Russia is Laughing
Pfäffikon SZ, Switzerland – The contours of the change of power in the U.S. are increasingly taking shape. During this process, investors sometimes replace hope with harsh reality. Overall, the sentiment is too optimistic, and the risks are at the bottom. Meanwhile, Russia is laughing behind their hands.
Challenging
2017 will be a challenging year for investors. All ingredients are on the move, and no one can tell you what the outcome is. Historically, a strong U.S. dollar is a harbinger for global growth problems. A strong dollar is simply a brake on growth. Forgotten is that many loans of weak countries are noting in (strong) dollars. The rolling over or financing of these debts is becoming more acute. It is, therefore, not surprising that global growth has been a downward trend since 2014.
Rosy
Many assumptions of analysts are too optimistic. Each investor puts his money on Donald Trump, but what happens if he can not deliver? Trump wants to reduce taxes for companies and investors, which sounds like music to the ears. But the so-called ‘fiscal deficit’ of the U.S. is at a high level comparable with the early nineties and mid-2000. Anyone know how this ended. Additionally, it will become clear that only the top layer of the U.S. –around 20%– will benefit from the measures and not the rest. While Trump just asserts to create jobs and purchasing power for the middle class. The chance that this will succeed is debatable. Tax incentives make no sense if production is not increased. Many small business owners in the U.S. are euphoric but see no revenue growth in their books. The facts do not support the hope.
Russia
Interim there is only one country which is well positioned for the future: Russia. Actually, on all fronts, the signals are on green for the huge country. Russia and China were recently positioned the best, but China will shortly be falling by the wayside. The ratio of China‘s private sector debt has more than doubled since 2010, and this will sooner or later play a role in the economy. Russia, however, has a lot of private property, is rich in resources and has its state finances. Add to that a possible political bonus and a reduction or elimination of the sanctions, and Russia will benefit even more than it already does.
Russia is by far the best positioned of all the so-called emerging markets. Many politicians see a great danger in Russia, but they forget that Russia is just in Europe, Russia’s role in the Second World War is sometimes pushed under the carpet. Slowly, investors also realize the enormous potential in this region from a value investor‘s perspective. It seems that patience would finally be rewarded.
To conclude a notice of administrative nature. Since January 31, 2017, after seven years, my work as a columnist for Follow the Money (www.ftm.nl) came to an end. With pleasure, I have been part of the start of a serious research platform in the Netherlands all those years. I wish to Follow The Money‘s team the very best for the future, and I would like to thank Eric Smith and Arne van der Wal for the good cooperation over many years.
It remains for me to wish you a good weekend.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
