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Where did Oleg Bogdanov go? Oleg Bogdanov - on Russia's withdrawal from American financial instruments

Where did Oleg Bogdanov go? Oleg Bogdanov - on Russia's withdrawal from American financial instruments

The popular Russian economic commentator, Oleg Bogdanov, chief analyst of the Russian-licensed forex dealer TeleTrade Group (TeleTrade), as part of a commercial partnership, continues his weekly column of macroeconomic reviews.

Traditionally, at the end of each year, financial experts make various forecasts. The investment public is waiting for predictions and over time this event has even turned into a kind of entertainment - some will surprise more, some will shock, some, in order to evoke invigorating children's confidence, dress up as Santa Clauses and Snow Maidens and talk about records or anti-records in the world financial markets. Well, I too will do this, of course, with a certain amount of shamanism and Santa Clausism.

So, let's start with the euro to dollar exchange rate. What can I say? Rotten sluggish market. In the first years of its life, the euro was still invigorated, there were two figures a day. What was the cost of the protracted fall from 1.18 to 0.82, and then, after the joint intervention of the world’s central banks, with songs and dances to 1.6. Over time, the volatility deflated, the euro became heavy and inactive, and again, like an old man and an old woman at a broken trough, it returned to where it started - to the level of 1.8-1.19. Forecast: torment until 1.12, then return to 1.15. The economic surge in the Eurozone will fizzle out, and M. Draghi will stand his ground - to hold out on a soft monetary policy as long as possible. In general, the sad Italian song “Amore” is about unhappy love.

About the dollar versus the ruble. A beautiful figure of 50 rubles per dollar. And it’s easy to count, and our people love round dates. Already after January, where payments on external debts are even larger, about 15 billion dollars, the approach to the anniversary figure, 50, will begin. The Ministry of Finance's operations to purchase foreign currency are unlikely to restrain the flow of those wishing to purchase Russian assets. Well, if the US Treasury does not impose any serious sanctions against our OFZs, then this flow could increase significantly. Our Ministry of Finance will restrain the growth of the ruble, and the Central Bank will have to more actively reduce the interest rate.

About oil. You have to take a risk here. I assume that we will be able to see $100 per barrel at some point. The main problem is the transition of the world oil market from balance to oil deficit. Moreover, this process is going faster than reputable agencies predict. The surprise was the drop in activity of American shale companies amid rising oil prices. They, apparently, also wised up and decided not to drive the horses, but to calmly take advantage of the favorable price situation. In such a situation, the ball is again in the court of OPEC and Russia. Now only they can stop the process of continuous growth in oil prices, that is, it is necessary to break the agreement on freezing oil production. But OPEC and Russia are unlikely to give up such a wonderful mechanism of influence on the world oil market, and not only on it. Most likely, some mechanism for a gradual withdrawal from the agreement will be proposed, but this will stop oil prices only for a short period of time. A shock in the form of a price of $100 per barrel is possible.

About stock markets - I want a correction, perhaps it will happen in Western markets, 10%-15% no more. Our Russian stock market will grow almost continuously. The reasons are partly indicated above. The target for the RTS index is 2,000 points.

Well, in conclusion, we must pay tribute to the fashionable theme. About Bitcoin and other cryptocurrencies. Of course, this is not a market, but... I think we have passed the peak of general madness. Regulators around the world are starting to tighten the screws, but what else? Then the road is only down. The goal for 2018 for Bitcoin is $1,500. W. Buffett made a good offer - he will buy a 5-year put on any cryptocurrency. The only surprising thing here is Buffett’s confidence that at the age of 93 he will be interested in the outcome of this option. The outlook for cryptocurrencies is 0.0000. As Lucretius said - ex nihilo nihil fit (from nothing nothing comes).

Russians rushed to buy currency because of the falling ruble. Analysts are talking about a return to 2016. There were queues at some operating cash desks in Moscow. The media of St. Petersburg also report a similar excitement around exchange offices. Petr Kosenko and Oleg Bogdanov talked live about the situation and possible strategies with Global FX investment analyst Vladimir Rozhankovsky.

Petr Kosenko: Will there be a currency shortage due to recent events?

Vladimir Rozhankovsky: With our people? Since the late 90s, we have had these wild queues at exchange offices. As soon as something happened to the ruble in our country, all sorts of “black” Mondays and Thursdays, people dropped everything, left work and simply ran at the call of their hearts, as they say, to the exchange offices. And there was nothing else, there were no ideas. And now little has changed.

