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    Russian Economy General News: #11

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    Austin

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    Post  Austin on Sat Nov 30, 2019 1:14 pm

    Capital investment: Forbes list offers Treasury projects worth 70 trillion

    https://iz.ru/948537/dmitrii-grinkevich/kapitala-vlozhenie-spisok-forbes-predlozhil-minfinu-proekty-na-70-trln

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    Post  miketheterrible on Thu Dec 05, 2019 7:53 am

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    Post  Austin on Thu Dec 05, 2019 11:11 am

    https://ria.ru/20191205/1561989265.html

    "The budget surplus in 2019 will be about 1.8% of GDP," the prime minister said.

    "Now we have a budget surplus. We assume that this surplus will be somewhere around 1.8% of GDP. This is also a very decent margin of safety, which allows us to look ahead with confidence," Medvedev said.
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    calripson

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    Post  calripson on Thu Dec 05, 2019 5:18 pm

    Austin wrote:https://ria.ru/20191205/1561989265.html

    "The budget surplus in 2019 will be about 1.8% of GDP," the prime minister said.

    "Now we have a budget surplus. We assume that this surplus will be somewhere around 1.8% of GDP. This is also a very decent margin of safety, which allows us to look ahead with confidence," Medvedev said.

    Around $31 billion in US dollars. Oil prices have averaged circa $60/barrel in 2019 but gas prices have fallen significantly - Gazprom rates are down 30% year on year to Europe and the lowest in 15 years. This is due to oversupply primarily from US fracking and the rapidly developing LNG market. It will not reverse any time soon. Oil prices have been supported by the Saudis who are trying to float shares of Aramco.

    Break-even budget forecasts in 2019 were predicated on circa $40/barrel oil prices and Russia adds roughly $2 billion per $1 above that level to the budget (or subtracts below), so an extra $40 billion less lower revenues on Gazprom profits and exports equals $31 billion.

    Russia's biggest miss is the lost investment income of reserve funds which historically when invested in capital markets have returned circa 1% per annum in dollar terms. Returns on plain vanilla pension fund type investments in the US over the same time period average 7-8% per annum, an opportunity loss of over $100 billion.
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    Post  kvs on Thu Dec 05, 2019 7:52 pm

    calripson wrote:
    Austin wrote:https://ria.ru/20191205/1561989265.html

    "The budget surplus in 2019 will be about 1.8% of GDP," the prime minister said.

    "Now we have a budget surplus. We assume that this surplus will be somewhere around 1.8% of GDP. This is also a very decent margin of safety, which allows us to look ahead with confidence," Medvedev said.

    Around $31 billion in US dollars. Oil prices have averaged circa $60/barrel in 2019 but gas prices have fallen significantly - Gazprom rates are down 30% year on year to Europe and the lowest in 15 years. This is due to oversupply primarily from US fracking and the rapidly developing LNG market. It will not reverse any time soon. Oil prices have been supported by the Saudis who are trying to float shares of Aramco.

    Break-even budget forecasts in 2019 were predicated on circa $40/barrel oil prices and Russia adds roughly $2 billion per $1 above that level to the budget (or subtracts below), so an extra $40 billion less lower revenues on Gazprom profits and exports equals $31 billion.

    Russia's biggest miss is the lost investment income of reserve funds which historically when invested in capital markets have returned circa 1% per annum in dollar terms. Returns on plain vanilla pension fund type investments in the US over the same time period average 7-8% per annum, an opportunity loss of over $100 billion.

    Russia cannot invest its money abroad. It does not have the stock market large enough to absorb the volume of investment and yield
    the returns you point to. So $100 billion is a theoretical figure not accessible in the real world.

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    Post  Hole on Thu Dec 05, 2019 8:23 pm

    Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.
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    Post  calripson on Thu Dec 05, 2019 9:51 pm

    Hole wrote:Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.

    Entirely untrue. Average returns over any 10 year rolling period of any 60/40 fund average 7-9% with the historic equity risk premium to treasuries a consistent 6-7% over the last 50 years. Even after 2008 when the S&P fell 40%, markets recouped all that loss in less than three years. Year to date, the S&P is up roughly 24%. People get rich by investing in innovation and technology, not by putting money under the figurative pillow.
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    Post  calripson on Thu Dec 05, 2019 9:57 pm

    kvs wrote:
    calripson wrote:
    Austin wrote:https://ria.ru/20191205/1561989265.html

    "The budget surplus in 2019 will be about 1.8% of GDP," the prime minister said.

