This is an example of the often breathtaking ignorance of European bureaucrats. I don't think I've ever seen so many mistakes made in a single tweet. One of the reasons improved relations with Russia is so difficult is people like this have no idea what they're talking about.
Facts: Russia's economy is growing not declining. It's leaders *do* want to diversify the economy away from natural resources, and the country *has* in fact already meaningfully diversified its economy away from resources over the past decade or so, albeit share is still high.
The rule of law needs more work but it has been improving in Russia. European gas imports are at record highs and gas prices have surged. Europe faces declining domestic O&G production in coming years & reliance on imports may rise. And Russia has built a gas pipeline to China.
Russia is also rapidly increasing LNG production. Consequently, Russia's reliance on Europe for natural gas exports is *declining* significantly as pipeline exports to China and LNG to other destinations significantly increase. Russia's bargaining power is therefore increasing.
Standards of living are rising. The reason GDP has been sluggish over past decade: demographics (a decline in working age population during 2010s); a halving in energy prices; & tight fiscal and monetary policies, that has seen deleveraging and govt move into net cash position.
In the coming decade, these headwinds will abate. Russia's working age population is expected to increase rather than decrease. Energy prices are recovering; China exports ramping up; economy is diversifying. Debt levels are low. We should see about 3% pa growth during 2020s.
On a per capita basis given a relatively flat population, this would make Russia one of the fastest growing major economies in the world.
European bureaucrats & commentators on Russia are totally clueless. It's embarrassing. Do some basic homework guys, seriously.
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From both a markets & epidemiological perspective, I think there is some legit cause for concern here - if just from tail risk perspective. The Delta variant per se is no big deal, but early evidence of rising hospitalizations amongst vaccinated could be.
A similar trend is being seen in Israel - albeit it is still early days. Some epidemiologists believe lockdowns and vaccines are creating selection pressures on virus that are driving the prevalence of new mutations in the same way antibiotics can promote antibiotic resistance.
They do not create the variants (per se). What they can do is create more space for those variance to increase in prevalence as other variants die off. Lockdowns can select for more infectious variants (Delta), and vaccines can select for vaccine-resistant mutations.
To some ears, this sounds sensible. To others, Orwellian.
It's because there is a commonly held misperception that repressive govt historically emerge due to "bad people doing bad things". In fact, it was driven by ppl that thought they were the good guys doing necessary things.
The issue is bigger than the short term issue at hand. The fundamental problem is the human tendency to hubris & a belief that centralized authority can and should ascertain truth. This leads to a tendency towards authoritarianism, driven by expediency & amplified by emergency.
Emergencies have often been the trigger for the emergence of repressive govt, as was the case in Hitler's Germany for eg. Emergencies lead ppl to accept the suspension of typical constitutional guardrails that prevent the excess accumulation of power, as it's considered necessary
One of the most underappreciated attributes of certain stocks is they are *very unlikely to lose you money*. Investors are often too preoccupied with *looking up*, worrying about catalysts & growth/re-rate potential, & forget to *look down* and ask, how likely am I to lose money?
It is striking the number of times I see people dismiss certain cheap stocks because they are unexciting, lack a catalyst & lack multibag potential, and totally ignore the fact that the likelihood of losing money over a decent holding period in such stocks is essentially zero.
Meanwhile, I routinely see people touting stocks for their growth potential, blue sky upside scenarios, etc, and totally failing to consider *how much could I lose if my bullish assumptions/expectations don't pan out*.
There is a problem in the medical field with people considering randomized controlled trials the *only* source of evidence. It is the *gold standard* of evidence, but that does not mean other inferior sources of evidence have no value. It is an excessively binary way of thinking.
Randomized controlled trials should, as a generalization, trump other inferior forms of evidence (although RCTs are not 100% infallible). But in the absence of RCT data, *the best alternative sources of evidence should be used*, and it should not be assumed to be useless.
An analogy: In a murder trial, the gold standard of evidence might be video footage of the murder occurring. However, we don't say that because we often lack the very best form of evidence, that it is impossible to infer by any other means/evidence what is likely to have happened
Excess mortality in Sweden in 2020 was below long term averages, despite a lack of lockdowns. This is a data point worth chewing on for those that believe authoritarian government control of people's personal choices/behaviour is the only way to get people to behave "sensibly".
Here is the reality: people care a lot about their own health. Given accurate information, they can generally be expected/trusted to make decisions that reflect a fairly rational assessment of the personal risk/benefits associated with their behaviour.
The left wing/authoritarian minded implicitly believe people are stupid; don't know what's best for them; and need to be corralled and treated like children. They need be told what to do; what decisions to make; & what risks they are allowed to take, for their own benefit.
Re US long rates, I think a key thing to watch (beside Fed purchases) will be the cost of USD hedging. A lot of the bid is coming from EU/Jap institos buying em and hedging out currency, generating better yields than available domestically. This will bust if cost of hedging rises
A recent WSJ article pointed out the cost of 12mth USD hedging to Euro/Yen was some 50bp. 1.3% long rates hedge out to 0.8%, better than 0.0% domestically. But what happens when those hedges roll off if the cost of hedging has risen to 200-300bp+?
If inflation continues to print above 5% in the US eventually this is going to have an impact on the USD. If a sense develops the Fed is not serious about tackling inflation, USD depreciation expectations will rise and the cost of hedging will skyrocket.