When will Russian equities be possible / a good idea to buy?

[ChpBstrd]

[3/16/22: edited title to reflect the cutoff of Russian markets from investors]

I've been thinking through the endgame scenarios for the Ukraine war. The following article somewhat summarizes my thoughts.

https://www.marketwatch.com/story/russias-invasion-of-ukraine-4-ways-this-war-could-end-11646324852?mod=mw_latestnews

Outcomes:
1) Putin retreats or a treaty is agreed to
2) Russia gets into a decade-long quagmire
3) New Iron Curtain
4) NATO vs. Russia war

In scenarios 1 or 2, Russian stocks could recover dramatically, even if they are limited by sanctions to their domestic market. Of course, if the ruble keeps falling they won't earn much for Western investors.

Scenarios 3 and 4 could involve bans on foreign ownership and investments going to zero.

Yes, these are speculative penny stocks. But at some point, we have to recognize that Gazprom and Lukoil will continue selling gas/oil to Europe and China as they are doing today, Russian banks will continue to earn profits in Russia, etc. I don't think we're looking at communist-style nationalization, but it's possible in scenarios 3 and 4. Putin's new Soviet Union may continue to have capitalistic elements such as a stock market (now closed for 4 days like in 1998), foreign ownership of shares (like China), open forex markets (like now, still) etc.

Russian stocks are now selling at TTM PE ratios less than 0.5 to the extent they are still trading. At some point, if one assigns any probability whatsoever of Russia not collapsing Venezuela-style, private property rights of foreigners still existing in the future, and the world still needing oil and gas a couple years from now, it makes sense to gamble at some level of cheapness. Even if their long-term earnings are cut in half, you're still buying a stock with a PE ratio of, what, one?

Maybe now is the height of the panic / liquidity squeeze due to the Russian stock exchange being temporarily closed. I assign the most weight to scenario #2, so I can imagine these shares rebounding quickly. Your thoughts?

[PDXTabs]

For me personally, when Putin resigns or is deposed and his replacement says that this was all a big costly mistake. MCSI isn't delisting them because of the war (AFAIK). MCSI is delisting them because Tsar Putin can just shut down MOEX and impose capital controls on a whim.

[Blender Bender]

I've been thinking through the endgame scenarios for the Ukraine war. The following article somewhat summarizes my thoughts.

https://www.marketwatch.com/story/russias-invasion-of-ukraine-4-ways-this-war-could-end-11646324852?mod=mw_latestnews

Outcomes:
1) Putin retreats or a treaty is agreed to
2) Russia gets into a decade-long quagmire
3) New Iron Curtain
4) NATO vs. Russia war

In scenarios 1 or 2, Russian stocks could recover dramatically, even if they are limited by sanctions to their domestic market. Of course, if the ruble keeps falling they won't earn much for Western investors.

Scenarios 3 and 4 could involve bans on foreign ownership and investments going to zero.

Yes, these are speculative penny stocks. But at some point, we have to recognize that Gazprom and Lukoil will continue selling gas/oil to Europe and China as they are doing today, Russian banks will continue to earn profits in Russia, etc. I don't think we're looking at communist-style nationalization, but it's possible in scenarios 3 and 4. Putin's new Soviet Union may continue to have capitalistic elements such as a stock market (now closed for 4 days like in 1998), foreign ownership of shares (like China), open forex markets (like now, still) etc.

Russian stocks are now selling at TTM PE ratios less than 0.5 to the extent they are still trading. At some point, if one assigns any probability whatsoever of Russia not collapsing Venezuela-style, private property rights of foreigners still existing in the future, and the world still needing oil and gas a couple years from now, it makes sense to gamble at some level of cheapness. Even if their long-term earnings are cut in half, you're still buying a stock with a PE ratio of, what, one?

Maybe now is the height of the panic / liquidity squeeze due to the Russian stock exchange being temporarily closed. I assign the most weight to scenario #2, so I can imagine these shares rebounding quickly. Your thoughts?

So you are saying that for all the scenarios (Putin and/or such in power) you would gladly support him more/his economy/regime?
Giving him more power to kill more civilians? Is this your plan?
Sorry, but i don't see how this could be interpreted in any other way!

[Glenstache]

I was kind of hoping for a thorstache-ish satire thread.

It seems they are priced accordingly relative to the risk. One could also look at the current situation and speculate that there will be more investment in renewables and domestic manufacturing capabilities in the coming years. The conflict has shown that economic interdependence - which the neoliberal wing has argued will lend itself to greater stability through codependence - can also be used as a cudgel against enemies. See German reliance on Russian gas. China could turn and do this to the USA or whatever. Much less the lessons on economic interdependence risks from the pandemic.

[scottish]

You forgot scenario 5 - Russia suffers a political and economic collapse.    One of the factors that ended the cold war and the USSR:  the cost of trying to maintain military parity with the US was too much for the USSR's weaker economy to sustain.    Apparently Putin forgot about this.

Aside from the moral issue of injecting capital into Russia, you run the risk of a complete loss of your investment.

