Russia and Moskou on the Thames

Vlad Putin is doing it again: a new gambling law banishes Russian casinos. That means 1 bln USD less in tax revenues and the loss of 500.000 jobs. If you want to go for some gambling fun, you take a train to Kaliningrad, the Altai region, Primoriye or the Sea of Azov.
Or you start investing in Russian shares.

The ECB let rates unchanged and the non-farm payrolls were worse than expected in the US.

This one comes from Niall Furguson, author of ‘The Ascent of Money/ A financial History of the World’ commenting on the Sterling and the negative outlook for the AAA status:

"We’re not Iceland or Ireland, but we’re closer to them than we are to the U.S.,”

To compare Ireland with Iceland – although one letter difference – is not funny at all. Anyway: if the pound pops it will be fast and furious as the 5 year sovereign CDS jumped to 81 and the numbers are becoming worse every month

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About correlation

I found this morning this website http://www.etfconnect.com/.
A very comprehensive site that not only shows you around in the ETF-universe but also in the world of funds.
One function is the ‘fund sorter’ which let you sort out funds versus various criteria.
Now, there exist close-end funds and ETF investing in almost the same underlying. Only thing: an ETF is shadowing an index very closely while a closed end fund –as an example- can quote with a premium or a discount.
Now imagine you have an ETF and a closed-end fund investing in the same underlying. Normally they should move in the same direction at the same pace. Their ratio should be 1.
But this is not always the case.
As an example we take the Market Vectors Russia ETF and the Templeton Russia Fund (ticker: RSX and TRF).
They have almost the same underlying but they do not move in unison due to the fact that TRF can quote at a discount or a premium.
As is illustrated.

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Free money for all (banks)....

Is it possible for the Russians to stop the slide from rouble and equity markets?
Since the top on June 1 the rouble-based Micex went down with 24%.
All right then, it’s not the only sector losing height.
As we mentioned yesterday.

But help is coming. From the ECB auctioning 442.2 bln euro’s today for one year at 1%. Euro rates fell to record lows.
As is illustrated by the overnight rates.
A success in terms of driving down rates. In terms of excess reserves this bargain opportunity gave banks the opportunity to stock up euro cash to an excess of some 270 bln euro.
Thank you ECB.
Last week the ECB said that eurozone banks could face 283 bln EUR losses before 2011.
Well, this makes pretty up for it, not?
No wonder European banks are going higher.
Don’t forget: there is still a FOMC meeting going on.

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Where eagles dare...

Soon it will be the only way to escape the Emerald Isle as Irish carrier Aer Lingus announced some news about revenue and other numbers. Everything seems to detoriate even quicker than the government fortunes. A sort of landing has set in.
Time to sell?

Elsewhere we observe a take-off…

Although we think a correction is well underway, we observe that some beaten stock markets continue to perform well. We want to mention Russia. After the steep fall, Russian stocks are gaining track again.

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With Love... from Russia

Everyone knows the story of the wings of the butterfly in Hong Kong causing a storm in the States. The Wall Street Journal had a story which reminds me of this phenomenon.

"A tiny default by a Russian aircraft-leasing company is sending ripples through the much larger market for the country's debt. The default by Finance Leasing Co. on $250 million of bonds is the first by a Russian state-owned company on foreign debt since the country's 1998 financial meltdown. That is rattling foreign investors, who worry that Russia could allow many more companies to renege on billions of dollars of debt while it grapples with an economic and financial crisis. "It's clear that the capacity and willingness of the government to...provide support to a large number of entities is declining," says Ed Parker, head of emerging Europe sovereigns at Fitch Ratings."

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