Okay so some of the people in the daily thread and some of the other threads have been looking for a “ruble comeback” or whatever looking to buy the Russia dip. Before we all start buying Russian sperm banks that are down 70% on the day on my husband’s girlfriend’s suggestion, I think it’s a good idea to look at the market as a whole.
This is my take on this entire thing.
Fighting the Fed and the US treasury is probably not a good idea. When they and other Western governments have done a lot to throw Russia’s economy into a straight up depression nearly overnight and have largely succeeded, it’s probably not the best idea to go long them. Especially when it’s been only 2 days since the central bank interventions.
The Russian central bank, in a manner of 2 days has:
- Suspended trading across equities and derivatives markets (source)
- Raised the key rate to a level James Bullard could only dream of (from 9.50% to 20.00%) (source)
- Has turned off the sell button for foreigners (source)
- Has banned premarket and after hours for a week (source)
- Has banned short selling (source)
- Has forced companies to sell 80% of their fx revenue (source)
- Has forced companies to not make debt payments to western countries
, i.e. default(edit: for new issues) (source)
I mean, does the head of Russian Central Bank Elvira Nabiullina really look like she’s been given a battle that she can win here? Imagine if there was a Fed meeting and in the photos released to the public JPow looked like that? The daily thread would be full of so many “bulls r fuk” you’d think it’s March 16th, 2020.
In her press conference yesterday, she called this a “non-standard situation” which is the understatement of the year.
A lot of companies as well as BP are basically preparing to straight up write off their equity investments. Reuters exclusively reported that removing Russia indexes is the “natural next step.” Without an index to track, ETFs like RSX will basically have to basically be liquidated. Direxion is liquidating RUSL (2x leveraged ETF) as well.
This also comes as CDSes (yes I know they’re manipulated) for Russia top 500bps and the fact that no one wants to go long Russian equities and bonds. Yeah yeah blood in the streets, but also, the west is attempting to directly strike Russia’s financial system.
You don’t close the stock market if you think stocks are gonna go up.
With every passing red colored line that comes across your Bloomberg Terminal, the situation is getting worse for the Russian economy. It’s very possible that the damage that’s done to Russia’s economy from the sanctions is pretty much, in my view, permanent. Many currencies have gone through similar shocks and have never recovered.
With all the damage having being done in over two days, I’m pretty confident in not only saying that this isn’t a dip worth buying and am willing to go short on Russia. What’s your thoughts?
10 RSX 5/20 11p 3.00 @ 3/1 15:00:03
I’d short it directly if I could find a borrow but options are fine. It’s not a YOLO or anything but yeah.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.