[JAYSLOL]

I was kind of hoping for a thorstache-ish satire thread.

The Top Putin?

But yeah I’m not going to seek out extra investment in Russia while Putin is their leader

[PDXTabs]

Aside from the moral issue of injecting capital into Russia, you run the risk of a complete loss of your investment.

Indeed. I would not feel happy putting any money into Russia right now for moral reason. But even if I was okay with that I still wouldn't because I wouldn't trust the Russian government not to just take all my money. With that said I might be willing to buy Ruble calls* hoping the Tsar Putin is deposed.

* - but I've never actually done something like that before

[Glenstache]

The Top Putin?

Well played. Like a Russian doll, there are just so many layers of jokes to expose. Or, like the Russian economy, the further this goes, the smaller it gets.

[NorCal]

I’m not normally supportive of divestment campaigns, as I don’t think they accomplish much.

However, this is a moral line that I don’t think is worth crossing at any price. We’re talking about artillery bombardment of civilian population centers here. Fuck that.

The only leverage the civilized world has is cutting off their access to hard currency. Oil and gas is their last meaningful access to hard currency. The longer these SDR’s stay at zero-bid, the better the world is.  While it’s only an indirect relationship, many individual companies are choosing to not do business with un-sanctioned Russian oil companies because they don’t have trust in the other side of the transaction. The longer these companies stay “valueless”, the longer it will take for others to start doing business with them.

[ChpBstrd]

I fail to see how buying shares on the London or New York exchanges for pennies on the dollar from panicked hedge funds and individual investors is putting money into Russia. If anything, my dividends might accrue until SWIFT connection is re-established - maybe years from now, and at that point I'd be taking money out of Russia. I don't see any share issues on the horizon. If the trade was successful, the losers would be those who sold me the shares, the winner would be me, and the Russian government would not be aided in any way.

And if the collective goal is to drive the value of Russian shares to zero as a political maneuver... good luck with that. Lots of investors around the world would be interested in safely retiring with a 10% WR. This isn't Wall Street Bets.

If we're looking for profiteers from human tragedy, look no further than the oil companies in our 401k's. Non-Russian oil companies are benefiting from high oil prices, while their production costs stay the same. The Middle Eastern oil dictatorships are also profiting from war, as usual. If you have oil and gas in your portfolio, then you're the one who has already profiteered from this tragic situation. I'm merely considering buying depressed shares amid a panic.

My last point is that our own US of A invaded Iraq without provocation and on the basis of lies only 3 presidents ago, causing at least 100k civilian casualties. Did my critics divest from the U.S. at that time, and are they still divested?

[less4success]

As long as we're gambling, assign probabilities and estimated returns and then compute the expected value. Using my own phony made up assumptions, I expect to get back < $1 for each dollar I put in.

I think prices would need to crash 99% before I'd even consider it a break-even bet.

[ChpBstrd]

As long as we're gambling, assign probabilities and estimated returns and then compute the expected value. Using my own phony made up assumptions, I expect to get back < $1 for each dollar I put in.

I think prices would need to crash 99% before I'd even consider it a break-even bet.

Lukoil is down 99.6% YTD. Jump in!

My estimated probabilities are:
1) Putin retreats or a treaty is agreed to (10%)
2) Russia gets into a decade-long quagmire (40%)
3) New Iron Curtain (40%)
4) NATO vs. Russia war (10%)

Thus I give it 50% odds (outcomes 1+2) that an outcome occurs where trade and financial flows are likely to resume within 5 years. It will be VERY hard for Europe to survive the next year or two without Russian gas, the source of much of their electricity. It will also be VERY hard for Western politicians to explain high natural gasoline prices to their constituents as necessary to protest the Russian invasion years ago of a country most of them can't find on a map. Solidarity doesn't last long when there's money at stake.

Additionally, a Republican win of the US presidency in 2024 will almost certainly be followed by relief in sanctions on Russia unless #4 happens. Half the party is sympathetic to Putin. If Democrats want sanctions, they'll have to accept inflation, which will cause the Republicans to win. This is yet another path to a rebound in Russian shares.

Everyone thought the Russian economy was surely dead in 1998 too. They defaulted, devalued, and moved on. On a 5-year timeframe, we can't claim to even know what form of government Russia (or the U.S.) will have, much less claim to know the status of sanctions or the outcome of investments.

[Weathering]

Grammarly (Ukraine)

[less4success]

I think prices would need to crash 99% before I'd even consider it a break-even bet.

Lukoil is down 99.6% YTD. Jump in!

Touche!

I guess my hypothetical return would be > 0... but I'm sticking with my index funds anyway because I'm too risk averse :)

[ChpBstrd]

I think prices would need to crash 99% before I'd even consider it a break-even bet.

Lukoil is down 99.6% YTD. Jump in!

Touche!

I guess my hypothetical return would be > 0... but I'm sticking with my index funds anyway because I'm too risk averse :)

My main aversion is getting stuck in a situation where I have to pour hours into doing paperwork, having to trade forex,  and filing complicated taxes at great cost to sell my shares.

