Author Topic: Can RSX go to 0?  (Read 3469 times)

Vilgan

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Can RSX go to 0?
« on: January 06, 2015, 11:52:10 AM »
Hi all,

I've been considering putting a bit of my "fun money" in RSX. However, one thing I'm not sure I understand is what would happen if Russia has a big economic collapse and defaults again. While stock prices could obviously go lower, what scenarios (if any) could cause the ETF as a whole to go to 0? Can they just claim all the ownership for themselves and any non-Russian investors lose their entire stake? Has that happened previously in other countries?

Anyway, just trying to understand the entirety of the risk before I potentially drop a bit of money on RSX.

MDM

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Re: Can RSX go to 0?
« Reply #1 on: January 06, 2015, 12:06:51 PM »
Going all the way to zero would more or less require that all the fund holdings (http://www.marketwatch.com/investing/fund/rsx/holdings) go to zero.

Unlikely.

But they could go lower than they are now....

Vilgan

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Re: Can RSX go to 0?
« Reply #2 on: January 06, 2015, 12:08:17 PM »
Going all the way to zero would more or less require that all the fund holdings (http://www.marketwatch.com/investing/fund/rsx/holdings) go to zero.

Unlikely.

But they could go lower than they are now....

Yeah, I guess the question is if Russia can sieze foreign holdings in their companies and if that is a realistic concern or fantasyland.

DrF

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Re: Can RSX go to 0?
« Reply #3 on: January 06, 2015, 12:08:52 PM »
Russia is so tied to the price of oil that I wouldn't invest in any Russia fund until oil prices start going up.

Once they do I plan to buy a Russia fund as well.

RyeWhiskey

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Re: Can RSX go to 0?
« Reply #4 on: January 06, 2015, 12:10:38 PM »
Russia is so tied to the price of oil that I wouldn't invest in any Russia fund until oil prices start going up.

Once they do I plan to buy a Russia fund as well.

Calling the bottom of oil may be as difficult as calling the bottom of Russian equities. OP may want to take a look at RSXJ as a higher risk/reward Russia play.

DrF

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Re: Can RSX go to 0?
« Reply #5 on: January 06, 2015, 12:12:23 PM »
I think it will be obvious once oil starts to reverse.

Jack

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Re: Can RSX go to 0?
« Reply #6 on: January 06, 2015, 12:32:48 PM »
I think it will be obvious once oil starts to reverse.

By the time it's obvious, the funds will already have the gain priced into them.

Vilgan

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Re: Can RSX go to 0?
« Reply #7 on: January 06, 2015, 12:42:49 PM »
Shrug, I threw a very small amount (1k) into RSX as part of my fun money speculation stuff for a few reasons:

1) I'd never bought an ETF before, just the mutual funds. This was an experiment to figure out how it works in Vanguard
2) I don't trust my ability to gauge the bottom (and mentally confirmed I wouldn't shoot myself if it dropped another 25%) while I feel like the 3-5 year outlook compared to its current price has a ton of upside.
3) It seems like there is a lot of pressure on Europe and on Putin to reduce the tensions/sanctions related to Ukraine in some manner in the next 6-12 months.
4) Those dividends aren't terrible
5) Its fun to speculate as long as I keep the amounts small ;)

If it does continue to drop I'll probably buy in again at 12, 10, and 8(!) but at these amounts it isn't exactly going to determine my financial future. 99% of my NW is not in RSX.
« Last Edit: January 06, 2015, 12:44:26 PM by Vilgan »

neil

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Re: Can RSX go to 0?
« Reply #8 on: January 06, 2015, 01:26:31 PM »
A mixture of outflows and performance could cause the fund to close, which would create a liquidation event and return any capital recovered from it.  It would be a forced sale in this case.  That would probably happen before "zero" happened, but significant losses would probably need to occur by then.

Funds like 3X index shorts have been hemorrhaging cash for the last three years but they still survive because people continue to speculate in them and provide inflows.  I wish I was smart enough to create such a business model.

innerscorecard

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Re: Can RSX go to 0?
« Reply #9 on: January 07, 2015, 12:41:52 AM »
A mixture of outflows and performance could cause the fund to close, which would create a liquidation event and return any capital recovered from it.  It would be a forced sale in this case.  That would probably happen before "zero" happened, but significant losses would probably need to occur by then.

Funds like 3X index shorts have been hemorrhaging cash for the last three years but they still survive because people continue to speculate in them and provide inflows.  I wish I was smart enough to create such a business model.

Asset management really is a "wonderful business" (for those doing the managing, not the clients, of course).