    "Now we have a budget surplus. We assume that this surplus will be somewhere around 1.8% of GDP. This is also a very decent margin of safety, which allows us to look ahead with confidence," Medvedev said.

    Around $31 billion in US dollars. Oil prices have averaged circa $60/barrel in 2019 but gas prices have fallen significantly -  Gazprom rates are down 30% year on year to Europe and the lowest in 15 years. This is due to oversupply primarily from US fracking and the rapidly developing LNG market. It will not reverse any time soon. Oil prices have been supported by the Saudis who are trying to float shares of Aramco.

    Break-even budget forecasts in 2019 were predicated on circa $40/barrel oil prices and Russia adds roughly $2 billion per $1 above that level to the budget (or subtracts below), so an extra $40 billion less lower revenues on Gazprom profits and exports equals $31 billion.

    Russia's biggest miss is the lost investment income of reserve funds which historically when invested in capital markets have returned circa 1% per annum in dollar terms. Returns on plain vanilla pension fund type investments in the US over the same time period average 7-8% per annum, an opportunity loss of over $100 billion.

    Russia cannot invest its money abroad.  It does not have the stock market large enough to absorb the volume of investment and yield
    the returns you point to.   So $100 billion is a theoretical figure not accessible in the real world.

    Except during the period in question, that is exactly what they did do - invest a substantial portion of the reserve funds abroad in the form of European and US government debt securities with piss poor yields. In fact, they financed the government deficits of NATO countries. You do have a semi-valid point in that Russia would be subject to potential asset freezes if the invested in offshore hedge funds or the S&P 500 for example. The US would be much more reticent to take such action involving their own government debt securities.

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    Post  miketheterrible on Fri Dec 06, 2019 12:35 am

    This may prompt Gazprom to do what Putin demanded a couple of years ago - to push gasification of various far eastern regions. Gas prices are about half what they were a year ago, thus making it cheap for Russians. It's been demanded of local gas companies to gasify the east and north with new power plants and the like since demand in Russia is increasing.

    But they withheld due to costs and the power of Siberia importance. Hopefully now they change that
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    Post  Austin on Fri Dec 06, 2019 10:12 am

    They should invest in Chinese and Indian Government bond , Pays 4-5 % average and safe to invest.
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    Post  owais.usmani on Fri Dec 06, 2019 12:38 pm

    https://sdelanounas.ru/blogs/127853/

    Russian coal export boom over the years. thumbsup
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    Post  Hole on Fri Dec 06, 2019 1:18 pm

    calripson wrote:
    Hole wrote:Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.

    Entirely untrue. Average returns over any 10 year rolling period of any 60/40 fund average 7-9% with the historic equity risk premium to treasuries a consistent 6-7% over the last 50 years. Even after 2008 when the S&P fell 40%, markets recouped all that loss in less than three years. Year to date, the S&P is up roughly 24%. People get rich by investing in innovation and technology, not by putting money under the figurative pillow.

    Absolutely true. The californian pension fund alone has a gap of 50 to 60 Bill. $. Instead of a pension of 3.000 bucks (which is not much in California) the customers will receive only 1.500. If the stock market doesn´t collapse again.

    Most muricans don´t own stock, the got saving or retirement plans from banks/insurance companies. This is were all the shit from wall street ends.
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    Post  Austin on Fri Dec 06, 2019 5:26 pm

    Russia, China’s Neighborhood Energy Alternative

    https://thediplomat.com/2019/12/russia-chinas-neighborhood-energy-alternative/
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    Post  calripson on Fri Dec 06, 2019 9:47 pm

    Hole wrote:
    calripson wrote:
    Hole wrote:Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.

    Entirely untrue. Average returns over any 10 year rolling period of any 60/40 fund average 7-9% with the historic equity risk premium to treasuries a consistent 6-7% over the last 50 years. Even after 2008 when the S&P fell 40%, markets recouped all that loss in less than three years. Year to date, the S&P is up roughly 24%. People get rich by investing in innovation and technology, not by putting money under the figurative pillow.

    Absolutely true. The californian pension fund alone has a gap of 50 to 60 Bill. $. Instead of a pension of 3.000 bucks (which is not much in California) the customers will receive only 1.500. If the stock market doesn´t collapse again.