My grandpa ended owning shares in Australia due to a merger. They were not in a brokerage account - they were simply listed by the recording service in Oz. The family just resolved his estate 13 years after his death. Now imagine if the people we had to talk to spoke Russian or if the systems were not so well established?

[PDXTabs]

I fail to see how buying shares on the London or New York exchanges for pennies on the dollar from panicked hedge funds and individual investors is putting money into Russia. If anything, my dividends might accrue until SWIFT connection is re-established - maybe years from now, and at that point I'd be taking money out of Russia. I don't see any share issues on the horizon. If the trade was successful, the losers would be those who sold me the shares, the winner would be me, and the Russian government would not be aided in any way.

They are traded on the NYSE, but excuse my ignorance, can the Russian government cause your shares to go to zero (or take them from you)?

[Travis]

Didn't know that suspending stock trading for a few days could land you in bankruptcy.

https://www.themoscowtimes.com/2022/03/04/russian-tech-giant-yandex-says-might-default-a76752

[ChpBstrd]

I fail to see how buying shares on the London or New York exchanges for pennies on the dollar from panicked hedge funds and individual investors is putting money into Russia. If anything, my dividends might accrue until SWIFT connection is re-established - maybe years from now, and at that point I'd be taking money out of Russia. I don't see any share issues on the horizon. If the trade was successful, the losers would be those who sold me the shares, the winner would be me, and the Russian government would not be aided in any way.

They are traded on the NYSE, but excuse my ignorance, can the Russian government cause your shares to go to zero (or take them from you)?

Yes, they can. However I see Putin more as a right-wing dictator than a communist. Property rights have a good chance of being preserved, even if Western investors face liquidity issues. Then again, you pays your monies and takes your chances.

[nereo]

I fail to see how buying shares on the London or New York exchanges for pennies on the dollar from panicked hedge funds and individual investors is putting money into Russia. If anything, my dividends might accrue until SWIFT connection is re-established - maybe years from now, and at that point I'd be taking money out of Russia. I don't see any share issues on the horizon. If the trade was successful, the losers would be those who sold me the shares, the winner would be me, and the Russian government would not be aided in any way.

They are traded on the NYSE, but excuse my ignorance, can the Russian government cause your shares to go to zero (or take them from you)?

Equities are shares of companies. Regardless of which exchange they are traded on, the companies in question are influenced by their home country.  Russia can and has seized control of private companies and/or their assets with alarming frequency for entirely political reasons. Personally I don't see many guard-rails up to prevent Putin from doing so for furthering the "special military operation" in Ukraine (to use Russian State language). Then of course there is the competitive dis-advantage of Russian companies operating in a global marketplace when the majority of the planet is openly pissed off at Russia.  To some degree these are likely already "priced in" to the share price, but... why on earth would you decide this is what you want to invest in?  Plenty of penny-stocks and moonshot companies without this baggage out there if swinging for the fences is your thing.

or... I'd rather examine which companies are likely to benefit with Russia facing such political pressure and economic shocks for the short to medium term.

[MustacheAndaHalf]

I'll add one risk others haven't considered: look at the Ruble to USD exchange rate.  My point isn't the large drop in 2014 when Russia annexed Crimea - it's that the Ruble never recovered from it.  Which is to say some of the losses you're seeing in Russian equities could be permanent.  So there could be profits, but make sure you don't assume a full recovery given that losses inflicted by the currency could be permanent or long term.
https://www.xe.com/currencycharts/?from=RUB&to=USD&view=10Y

I disagree with taking a moral stance on Russian stocks.  First, Russia passed a law that Russians can't buy Russian stocks from foreigners.  So by their own laws, your money cannot profit someone in Russia.  Second, you weren't buying these stocks last year, so the market doesn't care that you also don't buy them now.  It's wasted outrage which should be channeled into things that matter, like charitable donations.  I personally donated to "United Help Ukraine" after verifying that charity was efficient with it's donations.  And third, the US froze $600 billion USD of Russian central bank assets, and Putin didn't exit Ukraine.  Buying thousands of USD of Russian stocks isn't going to have any impact by comparison.

I considered buying Russian stocks earlier this week, but I think there will be plenty of time to do that.  There's a risk as Putin tries to take larger Ukrainian cities, that the Russian military resorts to harsher tactics.  And that could risk harsher sanctions - maybe even on Russia's oil sales.  I was actually looking at a company unrelated to oil/gas that does not seem to be in Putin's good graces.  But if they recover first, I won't feel like I've missed out.  So I'm waiting to see if sanctions get worse, or how things proceed.

Many of the airlines in the US have gone through bankruptcy before, but remained in business.  They reorganized their debts - but that still wipes out all of the shareholder's investments.  I wonder if that's possible with Russian stocks.

[nereo]

Many of the airlines in the US have gone through bankruptcy before, but remained in business.  They reorganized their debts - but that still wipes out all of the shareholder's investments.  I wonder if that's possible with Russian stocks.

The  trick of course is knowing which ones will survive/recover vs underperform/cease to exist. To use your example, many of the *current* US carriers have gone through bankruptcy in the recent past and have (to date) survived. But there’s a long list of carriers that didn’t. In other words, survivorship bias.

