Russian Stock Market in Freefall

MICEC 2013

Since the beginning of the year, the Russian stock market has entered freefall.  It started the year at 1550 on the MICEX index and just fell below 1350 as oil prices continue their decline due to low demand in China and the West.

The Russian stock market has lost nearly 15% of its value in just the first quarter of 2013, and there is no end in sight.  As we recently reported, numerous Russian experts now believe that the Russian economy has entered a recession as economic growth has been in freefall for more than two years now, and despite this Russia is also seeing soaring inflation, the classic economic disaster scenario known as “stagflation,” the dragon that killed the USSR.

Russia has no true stock market. Instead, it has an absurd little jester, who dances to the tune called by world oil prices.  It has no mind or life of its own, it simply does what the world oil markets tell it to do.  One cannot invest in Russia, one can only invest in the price of oil. We saw what happened to Russia in 2008 during the global economic downturn:  absolute economic disaster. Things aren’t even that bad this time, but Russia is still headed into recession.