Fending off the great Russian BearWhale

[Aepsilons]

Here's the right music to lighten up senheiser:

 

[BestUsernameEver]

RA RA RASPUTIN
Lover of the Russian queen
There was a cat that really was gone

RA RA RASPUTIN
Russia's greatest love machine
It was a shame how he carried on

 

[AgentOrange]

Money is fake. Production is real.

Do you use money? Do you have any money? Have you ever used money in exchange for goods and/or services? If so, why? Money is fake. Why couldn't you buy that video game with your production? Why did you have to exchange something fake for something tangible like a video game or that coloring book you always wanted? Isn't that stealing then? Maybe the whole world is stupid and you've been tricking people by giving them worthless paper while you amass a large collection of Hello Kitty figurines. Jokes on everyone else who can't see the light eh?

 

[Skull and Bones]

So , if we ever do decide to visit Russia. We'll get more bang for our buck, er, I mean, ruble.



@senheiser , how much does it cost to go to a karaoke bar in Russia? Are there any specific entry fees?

What's the infatuation with Asians and karaoke bar?

 

[senheiser]

bunch of nonesense propagnada ruble devaluation is a good thing it will make russia significantly cheaper given the oil price being low russia is much cheaper to produce natural resources and manufacturing. Russia will just forbid US dollar in russian bank accounts but not other currencies, US dollar will still be traded for oil but new projects will be replaced with other currencies

 

[senheiser]

 

[HeadHunter]

I don't know? They are notorious heavyweights so we might need an entire keg. Rumor has it Russian blood isn't blood at all... it's vodka. Russians handle their alcohol better than anyone I've seen. Though once their drunk they are just as stupid as we Americans are when we are sober.

Senheiser is a German living Russian... he's got to be a drinking machine!!!

You are right two beers can make me drunk lol but for Russia one liter vodka bottle is a normal thing

 

[LeveragedBuyout]

Russia can take comfort in that its peer, Nigeria, is in the same boat.

---

http://ftalphaville.ft.com/2014/11/07/2035652/bearwhales-everywhere/

BearWhales everywhere
Izabella Kaminska Author alerts | Nov 07 11:53

BearWhale
n.
/bâr-weil/

1. A large mythical creature known to operate in FX markets with the explicit intention of shattering upstanding and well-managed currencies like bitcoin, the rouble and the naira. If found to display extreme speculative dumping behaviour, defences must be organised by the champions of the superior currency zone so as to scare the wunderbeast away. These defences usually involve feeding the BearWhale large amounts of unwanted inferior dirty currency until it can physically consume no more and withdraws to its BearWhale cave. A successfully slain Bearwhale is usually cause for much jubilation and festivity within the defending community.


As FT Alphaville reported on Thursday, a BearWhale is stalking the Russian rouble and has been doing so for a few months now. Whilst the Russian central bank was quick to put up defences it seems that, as yet, conventional strategies for dealing with BearWhale threats are failing to scare it away:



Questions are now being asked whether Russia’s CBR may be dealing with a new breed of BearWhale. And, if so, whether the conventional strategy of just throwing dollars at it is actually effective?



(BearWhale Image courtesy of Reddit)

As the FT reports, the rouble touched new lows against the dollar on Friday on concerns that Russia’s central bank had decided to put a cap on the amount of dollars it would throw at the BearWhale in the near future.

The Central Bank of Russia said on Wednesday that it would not spend more than $350m a day buying roubles to ease the currency’s slide, pledging to allow the exchange rate to be determined “predominantly by market factors”, although it stands ready to make one-off interventions.​

As Citi’s Ivan Tchakarov sums up the CBR’s new defence strategy seems to be focused on unpredictability (our emphasis):

The menu of options to address the RUB weakness are limited, yet well known. The CBR all but eliminated the currency corridor against the RUBBASK on Nov 5th, reducing its fixed interventions and making its presence in the FX market less predictable. While we suspect that the CBR is hoping that next week’s new policy tool of FX Repo will alleviate the tensions, there are two more conventional measures — raise rates even further by a lot (300-500bpts) and/or massively and unpredictably intervene in the FX market. The former measure could weigh on the struggling economy, but overall financial stability should always be of paramount importance. We believe the latter tool should also be employed in addition to the FX Repo.​

And if that doesn’t succeed, the Russian Central Bank could well bring out the big guns: namely the building of giant capital control walls that:

Some forms of capital controls may no longer be considered an exotic avenue to pursue, but maybe a legitimate policy tool to be employed to preserve financial stability. We have argued elsewhere that the current policy mix in Russia is characterized by a tight fiscal and tight monetary policy and that the current macroeconomic and geopolitical backdrop correctly necessitates such a policy mixture. However, the sliding currency creates now an environment that may no longer be properly managed only by tightening monetary policy and that may need to be addressed by introducing some restrictions on the ability to freely move capital. These may take the form, for example, of enforcing obligatory sales of FX revenues to alleviate pressures on the FX market.​

