. airspace, killing dissident journalists with everything from midnight assassination squads to bombs to Polonium-210 and generally scaring everyone again after 20 years. Now he looks like a Madoff sibling.
Russian Stocks Tumble as Economic Outlook Worsens, Oil Declines [Bloomberg]
Related: Commodities Crash Decimates Russian Billionaires [The New York Post]
Poor Russia. All those dreams of greatness, renewed world position, and (dare we say it) power. For awhile there they looked realistic. Putin was General Secretary of the Communist Party of the Soviet Union President of the Russian Federation Prime Minister for life. Russia had adroitly dominated energy reserves and carved itself into a capitalist (sort of) power. Bear reconnaissance bombers began to harass U.S. naval vessels again, as well as testing the air defenses of the Northeast, to the surprise (and alarm) of the United States. One mission was such a surprise that the craft hit Pennsylvania before being intercepted. The pilots got medals. Someone at NEADS got reassigned to Alaska.
But it was not to be.
Now, with oil $30 a barrel below the budget-balancing level for Russia, and their inability to even blackmail the Ukraine and Europe with natural gas effectively, (no one believes they can leave the spigot off for very long) their dreams of power have slowly slipped away, and Putin, if you can imagine this, is politically vulnerable. The daunting health crisis they have been ignoring is making itself known in ugly ways (really their population is frightfully sickly) and their currency is heading back to 1998 levels as the central bank devalues it (again) this week.
It doesn’t help, of course, that concern over their little camping trip in Georgia sucked over $120-$200 billion of foreign investment out of the country. Inflation was over 13% in December.
Of course, the problem is, with circumstances like this, military conquest looks like a nice distraction.
We’re not long bomb shelters yet here, but that’s only because a certain Goldman partner (who shall remain nameless) promised us spots in his basement in the Hamptons.
Russian Ruble Slides to Pre-1998 Crisis Low; Forint, Zloty Sink [Bloomberg]