[MustacheAndaHalf]

Many of the airlines in the US have gone through bankruptcy before, but remained in business.  They reorganized their debts - but that still wipes out all of the shareholder's investments.  I wonder if that's possible with Russian stocks.

The  trick of course is knowing which ones will survive/recover vs underperform/cease to exist. To use your example, many of the *current* US carriers have gone through bankruptcy in the recent past and have (to date) survived. But there’s a long list of carriers that didn’t. In other words, survivorship bias.

I think almost all of the current US carriers have gone through bankruptcy.  So to my thinking, companies that survived and those that didn't caused people who bought their stock to take a 100% loss.  Rarely, bondholders get paid in full, and people holding shares get paid a few percent of their investment after waiting months or even years.  So my example is of US companies that wipe out investors, which means it could happen even more easily under the conditions in Russia.

If that happens in Russia, companies could declare some kind of technical bankruptcy.  Anyone holding stocks takes a -100% loss on their investment.  But the company then continues in business.  The pricing for a -99.5% loss does hint at this possibility, so it's worth researching before investing in Russian stocks.

[Blender Bender]

I would rather be poor than build my stache on blood of innocent people.
You can justify anything, putin is a nice genius, if you want fooling yourself.
Every time putin's stache is strong, he attacks neighbours. This is not a speculations, facts.

[MustacheAndaHalf]

I would rather be poor than build my stache on blood of innocent people.
You can justify anything, putin is a nice genius, if you want fooling yourself.
Every time putin's stache is strong, he attacks neighbours. This is not a speculations, facts.

Phrases like "blood of innocent people", "justify anything", "nice genius" are not "facts".  Russian companies have no say in Putin's war, so they do not have "blood of innocents" on their hands as you claim.  If that's a "fact", where is your source?

I don't see anyone else saying "putin is a nice genius" before your post, so who do you claim is using that to "justify" something?

[dividendman]

Speaking of deals... I guess "self-sanctioning" only goes so far, Shell Oil just received shipment of Russian oil for $28.50 below the market price... a 25% discount.

edited for link (probably behind a paywall but i have a subscription): https://www.wsj.com/livecoverage/russia-ukraine-latest-news-2022-03-04/card/shell-buys-russian-oil-at-bargain-price-2ZljvO2HQlmPm5d5aAgG

[MustacheAndaHalf]

1) Putin retreats or a treaty is agreed to
2) Russia gets into a decade-long quagmire
3) New Iron Curtain
4) NATO vs. Russia war

Can't (2) and (3) happen at the same time?  The Soviet Union was the old iron curtain, and waged a war in Afghanistan for 9.2 years (maybe the quagmire lasted longer?).  So it seems like (2) and (3) already happened together.

I view (3) as most likely, as shown by isolation of Russia by other countries.  And capitalist companies are joining in, divesting of Russian assets.

As to investing in Russian stocks, you might be too late.  Schwab has a warning that Russian stocks are no longer available for buying or selling.  At least some Russian stocks have halted trading on US exchanges, which could turn into a delisting of those stocks.  According to the bond contracts of those companies, that means bond holders could demand immediate repayment.

I think we'll see some Russian companies considered bankrupt.  Note when you buy Russian stocks on a US exchange, you are probably buying ADRs (American Depository Receipts?).  ADRs give you even fewer rights than holding US stocks - and US stocks are typically wiped out in a bankruptcy.  I predict many ADRs of Russian stocks will disappear for a -100% loss.

But we'll know more next week - this seems to be rather recent news, as I didn't see these stock halts and Schwab warnings earlier this week.

[Blender Bender]

I would rather be poor than build my stache on blood of innocent people.
You can justify anything, putin is a nice genius, if you want fooling yourself.
Every time putin's stache is strong, he attacks neighbours. This is not a speculations, facts.

Phrases like "blood of innocent people", "justify anything", "nice genius" are not "facts".  Russian companies have no say in Putin's war, so they do not have "blood of innocents" on their hands as you claim.  If that's a "fact", where is your source?

I don't see anyone else saying "putin is a nice genius" before your post, so who do you claim is using that to "justify" something?

Re: "nice genius".
If the commentators on this thread have not voted for trump then my comment was mis targeted. But i doubt it.

Re: "Russian companies have no say in Putin's war"
"No matter the source of energy, the Russian government controls it"
https://www.investopedia.com/articles/investing/040414/how-russia-makes-its-money-and-why-it-doesnt-make-more.asp

Re:  "blood of innocent people"
https://www.aljazeera.com/economy/2022/2/4/russia-ukraine-crisis-when-oil-prices-climb-putin-gets-bolder

Dots connected for you. Please specify which part of the connections are questionable to you. I will spend more time on providing you links and commentary.

Putin is in the same league as Hitler and Stalin. There were many back then doing business with Hitler. Was that moral to you?

