(Disclaimer: This is not a solicitation to buy or sell securities. I own a small weighting in RSX that I am adding to slowly, in small fractions. Investing in Russia is likely the riskiest thing you can do right now and carries a profound chance of 100% loss of your investment or inability to liquidate/transact. This is a ‘special situation’ that carries immense risk. This post is for discussion purposes only and is, in no way, financial advice.)
There’s no doubt that the events over the last couple of weeks in Ukraine have been horrifying. From a humanitarian and geopolitical standpoint, the damage has been immense and will continue to be for years, regardless of how the conflict ends.
Moving away from the conflict itself and looking at the world’s response to Russia’s invasion, we have experienced some of the most significant global economic shockwaves in history. It feels as though the entire world, probably with the exception of China, has committed to no longer doing business with Russia.
Economic sanctions have crippled the country’s stock market and its currency - something I talked about at length on my most recent podcast, published this morning.
If many of you are like me, the oversized moves in stocks tied to Russia may have caught your eye, strictly from a “morbidly curious” standpoint. Will Russian ADRs and stocks still be allowed to be traded in the US? Will these sanctions and bans that have already been instituted last forever? Will Russia separate itself from the west economically and try to start anew with China as a partner?
These are all questions I’ve been asking myself over the last week.
Putting aside my thoughts on the humanitarian travesty in Ukraine, the contrarian investor in me can’t help but acknowledge that Russia owns real strategic assets tied to commodities and, on the selloff, somebody - likely China - is going to get a sweet deal on commodity assets that will continue to provide them not just economic benefit, but productivity benefits, for many decades to come.
So far, I have only disclosed to my readers that I am purchasing small slivers of the RSX in completely negligible amounts, consistently on a daily basis, while I wait to see how the picture develops. I’m expecting to potentially lose 100% of the investment, but am also realizing that if things steady between Russia and Ukraine, it will likely already be too late to buy the dip. You legitimately have to buy into the fear, on days like today when Lavrov is talking about nuclear war, when the hope of resolution looks grim, in order to reap the benefits of (hopefully) the conflict de-escalating.
Incredible discussions like the below one with Luke Gromen, from earlier this week, have also opened up my eyes to exactly how Russia may try to leverage its commodity production to reestablish itself economically, but outside the world of western economics. I would recommend everybody listening to this one hour long podcast for incredible insight as to how Russia may weaponize its oil and its gold reserves.
Talking about investing in Russia is a sore spot. It’s the opposite of virtue signaling - it’s viewed as cutting a deal with the devil right now. Nobody wants to be seen as contributing to the ongoing chaos in Europe, regardless of whether or not buying 100 shares of the RSX has any impact or not (it doesn’t). But it is moments like these, when you feel the most uncomfortable, that it is important to channel your inner contrarian. I’m interested to know how many of my readers have done this so far.
I reached out to my friend Harris Kupperman yesterday (who I previously interviewed here) to ask him if he was still investing in Russia, as he said he would be doing since the onset of the invasion intelligence from U.S. officials.
He told me: “The companies themselves are printing f*cking money. They sell commodities and their costs are in rubles. They produce like 10-50% of various global commodities. Putin is winning. Unless they take my shares away, who cares? In 6 to 24 months, this de-escalates and I win massively.”
“They f*cked [Putin] on SWIFT, but they are still begging for the gas/oil/fertilizer/wheat/etc,” he added. “Unless we all die from nukes or they seize/liquidate my shares, I am gonna win.”
My questions to my readers are as follows:
Have you considered investing in Russia due to the devaluation of Russian assets as a result of sanctions in the war?
If so, what names are you looking at and why?
What are the risks of such investments? Is it possible that they will not be permitted in the United States or other western countries?
On a longer timeline, where do you see Russia economically a year from now? Five years from now? Two decades from now?
Do you ever feel ethical conflicts when it comes to your investing? Have you felt them in this instance? I’d love to hear about it.
I’d love to hear what you have to say. Please leave a comment and join the discussion:
My thoughts on the ethical aspect of this. No level of sanctioning will make the mines/oilfields in Russia disappear. And if everyone in the west is selling their stocks for pennies on the dollar, whos buying them? Probably Russian Oligarchs and Chinese billionaires. We are handing them a gift by essentially sanctioning ourselves. So while some people might FEEL bad investing in these companies, the reality is that by divesting of these assets and tanking the stocks, were giving our political enemies a gift.
I never believed that Putin would do it, so take what I say with a grain of salt. But I still reject the corporate news narrative of "Putin bad, Ukraine good." In case you haven't been paying attention these past 75 years or so, we(the USA) have a history of backing the side thats committing the most grievous atrocities. Facts:
1.) In 2014 the Ukrainians elected a pro-Russian president
2.) Pro-Russian president refuses to sign onto a pro-NATO, Pro-EU, Pro-USA trade agreement
3.) The Obama administration via Victoria Nuland funds anti-Russian insurgent groups ~$1B to stage another color revolution
4.) Among these insurgents are actual neo-nazis. For real. Look it up. "Azov Battalion". We funded and continue to back actual factual Nazis. For weeks these insurgent groups had snipers shooting civilians. But when Victoria Nuland shows up for her photo op in the Maidan, the pesky snipers are nowhere to be seen. Weird, that.
5.) With the USA's support, president Yanukovych is ousted and a pro-Western puppet government is installed. Putin annexes Crimea to secure the key military port at Sevastopol.
