Monday, December 15, 2014

15/12/2014: Don't Blink... or Russian Data Will Get You!

It seems you blink these days and Russian ruble slides: down 10%+ today alone against the USD and down massive 48.13% for the year so far:

Credit: @RobinWigg

Blink again: the Central Bank revises estimates for capital outflows: new estimates suggest Q4 outflows have accelerated again to the levels of Q1 2014, implying full year outflows of USD133.8 billion, basically on par with the disastrous 2008.

Credit: @Schuldensuehner 

You sneeze and... boom... new estimates for growth are coming out: down to -4.5% for 2015 or even 4.7% assuming oil prices staying at 'current' levels of USD60 per barrel (annual average).

Reach out for a cup of tea and as oil price plummets, so does the ruble. If we take RUB3500/barrel or RUB3720/ barrel estimates built into two revisions of the Budget, you have USD/RUB rate in 88-93 range.

Put kids to bed and 10.5% Central Bank rate goes up to 17% - on foot of an emergency:

Take a smoke break and Russian CDS are busting past the 30% CPD ceiling:

Analysts' nightmare, comedians' rich picking. And comedians are out, in force, pretending to be analysts - the host of geopolitical journalists are now all spotting 'economic analysis' on their webpages. It is going to get worse - Politburo 'Hats Readers' are now coming out with economics and finance analysis, so expect a massive crash...

In truth, as noted earlier ( 100bps hike in CBR rate earlier this month was useless. Useless across the board. Tonight's hike to 17% is clearly a serious push for an attempt to stabilise the ruble and stem the capital outflows. But it won't do the trick either. Much of outflows is driven by bond redemptions. So is much of the demand for dollars. And in this scenario, all the interest rates are going to achieve is collapse investment.

In brief, we are now headed into the inevitable:

  • Step 1: capital controls with limited exemptions for individual sectors and firms; and
  • Step 2: debt redemptions break for companies directly impacted by the sanctions.
  • Step 3 (or maybe it will be step 1 or 2): revise growth estimates for 2015 to -7%, because there won't be any domestic investment at 17% rates and there won't be any foreign investment at 49% devaluation rate, and there will be no government investment at capital outflows into USD130 billion and bond redemptions mounting ( There won't be much of consumption as RUB heads toward RUB/EUR100 marker and banks are not lending.
Speed up your blinking, folks, and buckle your seat belts.

1 comment:

Pete said...

Wow. Thanks for providing a ring-side seat as we watch Russia get a sound spanking from the US (helped by their buddies in Saudi Arabia). It's fascinating to see economics being so openly and effectively used as a weapon of war!