Moscow

[QUOTE=Ash1001]Helena, in the last 6 months the price of a barrel of oil has fallen by more than $100. The Russian economy is almost wholly dependent on commodities exports. And you think real estate prices won't fall?[/QUOTE]I don't think. I'm telling you the fact. We were all waiting for the crisis here in a hope for cheaper real estate. But the prices almost didn't change. Sometimes they are advertised as reduced, but when it comes to the deal they grow again on some stupid pretext that something was not included or so. Only renting prices fell down about 20% or so. May be within the next months something more serious will happen, but what I see now - nobody of who I know feels any crisis. We already joke that the crisis is a legend invented by companies to find a way easily fire people and hire new stuff cheaper.

What is happening in Russia and Ukraine? Ruble is going down and prices in Moscow are quoted in dollars? If this is true, nothing won't change in Moscow. Who can inform about prices for P4P now?

[QUOTE=Ash1001]Please reassure us all that you don't actually believe this? That you were just doing a very good Putin impersonation? :)[/QUOTE]

Sorry ... i cant reassure you.

Absolutely I believe that.

If there was no US subprime crisis, then ther would be no global credit crunch and it would be business as usual in Moscow ... and London and Beijing and Frankfurt and Sydney and Johannesburg. ... and Detroit.

But its not business as usual in Moscow, nor is it business as usual in London, Beijing, Sydney or Johannesburg.... Or Detroit.

If you want to see my Putin impersonation, thats something different altogether. It involes me walking with one arm stiff by my side and a tiger tranquiliser dart in my top pocket. Its an impersonation that drives the italian boys wild

[QUOTE=Acolonizer]What is happening in Russia and Ukraine? Ruble is going down and prices in Moscow are quoted in dollars? If this is true, nothing won't change in Moscow. Who can inform about prices for P4P now?[/QUOTE]Ruble is going down, prices are displayed in rubles, but recalculated almost daily according to euro's rate. Some companies returned to so called "у.е." (a sort of assumed currency), which is most cases the equivalent of euro.

[QUOTE=Helena Moscow]I don't think. I'm telling you the fact. We were all waiting for the crisis here in a hope for cheaper real estate. But the prices almost didn't change. [/QUOTE]

Well a luxury property in central moscow I am familiar with that was about to rent for $18k a month just 6 months ago is on the market at $7k a month now.

Which part of that price is almost not changing?

[QUOTE=Prosal]Today 1,00 € = 46 RUB.

Any chances that this could continue and effectively mean 50 or 55 RUB to the € before this summer ?[/QUOTE]

Might touch 50 ... but that depends if EUR strengthens vs the USD

The Russian central bank drew a line in the sand this week and said they will defend the currency basket at 41. The basket is made up of 55 us cents plus 45 euro cents. Much of the market now believes them. Today for the first time in 6 months, I saw buy recommendations on the ruble against the basket.

A bit of simple maths will tell you that if they do defend 41 ... Euro can hit 50 rubles only if the USD falls back to 33.64 rubles. That would mean a EURUSD exchange rate of 1.4863. Presently EURUSD is a fair way away from that at around 1.2800.

Anything is possible, but its probable the ruble has already had its big move.

[QUOTE=Ash1001]Classic sign of a bubble. The LESS knowledge and experience you have, the more money you make.[/QUOTE]

Tell me you seriously dont believe that is a classic sign of a bubble ? :-)

An experienced engineer who can build bridges in indonesia gets paid a quarter as much as a barely literate unskilled London tube driver who got the job a month ago cause his dad is in ASLEF.

So you are saying the UK economy is a bubble that should collapse down to indonesian wage levels? ... cause the guy with less knowledge and experience is getting loads more cash in London ... right? That was your logic?

Just cause you are jealous that someone in another country or city can make more than you with less education, skills or experience does not mean there is any bubble at all. A bus driver in Madras makes a 50th (as in 2%) as much as a bus driver in Zurich with exactly the same experience, education and skill levels. It doesnt mean JACK about bubbles.

It just means there are different costs of living and there is a different balance between supply and demand.

Ash was referring to your friend who was having difficulty recruiting newly minted MBA's (I assume) and had to throw increasing amounts of cash at them in order to persuade them to accept a position. Increasing amounts of money persuing diminishing resources is a classic sign of a bubble; whether it's tulip bulbs or internet IPO's.

As you said yourself, it's a matter of supply and demand...

