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Buzz Barometer: Why August is Most Dreadful Month for Russians?
July 17, 2015 16:37

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Chris Weafer of Macro-Advisory explains to the West why Russians approach August with almost a sense of dread. “It is a case of “if something bad is going to happen it is more likely to happen in August”, he makes a fair point in an article published at bne IntelliNews.
He digs deeper than even Russians themselves by looking at historical precedents.
“…the August syndrome only started in 1998, Russia’s history is filled with events which had a significant legacy impact on the country. The effect dates back to, e.g. August 1530 when Tsar Ivan the Terrible was born in August that year. In the last century Russia entered World War I in August 1914 and declared war on Japan in August 1945 which, technically, still continues. The Molotov-Ribbentrop Pact was signed in August 1939 and the start of the construction of the Berlin Wall was in August 1961. Soviet troops entered Prague in August 1968 and, in August 1991, there as an attempted coup against Gorbachev by those looking to prevent the ending of the Soviet Union,” he says.
Fast-forward to August 1998 when Russia defaulted on its domestic debt triggering a “complete collapse in the capital markets” with the RTS equity index “reaching an all-time low of 38.5 on October 5th”.
“Foreign investors exited Russia in 1998 and, apart from trading funds, did not return until 2004.”
Apart from heinous terrorist attacks, the accidents included the sinking of the Kursk submarine, a fatal fire in Moscow’s landmark Ostankino TV tower, the death of 170 people in an airplane crash on a flight from the Black Sea resort of Anapa to St. Petersburg in 2006. “In August 2009 one of the country’s largest hydro-power stations suffered a catastrophic explosion in which 75 people died,” he reminds his audience.

But Weafer also reminds us that risks and collapses are a time of opportunity. “…consider this: if you had invested $10,000 in Sberbank shares during the default of 1998 and sold them 10 years later you would have pocketed a profit well in excess of $1mn.” So “be lucky”, a message from an experienced analyst.

Author: Mikhail Vesely

Tags: Russian economy     

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