[PDXTabs]

I fail to see how buying shares on the London or New York exchanges for pennies on the dollar from panicked hedge funds and individual investors is putting money into Russia. If anything, my dividends might accrue until SWIFT connection is re-established - maybe years from now, and at that point I'd be taking money out of Russia. I don't see any share issues on the horizon. If the trade was successful, the losers would be those who sold me the shares, the winner would be me, and the Russian government would not be aided in any way.

They are traded on the NYSE, but excuse my ignorance, can the Russian government cause your shares to go to zero (or take them from you)?

Yes, they can. However I see Putin more as a right-wing dictator than a communist. Property rights have a good chance of being preserved, even if Western investors face liquidity issues. Then again, you pays your monies and takes your chances.

I'm not convinced "the move is part of a wide swathe of capital-control measures enacted since the invasion of Ukraine. The measures include prohibiting foreign-currency transfers abroad and a ban on foreign investors selling assets." - WSJ: Russia Likely to Miss Interest Payment for First Time Since 1998 Crisis. "Investors who own ruble-denominated government bonds have been unable to sell them this week after the central bank shuttered the stock and bond markets to prevent the mass sale of Russian securities. Russia’s central bank temporarily prohibited brokers from selling securities on behalf of foreign clients earlier this week." - WSJ: Russia’s Central Bank Blocks Coupon Payments to Foreign Bondholders

[simonsez]

I would rather be poor than build my stache on blood of innocent people.
You can justify anything, putin is a nice genius, if you want fooling yourself.
Every time putin's stache is strong, he attacks neighbours. This is not a speculations, facts.

Phrases like "blood of innocent people", "justify anything", "nice genius" are not "facts".  Russian companies have no say in Putin's war, so they do not have "blood of innocents" on their hands as you claim.  If that's a "fact", where is your source?

I don't see anyone else saying "putin is a nice genius" before your post, so who do you claim is using that to "justify" something?

Re: "nice genius".
If the commentators on this thread have not voted for trump then my comment was mis targeted. But i doubt it.

Voting for a person in an American election does not mean you agree with everything that person has ever said (or the party that they represent at that point in time) and every position they have ever taken.  On this forum as well as across the country the majority of Americans did not vote for Trump in 2016 or 2020 but that should be irrelevant to this already sensitive topic.  Please foment discord about Trump elsewhere.  It's a reductionist take and not brought to this discussion in good faith.

[Blender Bender]

Voting for a person in an American election does not mean you agree with everything that person has ever said (or the party that they represent at that point in time) and every position they have ever taken.  On this forum as well as across the country the majority of Americans did not vote for Trump in 2016 or 2020 but that should be irrelevant to this already sensitive topic.  Please foment discord about Trump elsewhere.  It's a reductionist take and not brought to this discussion in good faith.

Glad to hear.

Hmm, but what is more (in)sensitive. Mentioning previous president and quoting him almost carbon copy, OR starting this insensitive thread aka how to profit from the war. What Ukrainians would feel about it?

[erjkism]

I fail to see how buying shares on the London or New York exchanges for pennies on the dollar from panicked hedge funds and individual investors is putting money into Russia. If anything, my dividends might accrue until SWIFT connection is re-established - maybe years from now, and at that point I'd be taking money out of Russia. I don't see any share issues on the horizon. If the trade was successful, the losers would be those who sold me the shares, the winner would be me, and the Russian government would not be aided in any way.

And if the collective goal is to drive the value of Russian shares to zero as a political maneuver... good luck with that. Lots of investors around the world would be interested in safely retiring with a 10% WR. This isn't Wall Street Bets.

If we're looking for profiteers from human tragedy, look no further than the oil companies in our 401k's. Non-Russian oil companies are benefiting from high oil prices, while their production costs stay the same. The Middle Eastern oil dictatorships are also profiting from war, as usual. If you have oil and gas in your portfolio, then you're the one who has already profiteered from this tragic situation. I'm merely considering buying depressed shares amid a panic.

My last point is that our own US of A invaded Iraq without provocation and on the basis of lies only 3 presidents ago, causing at least 100k civilian casualties. Did my critics divest from the U.S. at that time, and are they still divested?

truth

[MustacheAndaHalf]

I would rather be poor than build my stache on blood of innocent people.
You can justify anything, putin is a nice genius, if you want fooling yourself.
Every time putin's stache is strong, he attacks neighbours. This is not a speculations, facts.

Phrases like "blood of innocent people", "justify anything", "nice genius" are not "facts".  Russian companies have no say in Putin's war, so they do not have "blood of innocents" on their hands as you claim.  If that's a "fact", where is your source?

I don't see anyone else saying "putin is a nice genius" before your post, so who do you claim is using that to "justify" something?

Re: "nice genius".
If the commentators on this thread have not voted for trump then my comment was mis targeted. But i doubt it.

Re: "Russian companies have no say in Putin's war"
"No matter the source of energy, the Russian government controls it"
https://www.investopedia.com/articles/investing/040414/how-russia-makes-its-money-and-why-it-doesnt-make-more.asp

Re:  "blood of innocent people"
https://www.aljazeera.com/economy/2022/2/4/russia-ukraine-crisis-when-oil-prices-climb-putin-gets-bolder

Dots connected for you. Please specify which part of the connections are questionable to you. I will spend more time on providing you links and commentary.