6.) The new Ukrainian Gov't officially bans the Russian Language, and citizens of the pro-Russian Donbass region are excluded from voting in elections. Furthermore, the region is placed under severe economic restrictions. This is all 2014. For the next 7-1/2 years the situation is basically a slog towards ever more threats of sanctions, arguments over the NS2 pipeline, threats of Ukraine joining NATO, and intermittent artillery shelling of residential areas of the Donbass by the Ukrainian military.
7.) fast forward to 2021 and now 2022. Ukraine cuts the Donbass region off from the Power Grid and stiffens economic restrictions as the situation begins to come to a head and the Donbass is now openly succeeding from Ukraine.
8.) Ukraine steps up the shelling the Donbass with artillery pieces(daily now) as the West ratchets up the bellicose threats of sanctions, SWIFT exclusion, etc. We enter the schizophrenic "will she or wont she" news cycle where US officials would claim that "Putin invades tomorrow" and Putin wouldn't invade.
9.) Putin finally invades. Word up to those who called it correctly to the day--My buddy Chris, The Saker Blog, and the Macro Ops Collective, were each spot on. Good calls guys.
10.) New pro-Western Uke President Zelensky begins arming civilians to fight the Ruskies, which is, incidentally, a war crime.
Have built 5% positions in both ERUS and RSX this wk. Could theoretically go to zero from a tradin perspective, but not the assets or future cash flows. I am willing to wait for years. The majority of the commodity/mineral/oil/gas holdings are still selling via SWIFT. From a proven reserves aspect the assets can't be ignored. The upside in NAVs of the ETFs and potential future distributions make it worth it to me to allocate 5% combined positions. A recovery and one would never sell these annual distributions/cost basis
I put 40% of portfolio into US energy companies like EOG, PXD on March 13th 2020. A lot of similarities, The Norwegian SupeFund was liquidating, forced sellers, but on a EV/proven boes they were at once in a lifetime buying opportunities. These energy names are up 2-3x. The people telling me this was stupid two yrs ago have of course forgotten they had no stones at the time
Yes i feel ethical conflicts. I feel for the citizens of Russia, Ukraine who did not want this. I also felt for the Iraqi's and Afghan citizens upon US invasions. The civilians of these countries are being decimated. I feel sadness for them. But i'm trying to build a portfolio for my family and kids for years to come.
There is a lot of blame to be thrown around here. it's not one-sided.
Also own a 7% gold position.
one US brokerage account (MS) i trade in this week no longer allows one to buy RSX or ERUS. Was not disclosed why. But able to buy thru other US brokerage accounts.
Leaving you with this.
“Buy on the sound of cannons, sell on the sound of trumpets” - Nathan Rothschild -1810
My family is from Kharkiv, we live in America now, and I'm talking with them about investing in LUKOY and Gazprom, as well as trying to figure out any agriculture Russian stocks. My family is not a fan of thinking about this, but they also know the best about how the sausage is made, and we're all trying to figure out the balance between investing and morals right now. Looks like we'll have more time to discuss as I can't purchase anything from the broker I'm using.
Fascinating subject. So I nibbled on Lukoil yesterday at 14. One month ago it was over 100. My assessment is US will continue to buy oil from Russia. I also believe many big hedge funds have tons of money in Russian stocks. Which cuts against delisting. No ethical conflicts for me. The conflict is as much the fault of the US and EU as it is Putin.
This is a great topic. Thanks for posting the article. It looks to be public (I understand marketing np) but it would be great to have a subscriber only thread. One of the biggest trading events in 2022
LUKOY is what I am buying--- When this war is over- the dust will settle and a rally will happen. I believe the Chinese are going to be buying all assets that are on sale right now. Wait till Warren Buffet puts his $144Billion in cash to work... Thats when the tide will turn.
Buying LUKOY at these prices is equivalent to buying $10 to $30 for a barrel of oil. Could everything go to zero, sure. But at the end of the day the resources are still there.. Buy when there's blood in the streets someone once said. Just be willing to part ways if something doesn't work out..
Irrespective of me being able to make any choice, ethical, financial, - E*Trade has blocked me from “opening new positions in this security”, RSX, LUKOY -unavailable to purchase for at least two days now…both my E*trade accounts. Curious what brokerages are currently allowing it?
Van Eck says no new share creation in RSX. Guess liquidation is next? Of course news comes from ZH yesterday and not my brokerage. I’m sure they’ll let me know later today after they have their coffee and danish.
Russia and her people remain a nation on the planet with a wealth of resources. At some point, rapprochement will be made for mutual benefit. In between now and then is the risk that generates value on this investment. For long term investors, I see this as a softball. From an ethical perspective, buying shares of RSX is not the same as buying shares of war profiteering from slave labor and property seizures in Ukraine. If that became a reality, which I think is extremely low in probability, that would create an ethical conflict on my part. For now, I can grossly dislike Russian aggression into Ukraine, yet still invest in a better, postbellum future. For that matter, how are other regional investments looking in Western Asia?
I have been slowly buying Russian stocks as they fall with a small portion of my portfolio. Russia is too big a part of the world to be completely ignored. They have multiple avenues to counter western hysteria.
Like you, I've been nibbling at $RSX but am also adding to my $LUKOY, $NILSY, and $OGZPY positions. Although I may kick myself later, I have resisted the urge to dip my toes in $SBRCY. They're all risky plays but, as you and Kuppy state, there's tremendous upside potential.
