Will it make sense to buy wads of Rubles soon?

[roykirk]

http://www.themoscowtimes.com/article/1009/42/371906.htm

I'm a virtual idiot when it comes to economics, and I understand the currency market even less.  What I understand is hard numbers.  I know when I was in Russia back in April, I was getting something like 23.xx Rubles to the dollar from the ATM machines.  Just three weeks ago, I was getting 25/1 when I first arrived in Russia and 26.8/1 when I left.  It's currently at 27.07/1 and the article above projects it continuing down to 28.90/1 in the next year.  I haven't seen that rate since a visit in 2001. 

My credit union will give me Rubles for a $10 exchange fee regardless of the amount.  I've used their service a couple of times when I've had short connections and didn't want to have to fool with ATMs for the first several days or weeks I was in-country.  If we see the Ruble get near 30/1 and start creeping back up, would it make sense to buy up a few hundred or thousand dollars worth of Rubles to stockpile for future visits? 

[Makkin]

Hello,

  I don't think the Ruble is a good investment but others may not agree. It would be better to invest in the Euro or the pound yes?
  The pound was at about 2,11 not too long ago and now it is 1.62 and the Euro was at 1.68 and now is at 1,28.
   The Russian money was at 24.25 or so and now it's at what 26.95? The persentage is not greater than the other two mentioned and when in a global economy you want one of the big three monies right?

   I suppose it's not a bad idea to buy some cheaply but remember they are connected strongly to the dollar and thus it is why they have not fallen as rapidly as the Euro and the Poud.

   I'm not sure exactly why the drop for the Euro and Pound has been so sharp but speculation see's the slowdown of production and jobs and all the regular things. Seems the Ruble is slow to follow on the money exchange but it will fall soon to maybe 32 per dollar and then thats a great time to buy yes?

   When there is blood in the water it's time to buy right?

Makkin

[BillyB]

Roykirk,
  The dollar has been gaining strength against every major currency now and it's best to keep it at the moment as it may continue. Russia's economy is heavily influence by oil prices as they sell a lot and oil keeps dropping in price. When the price of oil goes back up, then maybe you should consider buying Rubles when it starts to gain strength again. Unless you see big swings in the value of currency while making the right moves, don't expect to make big bucks. There may be better options to make money now. I'm sure some guys are waiting till stocks hit bottom based on those who panic before buying again.

[roykirk]

Roykirk,
  The dollar has been gaining strength against every major currency now and it's best to keep it at the moment as it may continue. Russia's economy is heavily influence by oil prices as they sell a lot and oil keeps dropping in price. When the price of oil goes back up, then maybe you should consider buying Rubles when it starts to gain strength again. Unless you see big swings in the value of currency while making the right moves, don't expect to make big bucks. There may be better options to make money now. I'm sure some guys are waiting till stocks hit bottom based on those who panic before buying again.

Makes sense.  Heck, I'm not even looking to make a bunch of money or anything, I was thinking more along the lines of making my dollar go a lot farther for future visits to Russia.  Between me going over before the K-1 is completed and her surely going back later to visit family, I'm sure there are a lot more Russia trips in my future.   

[Mishenka]

All currency is down against the USD. As oil prices have fallen, the dollar has gained an average of 20%.  If you had bought USD a month ago, and sold them today, you would have made that 20% profit. Remember oil is half the price is was 12 months ago. This causes a huge problem for countries outside USA. USA is using less and importing less.

Here is an article written Oct 14th that explains why:  http://services.inquirer.net/print/print.php?article_id=167925

According to Chris Lafakis, an economist at Moody's Economy.com, every $1 decline in the price of oil saves U.S. consumers $1 billion. The average oil price in the third quarter was $117; figure an average of about $80 ( now is between 64 - 66 pr barrel) for the current quarter, and that's about $40 (now 50) billion in savings for the American consumer — the equivalent of one-third of the first stimulus package implemented by the government earlier this year. And it's likely that gas prices will fall further. Mary Novak, managing director of energy services for the economic consulting firm Global Insight, says every $10 decline in the price of crude oil adds two- to three-tenths of 1% to America's GDP, and her firm believes that crude will come down further. Over the past four weeks, Americans' average consumption of petroleum products fell 8.5 percent from the same period a year ago, the DoE said.

