Russia’s financial desperation will lead to trouble
Today's Financial News - Posted November 12, 2008
Russia is going broke and is desperate for power. Its oil is worth almost a third of what it once was and its budget is suffering dramatic blows. Smart investors can make money off the country’s offensive ploys to get back on track.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): If you think the situation is bleak here in the United States, you would wet your pants if you took an in-depth look at Russia’s economy.
Its stock market seems to be closed more than it is open. Its currency is plunging. And its government is running out of options and money to fix the situation. Russia makes America look like we are sitting atop a booming economy.
Putin’s downturn could lead to some easy profit potential. But more on that in a minute.
For nearly all of the last decade, Russia’s economy has been based on the country’s ability to sell its natural resources to Europe and countries all around the world at a steep premium. Its Urals blend crude is not the best oil on the market, but it is all over the place in Russia and buyers once lined up to get their hands on it.
But now that the line has all but vanished and Urals blend is worth less than $53 per barrel, the Russian government has seen its revenues slashed in half. The country’s 2009 budget depended on its oil selling for $95 per barrel. But as of today, the country was forced to revise its estimate to $50 for 2009 and $55 for 2010. That leaves a significant hole in the Putin’s financial plans.
Running out of rubles
To make up for the deficit, Russia is forced to tap its rainy-day fund, consisting of billions of dollars of tax revenues from the oil industry. It is a serious blow to a country that was finally started to regain some of its global superiority.
Even worse than the country’s budget problems is the severe drop in its currency. Even with key central bank interest rates at 12%, the value of the ruble continues to fall. For foreign investors measuring their portfolios in rubles, the losses are stacking up quick.
Investors cannot pull their money out of the Russian markets fast enough and have created a run on the Russia markets. It is creating a whirlpool of problems for the country, forcing it to consistently close trading on its major exchanges.
Unless Russia makes dramatic political moves to drive up the price of its natural resources, it is in serious financial trouble.
This is where your profit potential comes in.
We already know President-elect Obama is widely expected to be tested during the first few weeks of his term. The worse Russia’s economy gets, the more likely it is we will see trouble from Moscow.
Just a day into Obama’s transition Putin and Medvedev promised to move its short-range missile armory into an offensive position if America’s missile defense system in Poland is not dismantled. It is a sure sign of political pressure to come.
And now, Medvedev is calling to extend presidential terms to six years. Do you think that has anything to do with his goals of getting Putin and his offensive goals back in power?
I have been working overtime to find ways to profit from this Russian hostility and desperation. I found some surefire winners. I am putting the finishing touches on my full report, right now. I should have it online within a few days.
For now, be sure to keep in touch with our trading tactics by studying our daily emails. You can get all of our profitable advice (for free, mind you) by signing up right here…
Next Article: Paulson’s TARP revision spooks the market
Posted by Andrew Snyder · Filed Under International Investing, News that Matters
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