Putin did this under the Obama administration and now under Biden - he did not do it under Trump. This is a strong message, and the outcome of the US elections in 2024 will play a very important role in the direction he takes in the medium term and thus on investment opportunities. Beyond the West not being prepared to go to battle (while simultaneously voicing depressingly ubiquitous support for Ukraine to fight a war it has zero chance of winning), the massive sanctions from the West drive Russia significantly further into the arms of China, they simply have nowhere else to go. One can assume that whatever Putin does from here will have China’s blessing - so the question of what China wants out of all of this must also be considered when looking at potential Russian investment options. Is Russia digging itself into a hole or are China and Russia building a mountain with the unwitting support of the seemingly endless litany of western foreign policy failings? The determination of Biden’s Democrats (driven by their powerful environmentalist overlords) to shift America from being Energy positive under Trump to oil & gas import reliant, has in a large part effectively enabled Putin to do what he has done, by removing the US as one replacement option for exporting oil and gas into Europe. God help Western markets (and all those devoted suburban stackers) if Russia and China decide to start dumping their not inconsiderable gold bullion reserves into the market.
I have been buying Gazprom and Van Eyck's Russia ETF in small batches over the last few days. I think this is a high risk high reward situation. The responsible party for this invasion by Russia is the failure of the US to negotiate in good faith. The Neocons and the MIC are responsible.
"Do you ever feel ethical conflicts when it comes to your investing? Have you felt them in this instance? I’d love to hear about it." Amazing how almost everyone that has anything to say that even remotely could be seen a "positive" about Russia has to throw disclaimers before their words to let the world know that they are NOT siding with Putin. Investing in Russia being viewed as doing a deal with the Devil? Really? If you have that attitude than I guess you should not ever buy American stocks either. Have you noticed that America has invaded many countries on far less premise and sometimes even based on outright lies. (Iraq) How about investing with Lockheed Martin or Raytheon? How about investing with JPM or Pfizer. Now that might be investing with the Devil. surely I could question the morality of it. The hypocrisy in the West is absolutely astounding. So many people have bought into to Russia BAD theme, that I think they have a version of Stockholm syndrome.
The greatest risk IMO is not the Russian companies going bankrupt (the banks maybe - not the resource companies that make up the bulk of the ETFs), but rather the ADRs and ETFs are liquidated/closed out.
No I am not struggling with this at all. Whether or not I would make money or lose it investing in an RSX ETF I can't look at myself in the mirror each day without reflecting on the giant squid I so despise on Wall Street and then try to carve out something for myself when decent Ukrainians are in agony. You have to take a stand sometimes. That's my personal code. I in no way judge others but, speaking only for myself, if I do not take a stand now when do I ? The future ? Not at all good for either side of this new iron curtain that seems to be dropping on the actors like a dusty old Vaudeville drape that doesn't work very well. I have to live with myself and its very personal as we have all seen the images. These Ukrainians I consider my family now. Oliver
40% off sales are only possible with extreme fear. When you couple fear with the fact many brokerage firms are not letting clients get long (the reason they give doesn't matter) tells you all you need to know. If these assets were headed considerably lower from here, TPTB would be letting us plebes get long for the ride down.
ROSN, Gazprom, Poly. We have debt, they have gold and commodities. Exceptions have been made. Oil assets are super cheap and Russia replaces Iran on the Oil black market.
Liquidations trades only so hard to buy. RSX can still be bought.
As a value investor I am really tempted to buy more RSX. Two things. You have to forget the wash sale rule because unless you’re a maniac you’ve been stopped out on this decline. Next. The exchanges on a lot of these brokerages are limiting purchases so if you sell it’s for good. That’s probably what is keeping some of the deep value guys in the Russian market through thick and thin
I bought JPMorgan JRS investment trust last Thursday for what seemed super cheap at the time. Just bought more for about 70 percent less. Might lose it all but buying much needed resources that cheap has to be be worth a punt. Regret buying too soon though.
I did ride Gazprom just until Russian official changed tone, and sold almost at top.
Now I would buy the gold miner, like Seligdar, Polyus and Polymetal if I could. They will always manage to export a production that weight just a few tons everyyears.
Hard to find a broker that would do it ... any advice guys?
If I was russian, I would take a mortage to buy everything on sight. I had done a write up on RusHydro as a "safe" utility. Selling power domestically with domestic ressources. Will likely never be directly sanctioned. Still truly safe from business perspective, but only if you are Chinese or Russian as your broker will not let you join the party...
While I understand the value of those assets, besides being a geologist who has studied Russia, I am also a student of Russian civilization and history. I can read the language and think I understand the people. I am also a wild risk taker. I thought Russia was going to be the new frontier for myself. But, I have seen the Russians do this before. As stockholders, you will get nothing. The Russians don't care if you do because all those Russian billionaires will be happy to walk away from bankrupt companies that cease to trade, leaving debt-holders, stockholders, and the like with nothing while they still own the hard assets. How do you think they became billionaires right out of the communist collapse? And don't believe for a second that Putin does not have an invisible major interest in all of those companies. They exist at his pleasure.
They did this dance to bp (British Petroleum) years ago, and fleeced them out out $500 million in a bankruptcy, where the company the caused the bankruptcy ended up owning the company bp had invested so much into. bp 0 to Russian oligarchs 100. Russians will not hesitate to cut off your hand when you reach for your money. So save your fingers. I think your money would be better spent on the lottery.
Regarding the morality of the situation, I’m not really able to take a stand one way or the other. The modern global investing situation is so complex and multiheaded it take a powerful joint government action to affect change in most cases. Investing with your morals in a market created during the decline of the old European aristocracies as a way to separate the taking of profits from the management of the capital and labor is laughable when you think about it.