The Euro has fallen to 1.27 to the USD, it was at 1.60 at one point during the year.
The NZ dollar has dropped from .80 to .58  22%
The Canadian and Aussie dollars have fallen from almost equal to the dollar to lose 25% of their value. it now cost $1.25 for a Canadian to buy a USD
The Ruble has fallen from 23 to the USD to 27 or about  16%
Russia has lost major investors since the conflict with Georgia, plus was hit hard again since the financial crisis hit on top of their own issues. It will take some time for all countries to recover from this mess. historically the Ruble has only fallen over the last 18 years, It has never been a good investment. This is why the Russians hoard US dollars and Euros.  

IN short, keep your USD, Oil prices will continue to fall and the dollar will continue to rise.
 
Mishenka

[daveyj]

Currency markets (and every other market) are very difficult (impossible?) to time.  I think most people view the dramatic change in the US dollar as a temporary bounce, but then again most people thought the markets were sound 3 months ago.

A more important consideration is the rate of inflation in Russia which is in the low teens.  Thus if you buy rubles, and are not planning on spending them in the next few months, then you will be losing quite a bit (unless of course you leave them deposited in a Russian bank which is paying a correspondingly high rate of interest)

[roykirk]

A more important consideration is the rate of inflation in Russia which is in the low teens. 

That's a really important point I didn't think about until last night.  I remember reading concerns that Russia's inflation could go up quite a bit, so that would certainly eliminate any savings by buying the currency.

[kievstar]

Japanese Yen is what the the people in the know have been buying last couple weeks.  But this will destroy economy there if it stays that strong to long.  A strong currency in todays world hurts new foreign investment. 

Be careful of the Euro are you sure Western Europe will get its act together.  Western Europe has a problem as their printing more money to solve their problem but not really fixing the root cause.  Printing money and lowering interest rates weaken your currency and few people want it. Never bet against the USA dollar in the long run specially with Obama coming into presidency.  Democrats actually create a stronger dollar with their current policies but a strong dollar helps Euro zone but Euro zone has no good ideas right now.

Regarding Russia and Ukraine their is big money to be made here but really which way will it go?  IMF gives Ukraine the $14B they think they will get it will cause a huge swing in currency.  You need to know the volume of oil Russia will sell and at what price plus the tonnage of steel and at what price Russia well sell and than you can make a good estimate at currency.  Oil price is half the equation - need to know volume sold.  OPEC making oil increase in price but cutting volume hurts some countries and helps some.  Also, if your in China look to see if construction cranes are going, right now most stopped.  Russia is becoming China's servant and China is USA manufacturing.  So Russia better play nice with USA and make sure USA has strong economy.  Outsourcing makes foreign countries dependent on USA economy. 

Regarding inflation your not spending the money.  For example buy Ukraine at 6 to 1 right now.  6 months it is 5 to 1.  you make 16%.  Inflation is 31% in Ukraine - does not matter your not buying anything in Ukraine and getting your dollars back.  High inflation in Ukraine is misleading to - to long of a discussion here.

Longterm USA dollar will get stronger against the Euro.  You may see short term ups and downs but Euro zone is a mess and they all disagree on what to do.  England was smart to keep their own currency. 


 

[Mishenka]

Today Oil is down by $5 more per barrel, the NZ dollar is down to .55 not a bad time to buy real estate in NZ at this dollar rate, when it goes up you profit twice, first when you buy property with the low NZD and second when you sell high.  It hasn't been this low since 2001.  I noticed the Euro at 1.27 is pretty low, but don't buy it now, they are expecting the Euro to drop to .60 to one USD, in this case, prices will grow with inflation, and their already high taxes, good for US exports, as prices will climb fast and USA GDP will rise with them. The economy is looking better for USA each day on a global scale, even as the stock market plunges to new lows. People are shifting funds to other places. We have to think smarter and act wiser to make ends meet. Think of what products people can't live without and invest in them.

mishenka

[Misha]

If we see the Ruble get near 30/1 and start creeping back up, would it make sense to buy up a few hundred or thousand dollars worth of Rubles to stockpile for future visits? 

