Putting Right What Has Been Put Wrong
Pfäffikon SZ, Switzerland – Exactly one week ago, I was invited to lunch in Zurich with one of the largest and most successful investors in Russia. The gentlemen are long-winded and are not at all concerned about a crisis such as the one in Ukraine, and I can’t blame them. Since we also wilfully have exposure in the CIS Region, I am always on the look-out for good information and ideas. The difference between (western) perception and the actual facts can provide interesting investment opportunities.
The stock market as a Friend
I have already explained that we try to collect our information differently. In particular, we avoid the usual media and try to form our own opinion directly and independently, which ultimately leads to our investment decision. After all, shares are easily purchased, but only after years of investigation. We see the ever-changing stock market as our friend. Sometimes it serves up brilliant moments to step into. The problem is that, in many cases, the masses have an entirely different viewpoint, which may also be the reason for a certain company or certain region to fall out of favour.
A part of our strategy is to also discuss the current issue – in this case, in Ukraine and Russia – directly with the Russians themselves. From the perspective of a western investor, the events in Ukraine are a major concern. The only thing that investors can do is to prepare and protect their portfolio as much as possible for the future. Anticipating unreliable politicians is no use when considering a long-term investment.
Crimea given away
It is striking that the Russians are not that concerned. According to a persistent rumour, the Crimea was given away in 1954 as a result of a drunken nod from Khrushchev. Even Mr Glasnost himself, Mikhail Gorbachev, agrees with Putin, even though the two men are far from friends. “Earlier, the Crimea was merged with Ukraine under Soviet laws, to be more exact by the Communist Party’s laws, without asking the people, and now the people have decided to correct that mistake.” says Gorbachev. Putin’s popularity has risen astronomically in Russia. This is not unusual considering the progress that he has made over the past few decades. Unfortunately, the western media refuse to see this. Gorbachev has called on Putin and Obama to emphasise the need to resolve the Ukraine issue diplomatically.
Do not disturb the fragile EU recovery
The Russian economy is in many ways much stronger than that of Europe. I have to snigger a little at the strong-arm tactics of José Manuel Barroso and his henchmen. Barroso also knows Germany doesn’t want to get in a fight with the Russians under any circumstances. Germany needs Russia and vice versa. To juggle with the extremely delicate EU recovery is stupid. The EU can simply not afford this. The result is that the Russians may further turn their back on Europe and simply start to sell their enormous gas and oil supplies in Asia. They are trying to improve their diversification. Coincidence or not, but the preparations by Rosneft for the first big deal with India were already underway last week.
Rutte makes an error
I think Mark Rutte was a little too impressed with the charisma and strength of ally Barack Obama in his statement to the international media after the successful Nuclear Security Summit in The Hague. Rutte stated that the Russian energy sector would have to be addressed further, because the country allegedly did not have a diversified economy. An erroneous view and a little rash, shortly after the Netherlands-Russia year. After all, the Netherlands wants to be an energy hub for the Russians and has been a loyal partner for decades. Not twelve hours after Rutte’s statement, the U.S. stated that the current sanctions, which are weak, would remain in force. A wise decision by Obama. He resisted a little in Brussels on Wednesday, but a military conflict has been pretty much avoided.
A previously planned Dutch trade mission to Russia under the leadership of minister Henk Kamp in mid-May is, quite rightly, going ahead. The trade mission has energy as its, highly fitting, theme. Kamp can put right what Rutte put wrong. It is fortunate that this has been entrusted to Kamp.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. 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 the above shares and has no intention of doing so in the next 72 hours.