Perhaps, of course, we are talking about the fact that people are preparing for the summer holiday season, they put off buying euros until the last minute - and now they realized that there is a collapse, they need to buy urgently, because things could get even worse. This is true. But, in addition, people take euros for savings purposes from the devaluation of the ruble. This is what I absolutely don’t understand. Firstly, all my friends already have foreign currency accounts in banks. There is a ruble card, there is a currency card - accordingly, it is absolutely not necessary to run somewhere, to breathe heavily into someone’s back. It seems to me that this is a rather stressful situation in itself.

Petr Kosenko: Problems may arise simply with cash - there may be this currency in your account, but the bank will not always be able to give it to you.

Vladimir Rozhankovsky: There is no need to give her away.

If they take this currency for the purpose of accumulation, if it is not urgently needed tomorrow in large quantities, if they simply want to protect themselves from devaluation, then, strictly speaking, it is enough to convert the rubles and transfer them to a foreign currency account.

Oleg Bogdanov: Yes, everything is correct, but the problem is that, by analogy with Rusal, will one day it occur to Donald Trump or someone in the American administration to cut off our largest state-owned banks from dollar oxygen?

Vladimir Rozhankovsky: We can turn this off, but on the contrary, it is convenient for them to export the dollar, because all dollar payments are transparent. It is not beneficial for America for countries to pay in other currencies.

Oleg Bogdanov: Wait, they have their own ideas about benefits, they took Rusal out of life. If a military escalation begins in Syria, they may decide to cut off our banks from dollar oxygen - this will be a freeze of correspondent accounts. Accordingly, the population will not simply withdraw money from their bank account. Let's say Sberbank has a correspondent account with the Bank of New York.

Vladimir Rozhankovsky: Draw your conclusions, gentlemen. Go to banks, diversify your investments. Look at which banks are considered systemically important - the Central Bank has such a list, and diversify so as not to put your eggs in one basket.

Petr Kosenko: Maybe try to move, if possible, into neutral currencies - the Swiss franc, the Japanese yen?

Vladimir Rozhankovsky: I don’t know, first of all, for me these are exotic currencies, what should I do with it then? There is another possibility - many people thanked me for this idea back in the ever-memorable year of 2014, when we had a similar situation, people also drank valerian and clutched at their hearts. Not everyone reached the exchangers then, then everyone started biting their elbows. But in the same “Sberbank-Online” there is an option “Purchase of metal accounts” - as far as I remember, there is gold and silver there.

The latest option is if you don’t have a foreign currency account and don’t have time to open one - buy gold.

Oleg Bogdanov: No one will seize the gold - it is in our Central Bank.

Petr Kosenko: Is it too late to change rubles now? You remembered the situation at the end of 2014, when the euro exchange rate reached almost 100 rubles, people continued to run and change currency. That's who bit their elbows later - those people who changed in the very failure.

Vladimir Rozhankovsky: For those who like a balanced approach, I recommend paying attention to this important fact - oil and raw materials continue to grow. Our foreign exchange market looks disgusting, our stock market looks crazy, but our commodity market looks great and stable. We are still exporters of raw materials, the country is focused on this, and, by the way, oil is growing, metals are growing - the same aluminum, zinc. There is no dollar factor in this growth. Sooner or later, the combination of a slightly weak ruble and very strong oil will lead to an increase in our export revenues to the treasury.

Oleg Bogdanov: That’s the danger - they don’t look at oil, but simply withdraw from our assets and sell...

Vladimir Rozhankovsky: It's panic, yes. I don’t forbid those who want to panic from panicking.

26.10 00:22 Exclusive

Economic experts Grigory Beglaryan, Alexander Kareevsky and Oleg Bogdanov in the studio of the “Right Course” program on the YouTube channel will summarize the main financial results of the week and share their thoughts on upcoming changes in the market.

25.10 15:30

On Thursday, the ECB held a meeting following which the regulator kept the most important parameters of monetary policy unchanged.

19.10 00:11 Exclusive

18.10 19:20

Stock indices in Asia closed mixed in recent trading in anticipation of news regarding trade negotiations between the United States and China. The US Treasury Secretary announced the need to work out the details of the first phase of the agreement between the countries.

11.10 23:25 Exclusive

11.10 19:14

The results of the week in the financial markets were summed up by leading QBF analyst Oleg Bogdanov and QBF portfolio manager Petr Kaminsky.

04.10 16:21

The index of business activity in the services sector in September this year in Germany fell to 51.4 points from 54.8 points a month earlier due to weaker domestic demand.