That said, a word of caution for all the amoral folks in the market. Do try and be a little more silent about your amorality. Remember a minority percentage of the u.s. population even owns stocks. Those of us that make a decent living from our investments are even smaller and we are extremely privileged by the government’s tax laws and the fed’s gaming of the market.
The average Joe sees a Wall Street investor as intriguing during the good times and one step below a lawyer in the bad and he’s likely correct. If the market is as rigged as we all seem to think it is, we have a hard value proposition to make for ourselves. Approached from the popular perspective, the argument that we’re vulturing off a corrupt system becomes pretty fair. Countering with the “I’m only doing this for my family!” argument is pretty weak in the face of so many other people that go to work every day to feed their families that can’t because the economic elites of the country are making decisions to protect the investor class that makes working for a living, the way a majority of the population has to for this economic system to work, increasingly impossible. Meanwhile, we’re sitting here spending most of our time trying to make money off of knowing more than most do rather than screaming from the roof tops that it’s wrong. (All props to Chris here, we’ve all heard him make the argument but I’d still posit that we spend more time trying to profit from the situation than we do trying to change it.) It’s all pretty indefensible to someone not profiting from the current state of things; and trying to butter our bread with statements like, “I feel for the people of the Ukraine, but…” are so unconvincing as to be counter productive.
If things do go south for the American economy, like Chris and so many others here seem to think it will, running around online or otherwise acting like your only driving motive in life is to figure out how to profit from the situation may become a dangerously unpopular perspective. This is no way a threat, just a gentle warning: History is littered with examples of economic elites winding up with their heads on pikes because they took this kind of position publicly as things went south. If shit really does hit the fan with this level of inequality in u.s. society, cancel culture might just seem like a funny prelude.
My maybe-less-than-humble suggestion would be to do what you’re going to do, educate everyone you can and share good knowledge bases and resources, but don’t go crazy talking about how much money you’re making or how much you’re up, especially if what you’re doing is looks like disaster capitalism. It doesn’t really matter if it is or isn’t. Rationalizations don’t mean much in the public sphere. If you do profit well, congrats! But drive a beater and be old school and circumspect about your money. The nouveau riche in our country are making a huge mistake with their “fake it till you make it” bling mentality. The mob will come for them first and it’s easy to understand why.
Yes, I have been nibbling at some Russian stocks, mostly via the iShares ERUS ETF. Only nibbling as there is a significant chance of 100% loss as you note.
I started looking into it yesterday. Not sure the best way to do this- some of the listings have already started to disappear this morning, so it might be that what you buy gets delisted and you are stuck with something you can't sell or realize any future gains on.
Have been buying LUKOY and OGZPY for about a week. My ownership may be nullified, but the underlying asset is a steal. ADR trading appears to be suspended for now. Have been following oil since the '78 crisis when I rode my bike 15 miles each way to work due to inability to buy gas.
I tried to buy several russian stocks this morning. My online brokerage account won't let me "due to sanctions." Is it even possible to trade russian stocks right now?
I've exited my small Russia position on Friday. It was a huge loss, but I felt morally incapable of holding it. Now I haven't made up my mind on returning, but contemplating it. I believe it's like a lottery ticket - either it wins big or gets nationalized.
Be aware, Russian seizure of any foreign assets is very likely. Unless you are Chinese citizen... Maybe Indian citizenship might also help. Buying as American or European entity/citizen is really a tough gamble, small success possibility. It's a lottery ticket.
It seems to me this is a bet on timing. Will the Russian stock market re-open before the ADRs / ETF is dissolved??
I owned Alcatel-Lucent and JPM was the custodian for the shares. I think it took them about 4-5 months to close the shares and send me a check for the fair value. That could be a similar case here.
Yes I like the Russian stocks - could be a huge bargain. I like OGZPY, LUKOY & two Russian gold miners, POYYF, OPYGY.
(I bought SBRCY @$4 and its now $1, ugh!)
Risks:
-With Russia exclusion from SWIFT can I get my dividend?
- If sales are reduced by even 10%, due to sanctions, how are profits impacted? Is dividend cancelled? Interest rates in Russia are now 20% and many of these stocks (like NILSY) have significant debt.
- mentioned by others - Will (ADRs) continue to trade
Aside from thinking that GS and Leahman are advising somebody about an LBO of the country, buying the stocks of the companies brings no money to the companies; they're bought from other shareholders. So...buying shares doesn't benefit anybody but the people who want to dump them. The assets of the country are immense and they've hardly touched their natural wealth, This will probably result in those companies being able to sell and be sold over time. TINA. The world needs what they have. I wonder what would happen if XI just ordered 35 million people 10 people deep shoulder to shoulder and start start marching north a mile a day. if the are 3 feet apart they would stretch 2,651 miles. What's Putin going to do? Nuke them? Lebensraum for the CCP. Just spitballing...I think I'm going to dip my toes in the water. If Putin is pushed out by the oligarchs who can (or could have) bought the army, or generals anyway, Russia will stabilize, somewhat, and has to open for business. An oligopoly posing as a country. Kind of like what we're moving towards here, no?
Beyond not permitting ownership by westerners or ownership bans by western countries, in the case of Russian re-integration or some sort of China partnership, what's to say Russia doesn't nationalize natural resources? What about bankruptcies to let the cronies come back as full owners? Seems like there is some very real risk when you stop assuming that Russia will play fair in a couple months/years (not unlike the fed here, but a different outcome).