Putin is in the same league as Hitler and Stalin. There were many back then doing business with Hitler. Was that moral to you?

When you said "nice genius", did you mean to insult Putin as a "very stable genius"?  That would have been a much better dig at ex-President Trump, who described himself with that quote in an interview (and it became a book title):
https://en.wikipedia.org/wiki/A_Very_Stable_Genius

Your evidence against "Russian companies" only refers to Russian energy companies.  And it doesn't show their personal wrongdoing, so much as the Russian economy prospering gives Putin the money to go on the attack.  But there's also a critical flaw with using investing to convey outrage: it does nothing.  Going from not buying Gazprom shares in 2021, to being outraged and not buying Gazprom shares in 2022 - there's no difference.  A better way to vent that anger is with donations to charities helping Ukraine (be careful they were not recently created - a sign of fraud).

As to you demonstrating Godwin's law, there's no need to respond to that.  But I will say 2022 is not the holocaust, and you should familiarize yourself with those events before trivializing them.
https://www.ushmm.org/
https://en.wikipedia.org/wiki/Godwin%27s_law

[mistymoney]

I would not invest in russia on principle. Even if large profits were to be had.

then, "pennies on the dollar" implies there is a dollar somewhere, that is pure speculation.

and then aside from all that - russia is known for rampant corruption, if there were dollars behind those pennies, I would not at all think that buying stock would ever get me to those dollars.

[Blender Bender]

When you said "nice genius", did you mean to insult Putin as a "very stable genius"?  That would have been a much better dig at ex-President Trump, who described himself with that quote in an interview (and it became a book title):
https://en.wikipedia.org/wiki/A_Very_Stable_Genius

Your evidence against "Russian companies" only refers to Russian energy companies.  And it doesn't show their personal wrongdoing, so much as the Russian economy prospering gives Putin the money to go on the attack.  But there's also a critical flaw with using investing to convey outrage: it does nothing.  Going from not buying Gazprom shares in 2021, to being outraged and not buying Gazprom shares in 2022 - there's no difference.  A better way to vent that anger is with donations to charities helping Ukraine (be careful they were not recently created - a sign of fraud).

As to you demonstrating Godwin's law, there's no need to respond to that.  But I will say 2022 is not the holocaust, and you should familiarize yourself with those events before trivializing them.
https://www.ushmm.org/
https://en.wikipedia.org/wiki/Godwin%27s_law

@MustacheAndaHalf Looks like you misunderstood, or you are just putin's troll (still guessing that not).

[MOD NOTE: there's enough anger and emotion here, there's no need for this kind of insult.  Warning issued.]

[Benders NOTE: The crossed out line means: "I don't think you are a troll, just misunderstanding"]

Re: genius
No, i was not digging at the fact that trumps called himself stable genius; that would have not much connection to this topic.
I was referring that he called putin genius and brilliant attacking Ukraine.
https://www.washingtonpost.com/politics/2022/02/22/trump-reacts-putins-invasion-ukraine-exactly-youd-expect/
Don't tell me that you did not know that?

Re: Hitler
Again, let me repeat that again clearly: putin is in the same league as Hitler and Stalin. Possibly could be even worse since has access to atomic bombs (the time will tell, so far he was about to destroy nuclear power plants).
I have never used comparisons of current events to Hitler. Because that would wash out the holocaust. Up to this point. And i know what i'm talking about. I was born 20km from Auschwitz. Some of my family members (luckily) survived the camp there.

[PDXTabs]

Again, let me repeat that again clearly: putin is in the same league as Hitler and Stalin. Possibly could be even worse since has access to atomic bombs (the time will tell, so far he was about to destroy nuclear power plants).

I just wanted to point out that Stalin was in power until March 5th 1953 while the first (successful) atomic bomb test in the USSR was August 29th 1949.

[Blender Bender]

Again, let me repeat that again clearly: putin is in the same league as Hitler and Stalin. Possibly could be even worse since has access to atomic bombs (the time will tell, so far he was about to destroy nuclear power plants).

I just wanted to point out that Stalin was in power until March 5th 1953 while the first (successful) atomic bomb test in the USSR was August 29th 1949.

True. But a bit of difference. Currently putler has actually nuclear advantage, especially with "tactical" mid/short range over NATO.
And putler actually threatens west with using it. This is stronger than stalin's case. Stalin was not in _that_ position.
Khrushchev later got advantage over west with "the mother of all bombs".

[bthewalls]

Option 5?...putins ptsd from Cold War and hate of west results in nuclear war and were all screwed?

Baz

[DaTrill]

Russian assets have been cheap for quite a while (since 1998).  If one is to invest in a communist/socialist country, they are taking major execution risk.  Even if correct on one's investment thesis, extracting the gain can be difficult or impossible (permanent lock-up period).  Russia and Ukraine are failed states, due to corruption, crime and oligarchs, both bumping along as the cheapest currencies for the past decade.  This is a lose/lose/lose situation for anyone that gets involved (US) if they don't have to (Germany has no choice).   

https://lestatistiche.com/big-mac-index-worldwide-2021/#:~:text=In%202021%20a%20Big%20Mac%20was%20estimated%20to,the%20cost%20of%20a%20burger%20in%20McDonalds%20network.