Well, it depends if you believe that the ruble will go back up. Some Russian online newspapers are speculating that the ruble may collapse going down to 60 or even 90 rubles to the dollar in the coming months.

Weren't you also thinking a while back of buying Russian stocks a while back? I would note that the two main Russian stock markets, so far, have lost close to 80% of their value since May. Russian analysts predict that they will go even lower.

[roykirk]

Well, it depends if you believe that the ruble will go back up. Some Russian online newspapers are speculating that the ruble may collapse going down to 60 or even 90 rubles to the dollar in the coming months.

Weren't you also thinking a while back of buying Russian stocks a while back? I would note that the two main Russian stock markets, so far, have lost close to 80% of their value since May. Russian analysts predict that they will go even lower.

Yeah, I had thought about buying some Russian stocks several months ago, but I was disappointed in the few companies the average American like me could invest in.  Thus, I stayed put.

[Misha]

The ruble is now trading at 32.2 to the dollar. Likely will hit 40 before the spring. Even the Russian Ministry of Finance is now acknowledging that the ruble will fall even lower.

[GoodOlBoy]

Longterm USA dollar will get stronger against the Euro.  You may see short term ups and downs but Euro zone is a mess and they all disagree on what to do.  England was smart to keep their own currency. 

Missed this part of your post Kievstar.

Two month's later, I completely agree with your economic "forecast".

IMO, the Euro will remain weaker against the dollar and the Ruble.....well...

"Obamanomics" is another topic all together.



GOB

[boaterguy]

The ruble is now trading at 32.2 to the dollar. Likely will hit 40 before the spring. Even the Russian Ministry of Finance is now acknowledging that the ruble will fall even lower.

I always watch the exchange rates etc. What's funny is I am certain that Russia tried to prop up the exchange rate for around a week. It stayed at 29.15/$ for around a week and didn't budge! It will be interesting to see where it bottems out.

[Shadow]

   I'm not sure exactly why the drop for the Euro and Pound has been so sharp but speculation see's the slowdown of production and jobs and all the regular things. Seems the Ruble is slow to follow on the money exchange but it will fall soon to maybe 32 per dollar and then thats a great time to buy yes?

Check the long term exchange rates and see what you can expect.
During the last twelve months there have been 2 moments the USD has gained value.
1. When Georgia started the war with Russia
2. When Israel started shooting back at Hamas.

As for the future, see where are chances of possible armed conflicts, as this somehow always let the USD gain value.

[BC]

As for the future, see where are chances of possible armed conflicts, as this somehow always let the USD gain value.

I thought the USD would go up with the Iraq war... It didn't.

[Mishenka]

As long as oil is - 35 per barrel the USD will stay high. I read some interesting things here in this predictions from a swiss bank. Rub was 33 today.

According to Saxo Chief Economist, David Karsbol, 2009 will be a turning point as things can't get much worse than what they already are.

Saxo Bank's Outrageous Claims for 2009:

1. There will be severe social unrest in Iran as lower oil prices mean that the government will not be able to uphold the supply of basic necessities.

2. Crude will trade at $25 as demand slows due to the worst global economic contraction since the great Depression. Today its closed under $35

3. S&P will hit 500 in 2009 because of falling earnings, vaporizing housing equity and increased cost of funds in the corporate sector.

4. The EU is likely to crack down on excessive government budget deficits in several member states, and Italy could live up to previous threats and leave the ERM completely.

5. The AUD JPY will drop to 40. The decline in the commodities markets will affect the Australian economy.

6. EUR USD will fall to 0.95 and then go to 1.30 as European bank balances are under tremendous pressure because of exposure to the faltering Eastern European markets and intra‐European economic tensions.

7. Chinese GDP growth drops to zero. (it already has) The export driven sectors in the Chinese economy will be hurt significantly by the free fall economic activity in the Global Trade and especially of the US.

8. Pre-In's First Out. Several of the Eastern European currencies currently pegged or semi-pegged to the EUR will be under increasing pressure due to capital outflows in 2009.

9. Reuters/ Jefferies CRB Index to drop to 30% to 150. The Commodity bubble is bursting, with speculative excesses so large they have skewed the demand and supply statistics.

10. 2009 will see the first Asian currencies to be pegged to CNY. Asian economies will increasingly look towards China to find new trade partners and scale down their hitherto US ecentric agenda.