Every broker I've seen is currently blocked buying of Russian securities, but I'm definitely interested in getting into Lukoil and perhaps some other once we can get passed the government stupidity and hopefully people stop fighting each other and come to the table. The assets in the ground don't care about the conflicts of governments and these companies look to be well run and throwing off a ton of cash. Additionally, I've been keeping my eye on the carbon credit/ emissions futures, there could be some interesting movement there as western governments attempt to bring more production online.
You realize the NAV for RSX is only around $3.00 and you are paying over $7. There is almost no ability to transact in the underlying GDRs/ADRs at this point because many banks don't want to take exposure because of some issues on settlement and failed trades recently. Foreigners which RSX would be considered are not able to sell securities in Russia at this time. Also the Moscow Exchange has been closed all week, will be closed tomorrow and probably Friday as well, so no one knows what the stocks will trade at. Some GDRs have traded at levels down 99% in the last week, since there is no ability for people to buy right now because of settlement issues. A good option bet if you are able to buy the individual securities at these levels.
My thoughts on the ethical aspect of this. No level of sanctioning will make the mines/oilfields in Russia disappear. And if everyone in the west is selling their stocks for pennies on the dollar, whos buying them? Probably Russian Oligarchs and Chinese billionaires. We are handing them a gift by essentially sanctioning ourselves. So while some people might FEEL bad investing in these companies, the reality is that by divesting of these assets and tanking the stocks, were giving our political enemies a gift.
I never believed that Putin would do it, so take what I say with a grain of salt. But I still reject the corporate news narrative of "Putin bad, Ukraine good." In case you haven't been paying attention these past 75 years or so, we(the USA) have a history of backing the side thats committing the most grievous atrocities. Facts:
1.) In 2014 the Ukrainians elected a pro-Russian president
2.) Pro-Russian president refuses to sign onto a pro-NATO, Pro-EU, Pro-USA trade agreement
3.) The Obama administration via Victoria Nuland funds anti-Russian insurgent groups ~$1B to stage another color revolution
4.) Among these insurgents are actual neo-nazis. For real. Look it up. "Azov Battalion". We funded and continue to back actual factual Nazis. For weeks these insurgent groups had snipers shooting civilians. But when Victoria Nuland shows up for her photo op in the Maidan, the pesky snipers are nowhere to be seen. Weird, that.
5.) With the USA's support, president Yanukovych is ousted and a pro-Western puppet government is installed. Putin annexes Crimea to secure the key military port at Sevastopol.
6.) The new Ukrainian Gov't officially bans the Russian Language, and citizens of the pro-Russian Donbass region are excluded from voting in elections. Furthermore, the region is placed under severe economic restrictions. This is all 2014. For the next 7-1/2 years the situation is basically a slog towards ever more threats of sanctions, arguments over the NS2 pipeline, threats of Ukraine joining NATO, and intermittent artillery shelling of residential areas of the Donbass by the Ukrainian military.
7.) fast forward to 2021 and now 2022. Ukraine cuts the Donbass region off from the Power Grid and stiffens economic restrictions as the situation begins to come to a head and the Donbass is now openly succeeding from Ukraine.
8.) Ukraine steps up the shelling the Donbass with artillery pieces(daily now) as the West ratchets up the bellicose threats of sanctions, SWIFT exclusion, etc. We enter the schizophrenic "will she or wont she" news cycle where US officials would claim that "Putin invades tomorrow" and Putin wouldn't invade.
9.) Putin finally invades. Word up to those who called it correctly to the day--My buddy Chris, The Saker Blog, and the Macro Ops Collective, were each spot on. Good calls guys.
10.) New pro-Western Uke President Zelensky begins arming civilians to fight the Ruskies, which is, incidentally, a war crime.
Have built 5% positions in both ERUS and RSX this wk. Could theoretically go to zero from a tradin perspective, but not the assets or future cash flows. I am willing to wait for years. The majority of the commodity/mineral/oil/gas holdings are still selling via SWIFT. From a proven reserves aspect the assets can't be ignored. The upside in NAVs of the ETFs and potential future distributions make it worth it to me to allocate 5% combined positions. A recovery and one would never sell these annual distributions/cost basis
I put 40% of portfolio into US energy companies like EOG, PXD on March 13th 2020. A lot of similarities, The Norwegian SupeFund was liquidating, forced sellers, but on a EV/proven boes they were at once in a lifetime buying opportunities. These energy names are up 2-3x. The people telling me this was stupid two yrs ago have of course forgotten they had no stones at the time
Yes i feel ethical conflicts. I feel for the citizens of Russia, Ukraine who did not want this. I also felt for the Iraqi's and Afghan citizens upon US invasions. The civilians of these countries are being decimated. I feel sadness for them. But i'm trying to build a portfolio for my family and kids for years to come.
There is a lot of blame to be thrown around here. it's not one-sided.
Also own a 7% gold position.
one US brokerage account (MS) i trade in this week no longer allows one to buy RSX or ERUS. Was not disclosed why. But able to buy thru other US brokerage accounts.
Leaving you with this.
“Buy on the sound of cannons, sell on the sound of trumpets” - Nathan Rothschild -1810
My family is from Kharkiv, we live in America now, and I'm talking with them about investing in LUKOY and Gazprom, as well as trying to figure out any agriculture Russian stocks. My family is not a fan of thinking about this, but they also know the best about how the sausage is made, and we're all trying to figure out the balance between investing and morals right now. Looks like we'll have more time to discuss as I can't purchase anything from the broker I'm using.