Meanwhile, over in Nigeria, a declining oil price has led to mounting speculation that the country could be forced to devalue, awakening a BearWhale attack all of its own:



On Friday the Nigerian Central Bank announced it could no longer ignore the threat, and said it would be prepared to defend the currency via the conventional strategy of BearWhale dollar-feeding, something that has slowed the run at least intermittantly:



But as Bank of America Lynch noted on Friday, while there may be political will to keep the naira stable — especially ahead of February’s elections — it’s not at all clear if the country’s FX reserves are sufficient enough to defer the devaluation option for too much longer, especially if oil prices continue to fall:

As markets digest the normal, we assess the level of FX reserve adequacy in Nigeria. Our own measure of adequate reserves (to safeguard stability in the event of an external shock) is between $44bn and $66bn and the current reserves of $39.4bn are some 10% below this level. Although there’s strong political will to keep Naira stable, the possibility of Naira devaluation will increase if oil prices keep sliding lower.

The Central Bank of Nigeria (CBN) remains committed to exchange rate stability before the 2015 Presidential elections and FX reserves may fall to as low as $30bn (as they did earlier this year) to support the currency. However, in the absence of an oil price recovery, we do not rule out a devaluation in 2015, especially given the dovish bias of the new CBN Governor Godwin Emefiele.​

So whilst BoAML believe the feeding of the BearWhale is likely to continue by means of the central bank’s twice weekly auctions, they add that it will likely take ever greater dollar sums to keep things stable :

 

[LeveragedBuyout]

http://blogs.ft.com/beyond-brics/20...vives-memories-of-dark-days-of-1998-and-2008/

Rouble’s slide revives memories of dark days of 1998 and 2008
Jonathan Wheatley Author alerts | Nov 07 10:01


Source: Thomson Reuters

The Russian rouble dived deeper to new lows on Friday, as the central bank’s decision on Wednesday to let the currency float failed spectacularly to put a floor under the exchange rate. It went briefly through Rbs48 to the dollar during the morning before recovering slightly, down from a low of Rbs45 to the dollar on Wednesday.

“People are in disbelief. The rouble is being smashed again,” said Timothy Ash of Standard Bank. “The central bank is nowhere.”

The bank spent almost $30bn in October alone attempting to prop up the rouble before appearing to throw in the towel. From Wednesday it said it would spend a maximum of $350m a day but stressed it would still step with more in if the currency moved too abruptly.

That promise may have been enough to convince any foreign speculators thinking of shorting the rouble that it was not worth taking on the central bank. Ash said any such investors would have closed their positions quickly.

But it was apparently not enough to prevent Russians from continuing to convert their cash out of the rouble and into foreign currency.

“If you were a Russian on the street or if you were a Russian oligarch, what would you do? You would get out,” Ash said.


Source: Thomson Reuters

Russians, he said, had been here before in 1998 and 2008, when the rouble was washed away by similar waves of capital flight. Those episodes sparked a surge in debt and loan defaults, causing deep pain across the economy for banks, corporations and individuals.

“They’ll be thinking, do we trust the authorities this time? People are just amazed that the central bank announced its move and has done nothing.”

The bank may well have decided to let the currency slide to a new low before stepping in to defend it at that level. Rouble weakness is partly a function of the recent strengthening of the US dollar, so defending the rouble would to some extent amount to taking on the dollar – not something the Russian central bank is likely to contemplate.

Nevertheless, Neil Shearing at Capital Economics said the bank might be forced into an early interest rate rise, on top of the 150 basis point increase it announced last week. He noted in a report sent to clients on Friday morning that Hungary (in 2008), India (2012) and Turkey (January this year) had been forced by sliding currencies to make big interest rate rises averaging 340 bp, bringing their average interest rates to 11.25 per cent a year.

He wrote:

At present, Russian interest rates are still below the levels that have previously been required to stabilise currencies (the policy rate is at 9.5% and the spread over Fed Funds is 9.25%). On past form, another 200-250bp increase in the 7-day repo rate to 11.5-12.0% may be needed. The good news is that all three countries were able to lower interest rates once they stabilised their currencies – but for Russia this point looks some way off.​

In a separate note on Friday, analysts at Danske Bank gave three fundamental reasons for the renewed sell-off in the rouble:

It is becoming increasingly clear that the ceasefire in eastern Ukraine has broken down – and both sides of the conflict are now quite openly admitting this.

The continued drop in oil prices is a significant drag on the rouble. Other commodity currencies have also been under significant pressure this week and this is likely pushing the rouble down.

The continued dollar rally. A stronger dollar is rarely good news for the rouble.​

Or as Ash put it: “The telling factor is that even when oil was more than $100 a barrel the Russian economy wasn’t growing. That’s a very high oil price. If you’re an oil economy and you’re not growing at $100, you’ve got a deep structural problem.”