Bullish About the Russian Bear
The Dow Jones Industrial Index stands today at 13,170 which is almost back to the same value it was towards the end of 2007 — that’s right, we’re almost back to being as ‘whole’ as we were 5 years ago. Almost.
However, the impending U.S “Fiscal Cliff” plus the “Eurozone Crisis” as well as the UK’s expected loss of it’s AAA rating, and now the predicted possibility of even a “German Recession in 2013” is likely to put the kybosh on parity with 5 years ago — and even more likely to drive us behind yet again. Yes, even further back than 10 years ago. If you think that’s bad, consider this: according to the U.S. Bureau of the Census, household “net worth” (total value of assets minus total of debts) is the same today as what it was in 1962 at constant 2012 currency values. Yep: our household net worth today is what it was half-a-century ago.
That said, I’m bullish on Russian investment opportunities. Why?
One factor is Russia’s production of petroleum: for some time now Russia has been the world’s largest producer and exporter of crude oil, natural gas, and petroleum-based derivatives like natural gas liquids (NGLs) and liquified petroleum gasses (LPGs). Russia’s share of world markets — particularly the US, the EU, India and China — has expanded beyond the Arabian Gulf nations’ share by a significant margin. One reason is because Russia’s petroleum products are pipelined from source to consumer — whereas the Gulf producers’ products have to be tankered to reach their markets, and therefore the costs of delivery are greater. Russia’s petro-products are simply more cheaply delivered to their points-of-sale. More than 60% of Russia’s GDP is derived from production and export of petroleum products, and this is not going to change, at least not within my remaining lifetime. Last month’s deal struck by BP and Russia to co-invest in order to exploit the natural resources of Siberia and Russia’s far northern territories is staggering, eclipsed only by this month’s announced deal between Rosneft and ExxonMobil, which is likely to return the co-investors more than a trillion US Dollars (equivalent to the US’s annual GDP) over the next decade from Russia’s Arctic Circle “pay-zone” alone.
A second factor is Global Warming. As global warming heats up because we’re getting closer towards 425 ppm of carbon emissions in the atmosphere, the polar ice cap melt continues to accelerate; and storms, floods and tsunamis prevail ever more frequently along all continental coastal areas — and droughts prevail in continental landmasses. The results are plain: geophysical and economic destruction, social upheaval, and population health hazards resulting in worsening conditions of morbidity (likelihood of becoming sick) and mortality (probability of early death). As equatorial nations will perish, sub-tropical and temperate zone countries’ economies will necessarily decline. On the other hand: Alaska, northern Canada, and Siberia, and Northern Russia will prosper — more southerly populations will migrate there to avoid the heat, causing demographic demand and supply advantages (i.e. those who own scarce land and real property will prosper as demand increases); and the extraction of raw material resources such as petroleum will be facilitated in greater proportion as the permafrost melts.
Et voila! So put your money into Russia now, while purchases of investment opportunities are relatively “cheap.” I am. Because, as the rest of the world’s economies stagnate and then decline, the demand to acquire Russian assets will increase — as will their consequential price.