[QUOTE=Helena Moscow]May be within the next months something more serious will happen, but what I see now - nobody of who I know feels any crisis. We already joke that the crisis is a legend invented by companies to find a way easily fire people and hire new stuff cheaper.[/QUOTE]Helena, as an example, a car dealership owning friend of mine who sold 3 cars a day in October sold a total of 3 cars a MONTH in November and December and now January. He'd pre-ordered 6 truckloads of cars in the fall that are due to be delivered but he's left them sitting at the customs border because he doesn't want them anymore. His customers have backed off, he can't get loans from the bank. Many people in sales have lost their jobs. Major companies have stopped paying their bills for goods purchased and lost their credit ratings. Office property rent has been cut in half. Moscow-City has seized construction on several projects. Others have been cancelled entirely. Most sales outlets I work with directly are predicting between 30 and 50% less business in 2009. A Swiss pilot friend of mine who flies both politicians, oligarchs and co. in their private jets complained to me that he is basically unemployed now. The jets are sitting idle or being sold off. Hotels are at 50% occupancy. Flights to Moscow reduced in quantity. Production in the resources sectors is down considerably. I've heard the same jokes you have and people laugh at them until they are the ones without work. Wait until the migrant workers lose their jobs (many have already) and have no money and times of their hands. It could get ugly. There IS a crisis and either you are just keeping an overly optimistic stiff upper lip or are incredibly naive. How long or how serious the crisis will get is still up in the air.

Supply and demand overvalued goods and services in Moscow, with demand falling dramatically and supply still increasing, prices will fall.

Mid-level real estate is one area that will hold steady for a while, as demand is still there. As RM said however, high-end real estate and office space is falling.

I'm hoping for recovery in summer or fall, but am an optimist. I'll use the "down time" to consolidate and improve my position. And maybe get laid now and then.

By the way, small attempts to cheat people are on the rise again. Exchanging money at the airport a cute innocent blonde teller girl tried to short me 1000 rubles, waiters are collecting bills and "forgetting" to return change until you remind them, other waiters are taking your cash and bringing your change without a bill (keeping bill amount themselves). This always happened before to a certain degree, but I've had it happen a lot more recently. People are worried, jokes or not.

[QUOTE=Stravinsky]Ash was referring to your friend who was having difficulty recruiting newly minted MBA's (I assume) and had to throw increasing amounts of cash at them in order to persuade them to accept a position. Increasing amounts of money persuing diminishing resources is a classic sign of a bubble; whether it's tulip bulbs or internet IPO's.

As you said yourself, it's a matter of supply and demand...[/QUOTE]

here's the thing ... they werent even MBAs ... just regular grad jobs.

Be careful throwing around the word "bubble" ... its very misused. Tulip bubbles, internet stock bubbles and US sub prime bubbles are one thing, but the russian economy is something totally different.

Tulips were a bubble because fundamentally they are worthless (and supply is potentially infinite). Prices were supported by meaningless demand. That demand disappeared and the prices collapsed and have not recovered in 300 years.

Internet stocks were a bubble because you paid money for a stock that was supposed to return a stream of money. When you paid a lot of money for stocks that had no possibility of ever returning you money unless the stock price went up, then its a bubble... you are buying nothing, except momentum. It was a meaningless concept. it was a bubble.

Sub prime mortagages were a bubble because banks and insurance companies bought what they thought were A rated investments (and priced them accordingly) when they probability of default meant that those instruments should have been priced far far lower. Fundamentally, what they bought could never be repaid. The economy as a whole could not logically get good value from the investment. Ergo, that was a bubble.

The Russian economy is completely different. Its underpinned by oil, gas, and increasing steel, nickel, gold, palladium etc exports. These are not whimsical items like tulips or ivory ... there was and always will be essential global demand for those products. Unlike tulips (or internet stocks) you cannot just increase supply when demand picks up. Unlike buying internet stocks or sub prime mortgages, you are not paying money for a future stream of income, so you cannot say there is a "fundamental" price for those items. You can not look at your likely returns and say the fundamental value of oil is X. You can do that with stocks, or mortgages - you can price them on what they should be worth, based on your knowledge of what they should return to you.

But something like oil ... there is nothing fundamental that says it cant be $10 / bbl or $200 / bbl. The world will buy pretty much the same amount of the stuff at either price(give or take 2-3%). The Russian economy is underpinned by it. If the oil price goes back to $150 bux or more, then the whole economic picture changes. In this scenario, its possible for Russia to boom again, even while the west is bogged down in economic malaise for the next 5 years. Oh how Putin would love that. In fact, oil at $150 will help contribute to the western economic misery. The irony will not have escaped VVP

And if that happens, then the disparity between professional wages in Moscow and professional wages in the west will again blow out. Those rapidly increasing wages in Russia are NOT a bubble, if the money available in Russia to pay for them is also growing at a whopping rate ... which has happened over the past 8 years as oil has gone from 10 bux /bbl to $150/bbl. If a company needs to recruit staff to expand its business, and each additional staff member will allow the company to increase its revenues by $1 mio per every 5 staff, then hiring anyone below $200,000 a year is economically justified ... i.e. its not a bubble. $72,000 per annum for a grad might sound a huge amount of money to we impoverished westerners, but its not part of a bubble if it is economically justified.

Dont get me wrong, russians are the type of people who are prone to bubbles ... overly happy and confident, or overly depressed and gloomy. But in the current case, I dont believe russian wages or the russian economy represents any type of bubble. Price movements have been logically justifyable by the increases in the amount of money flowing thru the economy and the massive increases in productivity over the past 10 years. The russians have been hit by totally external factors ... bubbles on the otherhand, self-prick.