The Mark Twain quote can apply to fighting with a failed state.  "Never declare war with a failed state, they will drag you down to their level and beat you with experience". 

“Never argue with an idiot. They will drag you down to their level and beat you with experience.”

[ChpBstrd]

Russia can and has seized control of private companies and/or their assets with alarming frequency for entirely political reasons. Personally I don't see many guard-rails up to prevent Putin from doing so for furthering the "special military operation" in Ukraine (to use Russian State language). Then of course there is the competitive dis-advantage of Russian companies operating in a global marketplace when the majority of the planet is openly pissed off at Russia.  To some degree these are likely already "priced in" to the share price, but... why on earth would you decide this is what you want to invest in?  Plenty of penny-stocks and moonshot companies without this baggage out there if swinging for the fences is your thing.

or... I'd rather examine which companies are likely to benefit with Russia facing such political pressure and economic shocks for the short to medium term.

The difference between Lukoil or Gasprom and a typical penny stock is the TTM PE ratio of one. They don’t have obsolete business models or 50x leverage.

The world is addicted to oil, the Russians have it, and Americans routinely change their government if forced to pay more than $5/gallon for gasoline. Thus these companies will continue selling oil. Western politicians will find a way to make that acceptable.

But yes, Russia has a corrupt economy run for the benefit of the state, not shareholders. That’s why I stayed away in the past, but this situation looks a lot like a panic that will pass and become another point on the old “Reasons Not To Invest” chart. The objective would be to buy for a penny and sell for a nickel next year when Ukraine is no longer the #1 headline, not wait for it to recover full market value.

[nereo]

Well,Moody’s downgraded Russia again, just days after dropping it six notches into junk status. It now predicts the Russian economy will contract 7% this year with further losses in 2023.

Something something falling knife…?

[maizefolk]

The Wall Street Journal had a really nice perspective piece relevant to the question of how bad the worst case scenario could be from an investor perspective: Stock Markets Usually Go Up, Sometimes They Go Away.

In 1911, Alfred Neymarck, a French economist, estimated that Russia was the fifth-largest investing center in the world, encompassing 5% of the global market for stocks and bonds.

More than 200 Russian companies were listed on the St. Petersburg Stock Exchange in 1914. Amid the havoc of World War I, it closed that year, reopening for two months in 1917. It shut down again after the Bolsheviks overthrew the Czar.

Trading didn’t resume for another three-quarters of a century.

[ChpBstrd]

Russian assets have been cheap for quite a while (since 1998).  If one is to invest in a communist/socialist country, they are taking major execution risk.  Even if correct on one's investment thesis, extracting the gain can be difficult or impossible (permanent lock-up period).  Russia and Ukraine are failed states, due to corruption, crime and oligarchs, both bumping along as the cheapest currencies for the past decade.  This is a lose/lose/lose situation for anyone that gets involved (US) if they don't have to (Germany has no choice).   

The point about investors getting wiped out by currency devaluations rather than the factors being discussed here is a good one.

Now everything seems to be locked up anyway, so it’s kind of a moot point. I did make $1,500 off the collapse of Russia’s stock market though. I managed to sell 100 bear call spreads at the 8/9 strikes for a 15% premium on Wed. They expired OTM on Friday. I guess I should have gone all-in because I was obviously trading against three computers that didn’t have all the news factored in.

Sometimes there is free money left laying around, sort of like when the betting sites were still offering odds on a Trump victory in Nov. 2020 when the vote counts had essentially ruled out the possibility.

[BicycleB]

Congrats on your bear call spread trade, @ChpBstrd.

Reading this thread with interest. I imagine it will restart at some point. In the meantine, I am in touch with a family of Ukrainian refugees through a friend and have reserved some US$ to help them when the current rush of support fades.

I remain curious about thread topic, and related trades such as the bear call spreads, because they don't seem like they would assist the Putin govt. Hard to figure out the risk/reward balance; hoping to learn for future by following this.

PS. How did you calculate that Lukoil was down 99.6%? A few minutes ago I checked LUKOY PNK on Yahoo Finance - it appeared to have dropped from $90.09 on January 3 to $6.96, the last trade shown, roughly a 92.3% drop.

[ChpBstrd]

Congrats on your bear call spread trade, @ChpBstrd.

Reading this thread with interest. I imagine it will restart at some point. In the meantine, I am in touch with a family of Ukrainian refugees through a friend and have reserved some US$ to help them when the current rush of support fades.

I remain curious about thread topic, and related trades such as the bear call spreads, because they don't seem like they would assist the Putin govt. Hard to figure out the risk/reward balance; hoping to learn for future by following this.

