Every cloud has its silver lining.
That was my thought when I looked at a little-known side effect of global financial crisis. Because it has given the Russian market a wicked cross-check.
From their treatment of BP employees to the recent Georgian invasion, Russian behavior has been pretty aggressive. Moscow’s estimate of the Golden Rule—whoever has the gold, makes the rules—meant that they felt their immense oil wealth made them immune to world opinion.
But with falling oil prices, the Kremlin’s recent actions, and the global flight to safety, a lot of major players have walked away. In fact, many 2nd-tier firms are facing insolvency.
After spending hundreds of billions the Russian Central Bank could be downgraded. But if they conserve their reserves the spiral of lower stock prices and tighter liquidity probably will continue. Only a long period of responsible behavior could induce outside investors to return.
One of Russia’s favorite sports is hockey. For the Russian market, this global financial cross-check may have put them into the penalty box.
Douglas R. Tengdin, CFA
Chief Investment Officer
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