Fascinating subject. So I nibbled on Lukoil yesterday at 14. One month ago it was over 100. My assessment is US will continue to buy oil from Russia. I also believe many big hedge funds have tons of money in Russian stocks. Which cuts against delisting. No ethical conflicts for me. The conflict is as much the fault of the US and EU as it is Putin.
This is a great topic. Thanks for posting the article. It looks to be public (I understand marketing np) but it would be great to have a subscriber only thread. One of the biggest trading events in 2022
LUKOY is what I am buying--- When this war is over- the dust will settle and a rally will happen. I believe the Chinese are going to be buying all assets that are on sale right now. Wait till Warren Buffet puts his $144Billion in cash to work... Thats when the tide will turn.
Buying LUKOY at these prices is equivalent to buying $10 to $30 for a barrel of oil. Could everything go to zero, sure. But at the end of the day the resources are still there.. Buy when there's blood in the streets someone once said. Just be willing to part ways if something doesn't work out..
Irrespective of me being able to make any choice, ethical, financial, - E*Trade has blocked me from “opening new positions in this security”, RSX, LUKOY -unavailable to purchase for at least two days now…both my E*trade accounts. Curious what brokerages are currently allowing it?
LUKOY is down another 52% this morning. Makes me feel like the ADR market is getting shut down
Van Eck says no new share creation in RSX. Guess liquidation is next? Of course news comes from ZH yesterday and not my brokerage. I’m sure they’ll let me know later today after they have their coffee and danish.
What are your thoughts on RSX premium to NAV of 178%? Looks expensive
Well, no dice on buying anything in this space on eTrade....
Russia and her people remain a nation on the planet with a wealth of resources. At some point, rapprochement will be made for mutual benefit. In between now and then is the risk that generates value on this investment. For long term investors, I see this as a softball. From an ethical perspective, buying shares of RSX is not the same as buying shares of war profiteering from slave labor and property seizures in Ukraine. If that became a reality, which I think is extremely low in probability, that would create an ethical conflict on my part. For now, I can grossly dislike Russian aggression into Ukraine, yet still invest in a better, postbellum future. For that matter, how are other regional investments looking in Western Asia?
I have been slowly buying Russian stocks as they fall with a small portion of my portfolio. Russia is too big a part of the world to be completely ignored. They have multiple avenues to counter western hysteria.
Like you, I've been nibbling at $RSX but am also adding to my $LUKOY, $NILSY, and $OGZPY positions. Although I may kick myself later, I have resisted the urge to dip my toes in $SBRCY. They're all risky plays but, as you and Kuppy state, there's tremendous upside potential.
Putin did this under the Obama administration and now under Biden - he did not do it under Trump. This is a strong message, and the outcome of the US elections in 2024 will play a very important role in the direction he takes in the medium term and thus on investment opportunities. Beyond the West not being prepared to go to battle (while simultaneously voicing depressingly ubiquitous support for Ukraine to fight a war it has zero chance of winning), the massive sanctions from the West drive Russia significantly further into the arms of China, they simply have nowhere else to go. One can assume that whatever Putin does from here will have China’s blessing - so the question of what China wants out of all of this must also be considered when looking at potential Russian investment options. Is Russia digging itself into a hole or are China and Russia building a mountain with the unwitting support of the seemingly endless litany of western foreign policy failings? The determination of Biden’s Democrats (driven by their powerful environmentalist overlords) to shift America from being Energy positive under Trump to oil & gas import reliant, has in a large part effectively enabled Putin to do what he has done, by removing the US as one replacement option for exporting oil and gas into Europe. God help Western markets (and all those devoted suburban stackers) if Russia and China decide to start dumping their not inconsiderable gold bullion reserves into the market.
I have been buying Gazprom and Van Eyck's Russia ETF in small batches over the last few days. I think this is a high risk high reward situation. The responsible party for this invasion by Russia is the failure of the US to negotiate in good faith. The Neocons and the MIC are responsible.
"Do you ever feel ethical conflicts when it comes to your investing? Have you felt them in this instance? I’d love to hear about it." Amazing how almost everyone that has anything to say that even remotely could be seen a "positive" about Russia has to throw disclaimers before their words to let the world know that they are NOT siding with Putin. Investing in Russia being viewed as doing a deal with the Devil? Really? If you have that attitude than I guess you should not ever buy American stocks either. Have you noticed that America has invaded many countries on far less premise and sometimes even based on outright lies. (Iraq) How about investing with Lockheed Martin or Raytheon? How about investing with JPM or Pfizer. Now that might be investing with the Devil. surely I could question the morality of it. The hypocrisy in the West is absolutely astounding. So many people have bought into to Russia BAD theme, that I think they have a version of Stockholm syndrome.
The greatest risk IMO is not the Russian companies going bankrupt (the banks maybe - not the resource companies that make up the bulk of the ETFs), but rather the ADRs and ETFs are liquidated/closed out.
No I am not struggling with this at all. Whether or not I would make money or lose it investing in an RSX ETF I can't look at myself in the mirror each day without reflecting on the giant squid I so despise on Wall Street and then try to carve out something for myself when decent Ukrainians are in agony. You have to take a stand sometimes. That's my personal code. I in no way judge others but, speaking only for myself, if I do not take a stand now when do I ? The future ? Not at all good for either side of this new iron curtain that seems to be dropping on the actors like a dusty old Vaudeville drape that doesn't work very well. I have to live with myself and its very personal as we have all seen the images. These Ukrainians I consider my family now. Oliver
40% off sales are only possible with extreme fear. When you couple fear with the fact many brokerage firms are not letting clients get long (the reason they give doesn't matter) tells you all you need to know. If these assets were headed considerably lower from here, TPTB would be letting us plebes get long for the ride down.