    Most muricans don´t own stock, the got saving or retirement plans from banks/insurance companies. This is were all the shit from wall street ends.

    Do you have the slightest idea of how a pension fund operates and the total irrelevance of your comment to a sovereign wealth fund? Pension funds have gaps because the actuarial assumptions did not match the real world results. They need to match fund liabilities. Shortfall could be due to a host of factors including lower tax revenues, higher payouts, or manager incompetence. In your example of California, the most significant factor influencing the gap is modeled versus real world long term interest rates and the cap rates used to discount future liabilities. A sovereign wealth fund like Russia's has no liabilities to match fund - it can theoretically invest in anything. It is a much cleaner and easier process to manage and given the ability to invest for the long term is better suited to handle riskier and more variable investment returns.
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    Post  Austin on Sat Dec 07, 2019 8:38 am

    What does one make of this Jim Rickards Interview ?

    We Were Hours Away From Closing Every Major Exchange in the World, Says Jim Rickards

    https://www.financialsense.com/podcast/19319/we-were-hours-away-closing-every-major-exchange-world-says-jim-rickards
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    Post  Austin on Sat Dec 07, 2019 3:12 pm

    More expensive than gold. One of the best projects since the collapse of the Soviet Union

    https://sdelanounas.ru/blogs/127904/
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    Post  kvs on Sun Dec 08, 2019 6:15 pm



    Finally the national welfare fund will be invested in the Russian economy and not farmed out into foreign instruments.

    But the narrator is not being honest. The prime reason for the poor economic growth in Russia is not some government fund
    not being invested locally. It is the criminal policy of the CBR to make borrowing basically impossible. Putin is seriously
    misinformed if he thinks that fighting some fictional threat of inflation (I have posted on this numerous times, if there
    was any inflationary pressure in Russia then the 50% annual money supply growth over the 2000s would have resulted
    in hyperinflation) justifies cutting off corporate financing. Capitalist economies operate on short term corporate borrowing.
    Putin, in spite of his supposed education, looks like he does not understand this. Saving money for retooling is simply not
    viable since retooling is required today and not several years in the future. Affordable interest rates (reflecting the
    true inflation risk and not BS claims) are necessary to minimize opportunity costs globally in the Russian economy.

    The current 7.5% prime lending rate not only suppresses economic growth, it actually is one of the prime inflation drivers
    since borrowing costs are excessive. For example, for small businesses there is an additional 30% penalty to their gross
    turnover from the CBR's criminal rate policy. They have to pass this along to the consumers. If the forex rate was different,
    these businesses would simply go out of business or not form at all. The high interest policy also implies that companies
    reduce wage increases. So if Putin wants to know why wages are not growing as fast as before, he should look at Nabiullina.

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    Post  Austin on Tue Dec 10, 2019 8:53 am

    It would be very naive to think that CBR decreasing its interest rates can some how magically boost Russian Economic growth trajectory. If that were to be remotely true then China PBOC would decrease its rate to 1-2 % and Chinese economy will start growing at 8 , 9 or 10 % or India RBI with lowest interest rate at around 5 % still got the worst GDP numbers in recent years.

    CBR can do as much it can because it primary mandate is Inflation and Macro Economic Stability.

    It is the Putins government that has caused the economic slow down because they kept pushing Structural Reforms as a trade off for Stability , Unless the Government can carry out range of structural reforms and significant increase private investment in the economy things like low interest rates or National Projects can do this much.

    Russian Government should lay out structural reform plans for the next 5 years follow it clock wise if its GDP numbers has to be bumped beyond 1-2 % Growth.
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    Post  Austin on Tue Dec 10, 2019 9:02 am

    Vice Prime Minister explains recession in Russian microelectronics in the 90s mindless privatization

    https://tass.ru/ekonomika/7307657

    France opposes US extraterritorial measures against Nord Stream 2

    https://tass.ru/ekonomika/7307023

    Izvestia: financial and investment audit will reduce budget spending on large projects

    https://tass.ru/ekonomika/7306743
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    Post  Arrow on Tue Dec 10, 2019 9:36 am

    Column 5 works very well in CBR. The Russian elite is too stupid to understand it. Russia's growth will also be further hampered.
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    Post  kvs on Tue Dec 10, 2019 4:26 pm

    Austin wrote:It would be very naive to think that CBR decreasing its interest rates can some how magically boost Russian Economic growth trajectory. If that were to be remotely true then China PBOC would decrease its rate to 1-2 % and Chinese economy will start growing at 8 , 9 or 10 % or India RBI with lowest interest rate at around 5 % still got the worst GDP numbers in recent years.

