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Why I Don't Follow Russia

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You capitalist pig!

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Editor's Note: Minyanville is a community of people who share an interest in learning about the financial markets. As perspective is an important aspect of our daily routine, we share this exchange with hopes that it adds balance to your process.



Hi Vitaliy,

I'm just curious as to why you don't follow the Russian market? Is this a choice (it is for me, and I missed the best stock market in the world for the last 6 years), or just "so happened"?

Thanks,

Minyan Alex


MA-

There are several reasons why I don't follow the Russian market:

• I was educated in the United States and though I do speak and read Russian, my Russian business vocabulary is very limited. Speaking in Russian on a business topic is a very painful experience as I keep looking for the appropriate translation for investment / business words.

• I don't know Russian GAAP, nor do I trust the numbers put out by Russian companies. That being said (to be fair), the Enron and WorldCom disasters did not happen in Russia. But Russia is still riddled with corruption. Bribery is widespread, though it is not an official expense line on the income statement - it should be - as it is a cost of doing business in Russia. I resented bribery all my life, it is the opposite of taxation (not that I am big fan of taxes) - economic resources are shifted from the poor to the rich.

The majority of us never encountered bribery that is instilled into the economical and political system. I remember when we were leaving Russia for the United States, on the way to the airport (a forty mile stretch), our car got pulled over three times by the police for no reason at all and every time the policemen wanted a bribe to let us go. We obliged. These types of incidents don't cultivate fondness about the country and put it at a significant competitive disadvantage. Maybe that is in part the reason why Singapore has such a successful economy - the most uncorrupt country in the world (albeit without any bubble gum).

• The US stock market is much more fun to follow; it has a lot more breadth and width than the Russian market. The Russian stock market is dominated by three industries: energy, industrials and banks - very limiting in terms of constructing a diversified portfolio. I suspect that high oil prices are the reason why the Russian stock market (and economy) has done well lately. I would not want to have my future tied to only one single commodity.

• I left Russia and never looked back. It honestly still puzzles me why I write about it. I have mentioned several times before, and I'll do it again - I am a capitalistic pig (and I think like one). In the 1980's Brezhnev came up with a slogan: "The economy has to be economical" - I am still not sure what that means.

Personal Note: My memories from living in Russia are mixed. All of my fondest memories come from my family; all the bad ones came from the external environment - secondary school and college etc. I was not a good fit within a culture that encouraged uniformity and discouraged creative and descending thinking.
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