Consider Armstrong's take on the stupid politicians response.
https://www.armstrongeconomics.com/world-news/war/has-biden-unknowingly-begun-world-war-iii-in-financial-markets/
ROSN, Gazprom, Poly. We have debt, they have gold and commodities. Exceptions have been made. Oil assets are super cheap and Russia replaces Iran on the Oil black market.
Liquidations trades only so hard to buy. RSX can still be bought.
NILSY 3xEBITDA, palladium and nickel, unlikely will be sanctioned, SGTPY - quiet money oil and cash reserves
Not for ethical reasons. Can’t think of any financial incentive to support a system that is slaughtering peaceful ppl for choosing freedom.
As a value investor I am really tempted to buy more RSX. Two things. You have to forget the wash sale rule because unless you’re a maniac you’ve been stopped out on this decline. Next. The exchanges on a lot of these brokerages are limiting purchases so if you sell it’s for good. That’s probably what is keeping some of the deep value guys in the Russian market through thick and thin
I have been watching RSX but have not pulled the trigger yet. May jump in this morning.
I have been buying RSK since reading your article on it. Planning on adding LUKOY today as it looks like it dropped another 50% last night.
I bought JPMorgan JRS investment trust last Thursday for what seemed super cheap at the time. Just bought more for about 70 percent less. Might lose it all but buying much needed resources that cheap has to be be worth a punt. Regret buying too soon though.
I got Mechel preferred shares at NYSE before the trading halt. Let's see how this plays out.
Thank you so much for this tip. I was able to beat Goldman Sachs and JP Morgan to the punch for first time ever! Going to make a ton of money!!!
I did ride Gazprom just until Russian official changed tone, and sold almost at top.
Now I would buy the gold miner, like Seligdar, Polyus and Polymetal if I could. They will always manage to export a production that weight just a few tons everyyears.
Hard to find a broker that would do it ... any advice guys?
If I was russian, I would take a mortage to buy everything on sight. I had done a write up on RusHydro as a "safe" utility. Selling power domestically with domestic ressources. Will likely never be directly sanctioned. Still truly safe from business perspective, but only if you are Chinese or Russian as your broker will not let you join the party...
NYSE suspended trading in ERUS, FLRU, and RUSL. RSX creation orders suspended.
Placed OGZPY order to add to position y'day. It was canceled. Tried today. Also no go. Going to try Fidel w/little confidence
I tried to buy Lukoil shares this morning, but my broker said trading was suspended. Is there another way to buy shares?
While I understand the value of those assets, besides being a geologist who has studied Russia, I am also a student of Russian civilization and history. I can read the language and think I understand the people. I am also a wild risk taker. I thought Russia was going to be the new frontier for myself. But, I have seen the Russians do this before. As stockholders, you will get nothing. The Russians don't care if you do because all those Russian billionaires will be happy to walk away from bankrupt companies that cease to trade, leaving debt-holders, stockholders, and the like with nothing while they still own the hard assets. How do you think they became billionaires right out of the communist collapse? And don't believe for a second that Putin does not have an invisible major interest in all of those companies. They exist at his pleasure.
They did this dance to bp (British Petroleum) years ago, and fleeced them out out $500 million in a bankruptcy, where the company the caused the bankruptcy ended up owning the company bp had invested so much into. bp 0 to Russian oligarchs 100. Russians will not hesitate to cut off your hand when you reach for your money. So save your fingers. I think your money would be better spent on the lottery.
Regarding the morality of the situation, I’m not really able to take a stand one way or the other. The modern global investing situation is so complex and multiheaded it take a powerful joint government action to affect change in most cases. Investing with your morals in a market created during the decline of the old European aristocracies as a way to separate the taking of profits from the management of the capital and labor is laughable when you think about it.
That said, a word of caution for all the amoral folks in the market. Do try and be a little more silent about your amorality. Remember a minority percentage of the u.s. population even owns stocks. Those of us that make a decent living from our investments are even smaller and we are extremely privileged by the government’s tax laws and the fed’s gaming of the market.
The average Joe sees a Wall Street investor as intriguing during the good times and one step below a lawyer in the bad and he’s likely correct. If the market is as rigged as we all seem to think it is, we have a hard value proposition to make for ourselves. Approached from the popular perspective, the argument that we’re vulturing off a corrupt system becomes pretty fair. Countering with the “I’m only doing this for my family!” argument is pretty weak in the face of so many other people that go to work every day to feed their families that can’t because the economic elites of the country are making decisions to protect the investor class that makes working for a living, the way a majority of the population has to for this economic system to work, increasingly impossible. Meanwhile, we’re sitting here spending most of our time trying to make money off of knowing more than most do rather than screaming from the roof tops that it’s wrong. (All props to Chris here, we’ve all heard him make the argument but I’d still posit that we spend more time trying to profit from the situation than we do trying to change it.) It’s all pretty indefensible to someone not profiting from the current state of things; and trying to butter our bread with statements like, “I feel for the people of the Ukraine, but…” are so unconvincing as to be counter productive.
