Russia looks like a bargain

Despite sanctions, the country is in no serious economic trouble, and its oil stocks look attractive

The Russian ruble fell sharply in overnight trading after the announcement of US economic sanctions and the threat of more. It has lost more than 2% of its value against the US dollar during the past two days.

Unlike Turkey, which has to borrow about 6.5% of GDP to finance its net imports of goods and services, Russia is a net exporter, with a current account surplus a bit over 2% of GDP. The country’s debt is low by international standards. Total credit to the nonfinancial sector stands at just 83% of GDP, compared to 250% for the United States and China.

Russia’s economy is overly dependent on hydrocarbons, to be sure, but it has a reliable buyer in China, which prefers overland sources of energy for national security reasons. Economic growth is a tepid 1.3%, and the country has a headwind from demographics in the long term, but it has no urgent financial or economic problems.

That makes Russian oil stocks look attractive in comparison to Western peers. Lukoil is now trading 7 times trailing earnings and 6 times free cash flow and pays a dividend of nearly 5%.


Thomas Daniel Kuhn

In the Middle ages, in Great Briton they had a betting game. The world economy today resembles that game. it was called the ratting game. The game worked like this. 300 rats were released into a pen. Then a Mastiff was released into the pen. The bet was how many of the rats would survive after they killed the dog. At first the dog killed at will chasing rats around the pen, even seemed to enjoy the sport. But then the dog began to tire, At one point the rats would stop running and turn to face the dog. It was when they realized that they could not escape it. Then they turned on the dog and killed it. It would not seem possible for rats to kill such a massive and ferocius dog. But one would grab the dog by the lip , othere would go for the achilles tendon and so on and between them they would bring the dog down. Then they would kill it.

The US today is behaving much like that dog. Striking out in every direction. Invading, occupying, bombing, killing economies, in other words stomping around the world, trampling on International Law, human rights, and using sanctions as a weapon against friend and foe alike. There are signs that the world has realized that it can`t escape this behemouth and is turning to face and fight it. There is a lot of hatred and fear of the US in Canada, Mexico, Central and South America, Europe, and of course China , Russia and the rest of Asia. One has to wonder what will be the straw that broke the camels back? When will the world turn and attack and kill the USA? Like Nazi Germany. The US is a threat to the entire world right now and appeasement is not working.

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