PS. How did you calculate that Lukoil was down 99.6%? A few minutes ago I checked LUKOY PNK on Yahoo Finance - it appeared to have dropped from $90.09 on January 3 to $6.96, the last trade shown, roughly a 92.3% drop.

Thanks. I suspect that with shares/options trading suspended on most exchanges, the opportunities are limited from here. It is Western oil companies who are profiting the most from the situation, and many of them still trade at relatively low valuations despite recent run-ups. However, I'm very wary of jumping on any bandwagon that has been at the top of Yahoo Finance for a week.

The 99% thing was quoted in several news articles around that time, but like you I see most charts indicating a 92% drop. Maybe they were relying on a bid price near the bottom, right before trading was halted? Apparently, a series of brokers halted trades to buy shares of Russian companies, and people could only sell them (to whom? Russian and Chinese investors apparently) and this occurred at various times. 

[BicycleB]

The 99% thing was quoted in several news articles around that time, but like you I see most charts indicating a 92% drop. Maybe they were relying on a bid price near the bottom, right before trading was halted? Apparently, a series of brokers halted trades to buy shares of Russian companies, and people could only sell them (to whom? Russian and Chinese investors apparently) and this occurred at various times.

That makes sense. Thanks.

[vand]

After a 90% drop, I suspect they are more than cheap enough already to see a very good return over the next 5-10 years.

Unforunately for me I already held a Russian equity fund which I'm now down 75% on. I won't be seling it but I won't be adding any more either, as I aready did that and am well down on all the extra buys I've made!

It wouldn't surprise me if the fund is closed soon and all the cash returned to the shareholders. Win some, lose some.

[chasesfish]

I've been following this thread for a while.

At this point any purchases of Russian equities are on the secondary market and I wouldn't consider that providing support now.

The calculation is does the country have regime change and if so, will prior investments be honored?  That probability is worth some dollar amount greater than zero, but that's the only way I see value being realized out of a purchase.

[ChpBstrd]

I've been following this thread for a while.

At this point any purchases of Russian equities are on the secondary market and I wouldn't consider that providing support now.

The calculation is does the country have regime change and if so, will prior investments be honored?  That probability is worth some dollar amount greater than zero, but that's the only way I see value being realized out of a purchase.

I think regime change is doubtful. Putin controls 99% of the information regular people get in that country and people tend to believe whatever flashes across their screens. In a twist Orwell never considered, lots of people actually prefer living in high-certainty information bubbles. Also, I can think of exactly zero dictators who lost their jobs due to sanctions. Sanctions are utterly ineffective symbolic gestures.

What's more likely is that Western investors and funds are locked out of Russia for the foreseeable future. Russia may not go the route of Cuba or Venezuela and blatantly "nationalize" investor assets, but the outcome will be similar as that experienced by American investors who owned real estate in Cuba or shares in Venezuela prior to their descents into totalitarianism. It's also likely that with Western investors unable to vote or sell shares, the Russian shareholders make corporate changes to their advantage, such as moving assets to shell companies within Russia with options to maintain one's equity value only Russian investors can exercise, or mergers for pennies on the dollar orchestrated by oligarchs.

There is a slight chance that shareholder registries survive whatever lies ahead for Russia, and at some distant point in the future, sanctions are lifted and their holders can claim whatever is left of their shares in the companies or convert them to ADR shares, if such things exist. I did something like this for a relative's estate that had shares in Australia that only existed in the registry, rather than in any account, and even speaking the same language it was not easy! Additionally, Russia's banks might have been wiped out and fossil fuels might be dying industry a couple of decades from now. It's that longshot option that you're buying or holding.

[MustacheAndaHalf]

In a twist Orwell never considered, lots of people actually prefer living in high-certainty information bubbles. Also, I can think of exactly zero dictators who lost their jobs due to sanctions. Sanctions are utterly ineffective symbolic gestures.

Among other examples, US Sanctions pushed the Netherlands to grant independence to what is now Indonesia.  Russian elites will be impacted, and have complained - but it's not clear if they got approval to complain from Putin or not.

What's more likely is that Western investors and funds are locked out of Russia for the foreseeable future ... It's also likely that with Western investors unable to vote or sell shares, the Russian shareholders make corporate changes to their advantage, such as moving assets to shell companies within Russia with options to maintain one's equity value only Russian investors can exercise, or mergers for pennies on the dollar orchestrated by oligarchs.

Do you have examples of the "mergers for pennies on the dollar"?  I'd be curious to read more about that.

Another approach would be  a Russian company fears foreign influence, so all Russian shareholders vote to have their shares multiplied by 10,000... that could cause foreign investors to lose 99.99% of their investment, and Russian shareholders to pickup the lost value for themselves.

I don't have an example of that from Russia, but Mark Zuckerberg used dilution to screw over one of Facebook's co-founders.  Quoting an email from Zuckerberg:
"Is there a way to do this without making it painfully apparent to him that he's being diluted to 10%?"
https://gizmodo.com/mark-zuckerberg-betrayed-facebooks-cofounder-in-this-em-5910458

[PDXTabs]

Could you even buy Russian equities if you wanted to? Is MOEX ever going to open again?