If things do go south for the American economy, like Chris and so many others here seem to think it will, running around online or otherwise acting like your only driving motive in life is to figure out how to profit from the situation may become a dangerously unpopular perspective. This is no way a threat, just a gentle warning: History is littered with examples of economic elites winding up with their heads on pikes because they took this kind of position publicly as things went south. If shit really does hit the fan with this level of inequality in u.s. society, cancel culture might just seem like a funny prelude.
My maybe-less-than-humble suggestion would be to do what you’re going to do, educate everyone you can and share good knowledge bases and resources, but don’t go crazy talking about how much money you’re making or how much you’re up, especially if what you’re doing is looks like disaster capitalism. It doesn’t really matter if it is or isn’t. Rationalizations don’t mean much in the public sphere. If you do profit well, congrats! But drive a beater and be old school and circumspect about your money. The nouveau riche in our country are making a huge mistake with their “fake it till you make it” bling mentality. The mob will come for them first and it’s easy to understand why.
Yes, I have been nibbling at some Russian stocks, mostly via the iShares ERUS ETF. Only nibbling as there is a significant chance of 100% loss as you note.
I started looking into it yesterday. Not sure the best way to do this- some of the listings have already started to disappear this morning, so it might be that what you buy gets delisted and you are stuck with something you can't sell or realize any future gains on.
Have been buying LUKOY and OGZPY for about a week. My ownership may be nullified, but the underlying asset is a steal. ADR trading appears to be suspended for now. Have been following oil since the '78 crisis when I rode my bike 15 miles each way to work due to inability to buy gas.
I tried to buy several russian stocks this morning. My online brokerage account won't let me "due to sanctions." Is it even possible to trade russian stocks right now?
I've exited my small Russia position on Friday. It was a huge loss, but I felt morally incapable of holding it. Now I haven't made up my mind on returning, but contemplating it. I believe it's like a lottery ticket - either it wins big or gets nationalized.
Be aware, Russian seizure of any foreign assets is very likely. Unless you are Chinese citizen... Maybe Indian citizenship might also help. Buying as American or European entity/citizen is really a tough gamble, small success possibility. It's a lottery ticket.
It seems to me this is a bet on timing. Will the Russian stock market re-open before the ADRs / ETF is dissolved??
I owned Alcatel-Lucent and JPM was the custodian for the shares. I think it took them about 4-5 months to close the shares and send me a check for the fair value. That could be a similar case here.
For LUKOY it seems is the custodian with a 1:1 ratio in value for the Russian shares. It would be great if investors could request the shares if the ADR closes, but it doesn't work like that unfortunately. (Or maybe it is possible, and I'm unaware.) https://www.sec.gov/Archives/edgar/data/0001137215/000119380517000488/e615916_f6-pjsc.htm
I'm by no means an ADR expert here, and I'd be interested to hear others thoughts on how this could play out.
Bought LUKOY and MBT before all this happened. Not planning on any changes, but I consider them to be a write-off.
Yes I like the Russian stocks - could be a huge bargain. I like OGZPY, LUKOY & two Russian gold miners, POYYF, OPYGY.
(I bought SBRCY @$4 and its now $1, ugh!)
Risks:
-With Russia exclusion from SWIFT can I get my dividend?
- If sales are reduced by even 10%, due to sanctions, how are profits impacted? Is dividend cancelled? Interest rates in Russia are now 20% and many of these stocks (like NILSY) have significant debt.
- mentioned by others - Will (ADRs) continue to trade
Aside from thinking that GS and Leahman are advising somebody about an LBO of the country, buying the stocks of the companies brings no money to the companies; they're bought from other shareholders. So...buying shares doesn't benefit anybody but the people who want to dump them. The assets of the country are immense and they've hardly touched their natural wealth, This will probably result in those companies being able to sell and be sold over time. TINA. The world needs what they have. I wonder what would happen if XI just ordered 35 million people 10 people deep shoulder to shoulder and start start marching north a mile a day. if the are 3 feet apart they would stretch 2,651 miles. What's Putin going to do? Nuke them? Lebensraum for the CCP. Just spitballing...I think I'm going to dip my toes in the water. If Putin is pushed out by the oligarchs who can (or could have) bought the army, or generals anyway, Russia will stabilize, somewhat, and has to open for business. An oligopoly posing as a country. Kind of like what we're moving towards here, no?
Beyond not permitting ownership by westerners or ownership bans by western countries, in the case of Russian re-integration or some sort of China partnership, what's to say Russia doesn't nationalize natural resources? What about bankruptcies to let the cronies come back as full owners? Seems like there is some very real risk when you stop assuming that Russia will play fair in a couple months/years (not unlike the fed here, but a different outcome).
Every broker I've seen is currently blocked buying of Russian securities, but I'm definitely interested in getting into Lukoil and perhaps some other once we can get passed the government stupidity and hopefully people stop fighting each other and come to the table. The assets in the ground don't care about the conflicts of governments and these companies look to be well run and throwing off a ton of cash. Additionally, I've been keeping my eye on the carbon credit/ emissions futures, there could be some interesting movement there as western governments attempt to bring more production online.
You realize the NAV for RSX is only around $3.00 and you are paying over $7. There is almost no ability to transact in the underlying GDRs/ADRs at this point because many banks don't want to take exposure because of some issues on settlement and failed trades recently. Foreigners which RSX would be considered are not able to sell securities in Russia at this time. Also the Moscow Exchange has been closed all week, will be closed tomorrow and probably Friday as well, so no one knows what the stocks will trade at. Some GDRs have traded at levels down 99% in the last week, since there is no ability for people to buy right now because of settlement issues. A good option bet if you are able to buy the individual securities at these levels.