The very fact that the Russian economy could rapidly bounce back with a pick up in oil prices confirms it was not a bubble. Bubbles dont rapidly reinflate. They burst.

To make it clearer ... too much money chasing too ofew resources is a classic sign of "inflation" ... Inflation and a bubble are sorta kinda totally different concepts. Inflation can be caused by too much money chasing too few resources, while a bubble is caused by irrational demand.

Sorry for the economic lectures, but as I said earlier, the word "Bubble" is misunderstood and often misused. There is a lot of schadenfreude the last few days over the relative impoverishment of Russia. A lot of pent up jealousy and annoyance at how we foreigners have been screwed by price rises there ... how for the last few years Russian guys have been clearly able to outspend us ... and how joyous it is that we westerners are now potentially back in the ascendency.

Enjoy it, take advantage of it, milk it for all its worth, cause I believe its a short term distortion in the long term trend of Russian economic resurgence.

Make hay while the sun shines boys.! (and for gods sake, please take - and post - lots of fotos while you are making that hay)

Hi! Who knows which bank is most reliable to open a bank account in Moscow?

Could anybody help us?

PM accepted.

Thanks

[QUOTE=Roger Mellie]Well a luxury property in central moscow I am familiar with that was about to rent for $18k a month just 6 months ago is on the market at $7k a month now.

Which part of that price is almost not changing?[/QUOTE]Middle-class property in good areas didn't change. Or changed ridiculously little. I mean buy-sell prices. Rent yes, reduced.

Looks like I'm going to Moscow. Been a member of this site for quite a while, but never had much to say, because I never go anywhere. It's all just a fantasy that I live through vicariously, thanks to you brave few. Well, fuck that, I want to "explore" the wilds of FSU. I want to go in Febuary. Is this a good time to go? Bez, I know you are the voice of experience here. Where can I get the best apartment? How do I find a driver (who speaks English) for a decent price? Where the fuck do I start? Tickets, high priced visa, transport? I need some pointers before I go as not to waste time on the learning curve, so I ask you, any of you, for some help here. Love the site, love the reports, photos, info... No more lurking, want to write my own report(s). ***** ratio

[QUOTE=Roger Mellie]Enjoy it, take advantage of it, milk it for all its worth, cause I believe its a short term distortion in the long term trend of Russian economic resurgence.

Make hay while the sun shines boys.! (and for gods sake, please take - and post - lots of fotos while you are making that hay)[/QUOTE]RM, thanks for the lecture - seriously. Nicely done and explained.

My prediction is that on December 31, 2009 oil will be at between $82 - $96. A year later(December 31, 2010), that $147 we saw lat summer is going to look like a fond memory. Real supply and demand will start to kick in sometime this summer I am guessing. Once all of those short sold oil futures run their course, REAL S&D for crude and petroleum products will start to affect the price and there will be little to hold it back. If anyone follows Matt Simmons (Simmons and Co.), his most recent report paints a very scary picture indeed. A few highlights are;

- Middle East producers are now facing deficit spending
- Key project have been postponed or canceled
- Drilling rigs are now being decommissioned
- Credit crisis has stalled construction of new rigs.
- Even at $147 a barrel, the crude SUPPLY did NOT increase.

Prices today and not based on supply and demand. They are a remnant of the commodities futures market that got sold off at fire sale prices in order to raise badly needed short term cash. Once those contracts work their way through the system it's all over for cheap oil.

It just is not possible for the world to convert to an alternative energy source quickly enough to avoid oil prices to run up past $200 in the next 3 - 5 years. In the long term, it's probably reasonable but in the short term; not a chance. Increased demand in for oil in China and India is continuing to surge DESPITE the reduced demand for oil in Western Europe and North America due to the price increases of last summer. Disruptions in drilling due to to current conditions are going to push the crude supply curve further and further behind demand.

So what does that mean for Russia? Back to the future. Does anyone want to guess what the oil prices was back in 1998 during the last Russian financial crisis? It was $10. Even today at $40, things are not even close to where they were. When the oil price surges, so will the Russian economy. And we all know what that means don't we?

So enjoy any low prices while you can boys, because the party will be over before you know it.

[QUOTE=Roger Mellie]The Russian economy is completely different. Its underpinned by oil, gas, and increasing steel, nickel, gold, palladium etc exports. These are not whimsical items like tulips or ivory ... there was and always will be essential global demand for those products.

But something like oil ... there is nothing fundamental that says it cant be $10 / bbl or $200 / bbl. The world will buy pretty much the same amount of the stuff at either price(give or take 2-3%). The Russian economy is underpinned by it. If the oil price goes back to $150 bux or more, then the whole economic picture changes. In this scenario, its possible for Russia to boom again, even while the west is bogged down in economic malaise for the next 5 years. [/QUOTE]
[QUOTE=Jake993]So enjoy any low prices while you can boys, because the party will be over before you know it.[/QUOTE]Thanks for your insight fellas!

BTW: High oil prices ARE my business. The higher oil goes, the better I do. I don't see recovery as quickly as some of you do however, as low resource prices aren't the only factor blocking growth/recovery right now.