[kievstar]

Usually stock market increases and more jobs are created in the USA but currency does not get stronger always with war.  Stock market did go up from Iraq.    I like a weak USA dollar better for the manufacturing in USA and creates jobs.  

GoodO'boy - longterm to me is more than 3 years.    I am no expert on currency but no one in the world is.  My overall networth did increase last year and not many people can say that.  I do make bad trades on currency and stock.  

Makkin - Many things make currency move but one thing this year was a lot of Europe made goods were purchased by the World for Christmas.  Made a stronger Euro last 3-4 months of 2008.

Shadow - you should look at what made the dollar strong and weak by month.  Your analysis is off but you hate USA so I would expect this from you.

Why would you buy rubbles - better to get a margin account and role the dice on a big payday on a longterm and daily bets on Rubble.  Russia currency is a big risk but high reward or high loss.  So you buy 1 million rubbles and it goes back to 25 do really make much $ compared to the risk.   Currency trading needs to be done daily and longterm  - need a good mix.

USA companies build Asian factories so business will continue between companies.  USA is largest economy and China will not pass USA in next 50 years.  China is linked to USA manufacturing.  So if the dollar gets weak than the World will collapse again.   USA buys foreign goods.  World needs strong USA economy.

[Shadow]

Shadow - you should look at what made the dollar strong and weak by month.  Your analysis is off but you hate USA so I would expect this from you.

kievstar telling that I hate the USA is a complete lie. I have been to the USA and always loved things there. I might not agree with some political things, and have a different view. But that does not make me hate the people or the country.

You can look at many factors that have influence, but look at these conflicts where the USA was NOT directly involved, and it will always reflect positively on the USD. If they do get involved, the effect is much less.
I might be a coincidence, but if you are always at the place where a fire starts, someone might question your presence.

[Mishenka]

It makes no sense to buy rubles in this market. They have only lost value over the last year and will keep falling. Russia is selling oil at a $35 loss per barrel. Their break even point is $70 per brl. How much have they lost on Gas already? While more pipelines are being built to supply EU from Middle East, Russia will loose more oil and gas revenues.  At this rate Russia's cash reserves will be depleted by March 09.  Chances are this will go on for at least another year and is headed for total collapse again, but this time there are no investors to bail them out.

The world financial market is far from stable. People I know who work in major banks here have bought a fire proof safe to keep their cash in. People don't trust banks anymore, nor will they begin to trust them anytime soon. If Bankers won't put money in banks, why should we? They will surely fail. There is not enough money in the world economy to bail out the US banking system. At this point, the realestate forecast for California is to loose another 25% in 2009 bringing total loss in values down 60% from the peak 2006 prices. This accounts for 60% loss in bank loans from foreclosures in the 2- 3 year period. Projected 2009 will exceed 2008 foreclosures. The loss in Trillions exceeds the world GDP per year. Simply having congress throw one or two trillion at bailouts is laughable.

I spoke with the manager today at Bank of America about this 45 billion bail out they are receiving (25+20). They say it will only cover losses after buying Countrywide mortgage and losses in wall street. They are not making loans with it. The market in Ca is dead, they have cut back employee hours and pay by 20 hours per month. On top off this they have raised the threshold on loan commissions before they can make a bonus. They have to sell more in less hours to make the same paycheck. Problem is, there are no new loans being made. No one is buying new homes or selling old ones. very few have good enough credit to get an equity loan. The ones who have good credit don't need Equity loans, they have liquid cash savings. If the largest bank in America is failing, what does all this mean?

Stagnant economy, more lay offs and hiring freezes.
Circuit City Rest in peace. The troubled 60-year-old electronics chain tried its best to survive bankruptcy, but to no avail; now, it will liquidate its merchandise and close all 567 remaining stores. 30,000 more jobs will be lost. Best buy isn't hiring.

Mishenka

[Gator]

Russia is selling oil at a $35 loss per barrel. Their break even point is $70 per brl.

I was under the impression that the $70/bbl figure was the basis for next year's budget.  Are you sure that the cost of production and delivery amounts to $70/bbl.  The Siberian fields are expensive to operate, yet $70 is a helluvalot of money.

