Investment in Russia and Eastern Europe Message Board

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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Thomas Haegin who wrote (276)	7/7/1998 9:59:00 AM
From: doormouse	Read Replies (1) of 1301

This is deeply political as well as financial. The Bank of Moscow is a Moscow Mayor Luzhkov operation--same bunch that bought out large portions of Lexington-Troika Russian Mutual Fund. The fundamentals on Tokobank appeared bad, but Moscow Bank was going to take it over until Friday. Their last minute backout may be brinksmanship on the part of Luzhkov. The best number I have seen indicates a 2% survival rate (maybe 30 of 150,000 Russian banks) would survive a serious devaluation of the ruble. A very serious Russian economist who is well connected and usually cuts his words carefully now says that a realistic valuation for the ruble is 9 to one dollar (it is currently trading in a limited ruble corridor at 6.24 to the dollar) and that since much of the population lives off barter, dacha gardens, and non-paid wages any devaluation would not hurt the "silent majority". The underlying assumption is that the worst damage--wiping out people's life savings (while guranteeing the old communist elite a cushy life and riches or at least potential richs which they could quickly ship abroad) was done by the 1992 Gaidar-Harvard economic shock therapy and that nothing can hurt or ignite the population,---at least the urban population in the five largest cities. Revenge of the Gorbachities may be at work, but the pullback by the ERDB suggests, at least a recognition that financial fundementals are so flawed at Tokobank that they are beyond salvation or worse that banking dominoes are starting to fall, big time, across Russia. Public reaction will be important: when millions of people, mostly pensioners lost large sums on the collapse of the clever MMM pyramid scheme, the Duma eventually with Yeltsin, appropriated many millions in compensation---it all disappeared down some Orwellian sink hole called post-communist corruption. Russians are scrambling...duck and cover....the silent majority is untouched and uncaring about the stock market, but maybe slightly less so about the banks and currency. jes

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