    Put the crack pipe down. It is clear from my posts that the current CBR policy is SUPPRESSING Russian economic
    growth by artificially constricting Russian bank borrowing. Your little example about China is a total non sequitur since
    China is not operating in a suppressed financial context due to an artificially high prime rate. So OBVIOUSLY toying
    with the prime rate in China will not produce magic growth.


    CBR can do as much it can because it primary mandate is Inflation and Macro Economic Stability.

    And where is the instability that justifies a 7.5% prime rate. Your really should try to add value to these threads instead
    of posting vapid factoids.


    It is the Putins government that has caused the economic slow down because they kept pushing Structural Reforms as a trade off for Stability , Unless the Government can carry out range of structural reforms and significant increase private investment in the economy things like low interest rates or National Projects can do this much.

    Now I see. You are a monetarist propagandist spouting the tired "structural reform" drivel so much loved by shock therapy
    monetarist witch doctors. I dare you to list, in detail, these structural reforms. I know ahead of time that this is
    double talk for rampant privatization. Russia's economy was already 70% privatized. You monetarist cunts want it 100%
    privatized into foreign hands.


    Russian Government should lay out structural reform plans for the next 5 years follow it clock wise if its GDP numbers has to be bumped beyond 1-2 % Growth.

    Boiler plate monetarist drivel. Nabiullina is one of your tribe, that is why you defend her sabotage so vigorously.


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    Post  kvs on Tue Dec 10, 2019 4:34 pm

    @Austin

    Take your monetarist propaganda spew elsewhere. You have zero credibility. Recall all the load of crap posts from
    you about the looming bankruptcy of the Russian sate because the reserve fund was being depleted and Russia was
    running a deficit less than 2% of GDP. All that doomer BS hasn't panned out, eh. Funny how the USA and the rest
    of NATO can run massive deficits (e.g. 14% GDP per year as is the case for the UK at certain times) and there is
    no call for "structural reforms" and hysteria about bankruptcy. But in the case of Russia it's an endless cycle
    of rinse and repeat of the same tired predictions and fear mongering. With systematic omission of the failure of
    all the monetarist drivel to pan out from the "analysis".

    Bugger off with your analism.

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    Post  Austin on Tue Dec 10, 2019 6:04 pm

    The Russian government are doing structural reforms so this is good thing

    https://tass.com/economy/1005912

    https://tass.com/economy/1087870





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    calripson

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    Post  calripson on Wed Dec 11, 2019 4:10 am

    The Central Bank rate is set at a level that retards business activity. The original response post 2014 sanctions was to defend the ruble and to stem the tide of capital outflows. That crisis period has passed and the ruble is stable. There is no threat of inflation. Certain individuals and banks benefit from higher central bank rates - that is why they are not lowered.
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    Post  Austin on Wed Dec 11, 2019 6:28 am

    calripson wrote:The Central Bank rate is set at a level that retards business activity. The original response post 2014 sanctions was to defend the ruble and to stem the tide of capital outflows. That crisis period has passed and the ruble is stable. There is no threat of inflation. Certain individuals and banks benefit from higher central bank rates - that is why they are not lowered.

    High interest rates also help the savers to get more from their fixed income deposit so it is not a one way street.

    No one can sit here on a high table and say what the CBR has to do we dont have all the facts including geopolitical one ......Who is to say that economic intelligence received from SVR would still say economy/ruble is at risk from further sanction and that goes into the inputs of CBR.

    The CBR is conversative in its approach and that is a good thing , More ever you cant reduce the interest rates to 1-2 % and wipe out the savers or tell them to invest in risky assets like stocks as US interest rates has forced savers to do.

    Historical interest rates has been around 4-5 % to help the Business and Savers and that is where CBR should aim to be not less not more.

    PBOC and Indian CBR are almost at those interest rates.

    The Putin Government has to carry out structural reforms if they aim to grow at 4-5 % and they understand these facts very well.

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