[Mishenka]

GATOR,  I've read this accounting of a break even point at $70 per barrel, in at least two different unrelated articles from major news agencies online. One Russian and the other BBC. I think the main reason Rusia pulled out of Georgia as quickly as they did was because of the cost. Also, Russian banks lost over 20 billion in the first week of the war as foreign investors and depositors withdrew funds. The ruble has fallen from 22 to 33 per one USD. This means you pay 30% more for everything in Russia than before the fall in oil prices and Ruble. Everyone in Moscow is talking about the high prices, layoffs,unemployment and hard times.

As unemployment rises it creates far less demand for travel, gas for cars and world wide supply. The same thing going on in USA is hitting every country in the world in the same measure. Oil prices were cut from $147 at the high down to $35.00. There is a huge loss of net profit. It pays to leave it in the ground!  The forecast by the bank I posted says it could fall to $11 per barrel. imagine gas at under less than a dollar per gallon?

[Misha]

I was under the impression that the $70/bbl figure was the basis for next year's budget.  Are you sure that the cost of production and delivery amounts to $70/bbl.  The Siberian fields are expensive to operate, yet $70 is a helluvalot of money.

The $70/barrel is the price of oil required by the Russian state budget to break even, not the cost of producing a barrel of oil in Russia.

[BC]

I was under the impression that the $70/bbl figure was the basis for next year's budget.  Are you sure that the cost of production and delivery amounts to $70/bbl.  The Siberian fields are expensive to operate, yet $70 is a helluvalot of money.

IIRC, the resident oil man jb stated that the price of producing a barrel of oil was around 2 to 3 bucks..  I believe him.

[Mishenka]

You can read about the break even point here in this article written September 2008 when oil was higher. Remember it is at $35 per barrel now. There are many countries loosing money on oil today. If Arab countries are loosing money, you can bet Russia is even deeper in the hole.

http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=242775&version=1&template_id=48&parent_id=28

Saudi needs oil above $49 to avoid deficit; Qatar break-even $24: IMF
DUBAI: Saudi Arabia, the world’s largest oil exporter, will need crude prices to remain above $49 a barrel to avoid a fiscal deficit, a senior International Monetary Fund official has said.
“If it goes below that level we would start seeing a fiscal account deficit,” Mohsin Khan, director of Middle East and central Asia at the IMF, told Dow Jones Newswires.
Oil prices have fallen drastically in the past two month, shedding over $50 in value since they hit $147 a barrel in July, raising concerns over the continued strength of Persian Gulf Arab economies.
Saudi Arabia, the Middle East largest economy, depends on oil and gas sales for 90% of its export income.
“Saudi Arabia’s break-even price is the highest among the Gulf Co-operation Council Countries because they are spending on a lot of projects right now, and oil money is used to fund these projects,” he said. Further declines in oil prices could tip the region’s economies over the edge as they continue to spend heavily on infrastructure projects.
According to Middle East Economic Digest, Gulf states are spending about $2.3tn on projects.
Other Gulf states with smaller populations and lower government spending like the UAE are able to run a fiscal surplus as long as oil prices are above $23 a barrel.
“The UAE will have a fiscal balance at an oil price of $23, if it goes below they would run a deficit. For Qatar, the break-even price is $24 a barrel,” Khan said. Kuwait’s break-even price is $33 a barrel, he added.
The figures, to be published in the IMF’s next regional outlook for the Middle East and Central Asia, also show that other countries in the region are already running a fiscal deficit with current oil price levels.
“Iran’s break-even price is $90 a barrel, and that is a big issue in Iran right now,” Khan said.
“If prices dip below $90 a barrel, and we have seen it touch $89 earlier this week, then they would have to tighten their public expenditure policy, and probably cut subsidies, which would be an issue for the government there – the public would not be content,” he said.
Iraq has the highest break-even price in the region, according to the IMF figures. The war-torn country needs prices above $110 a barrel to balance its books.
“They are almost starting from scratch, so it’s normal... it won’t be normal if the break-even point is lower because that would mean no work is being done,” he said.
Algeria, whose minister is acting as the president of the Organisation Of Petroleum Exporting Countries this year, will be able to balance its budget with oil above $56 a barrel, Khan said. – Dow Jones Newswires