Stocks -- A Push From Russia

Russia plans to privatize another and very substantial $100 billion of Its industry next
year. Bloomberg mentioned that Russia may retain Goldman Sachs  to provide support
for the effort. So, there may be another push coming to interest outside capital in the
Russian market.

The RTSI index is up slightly on the year even though the economy has held up better than
most forecasters expected given Russia'a economic ties to the EU. Among larger economies,
the Russian market does have a very low -- 5 x earnings ratio. Fact is though that the economy.
though growing consistently, has experienced both a deceleration of economic growth
momentum and an acceleration of inflation pressure up to 6.5% currently. With investors
wary of capitalizing earnings too generously, the p/e for Russia is not that cheap given the
inflation scenario. Russia GDP

I have traded the Russia etf RSX in the past as a high beta way to play a rising oil price.
Oil is still critical to Russia's economy and budget and because I think 2013 could be a
volatile year for oil given turmoil in the mideast and the likely return of US focus to Iran's
nuclear program, the Russian stock market could have a couple of strong price rallies as
the oil traders seek to handicap developments in the greater middle east. In addition, a
large broadening of industry privatization and, perhaps, support from Goldman's bankers
and research for Russian equities, could add some excitement to the market next year.

I have linked to the RTSI index below. The market is nearing another positive turn
following a recent correction. You should also compare the RTSI to the oil price and to
the S&P EURO STOXX 50 (both of the latter are on the chart). RTSI Chart

Next year could see the US and Russia on different sides of major geopolitcal developments.
Many Americans wish Russia could be more like the US. But, Russia is Russia. I love the
music, dance, literature and the older architecture, but not the politics. I am not fully at ease
with Russia, but great nation, great people.