28.09 00:00 Exclusive

Alexey Bobrovsky sums up the results of the week in financial markets together with economic observers Grigory Beglaryan and Oleg Bogdanov in the “Right Course” program on the YouTube channel.

27.09 16:44

The US money market continues to experience a shortage of short-term liquidity. On Wednesday, the Federal Reserve Bank of New York said it would increase its short-term lending operations.

20.09 23:54 Exclusive

Alexey Bobrovsky sums up the results of the week in financial markets together with economic observers Grigory Beglaryan and Oleg Bogdanov in the “Right Course” program on the YouTube channel.

20.09 16:29

The price of oil showed a significant increase on Monday. Last weekend, Saudi Arabia's oil facilities were attacked by drones. The US Federal Reserve lowered the interest rate to 2% per annum.

13.09 23:59 Exclusive

Alexey Bobrovsky sums up the macroeconomic results of the week together with experts Alexander Kareevsky and Oleg Bogdanov in the “Right Course” program on the YouTube channel.

13.09 17:48

Following the results of the next meeting, the ECB lowered the deposit rate and resumed the QE program. The regulator expects that rates will remain at current or lower levels until there are clear signals of an increase in consumer and

09.09 16:49

The main American stock indices showed growth at the end of the week due to progress in trade relations between the United States and China, as well as against the backdrop of published macroeconomic statistics.

30.08 23:24 Exclusive

Alexey Bobrovsky sums up the results of the week in financial markets together with economic observers Grigory Beglaryan and Oleg Bogdanov in the “Right Course” program on the YouTube channel.

30.08 19:40

The Chinese Ministry of Foreign Affairs confirmed the news that negotiations are currently underway with US representatives on concluding a trade agreement between the two countries.

23.08 15:33

The weakening of the yuan against the US dollar to an 11-year low yesterday increased investor doubts about the possibility of soon reaching agreements on trade issues between the US and China.

16.08 22:30 Exclusive

Trump has modeled a day of reconciliation, but the situation is still difficult. It has finally dawned on investors that the conflict between the United States and China is quite serious. Analysts began to calculate how a head-on collision between the two powers could end.

16.08 21:59

The results of the week in the financial markets are summed up by QBF leading analyst Oleg Bogdanov and QBF portfolio manager Mark Donikyan. Hong Kong's economic growth slowed down and turned out to be worse than expected - in the second quarter, GDP grew by 0.6%, while analysts had expected growth

On September 27, in Perm, representatives of Teletrade Group held a press breakfast for regional and federal media. General Director of Teletrade Group LLC Sergey Shamraev, chief analyst of the company Oleg Bogdanov and media personality of the Teletrade brand - actor Anton Bogdanov spoke about “Investment opportunities under conditions of sanctions and uncertainty.”

Also taking part in the press breakfast was Viktor Darienko, head of the Center for Analytics and Financial Technologies, CAFT Perm provides financial consultations and offers investment ideas.

The situation in the Russian economy leaves much to be desired. Internal structural problems, sanctions pressure, instability of the ruble. In these conditions, citizens and companies are trying to find external and internal reserves to increase personal income and develop business. Traditional types of investment, such as bank deposits, today can no longer be considered an effective investment.

“Rates in Russia are now at historical lows. The best you can count on with such bets is to preserve your funds; we are no longer talking about increasing them. The same is true for short-term federal bonds. Until recently, Russian shares had potential, but over the past year our stock market has suffered too much from sanctions and unpredictable US policies, and this vulnerability remains,” Sergei Shamraev noted in his speech.

Oleg Bogdanov touched upon perhaps the most sensitive topic for all those present - the ruble exchange rate. “Modern exchange rate formation has, let’s say, obvious and shadow sides. The impact of sanctions is obvious to everyone, this is a clear side. Less noticeable, but no less significant for the ruble, is the relationship between the Ministry of Finance and the Central Bank. The regulator has its own agenda, the ministry has its own, and they do not always coincide. As a result, we can observe significant movements in the exchange rate even with a neutral foreign policy background,” the analyst said.

In a stagnating economy, investments aimed at passive income are irrelevant; investments with active capital management are currently in demand. The foreign exchange market has excellent potential due to constant exchange rate fluctuations, but such activities require an extremely careful approach.

“The market is a market, you can both make money and lose money on it. And to grow profits and minimize losses, it is vital for Russians to be able to manage their capital. Training programs on personal finance management are offered by the Center for Analytics and Financial Technologies - Perm (CAFT). We are engaged in training and consulting, but, I want to emphasize, not in trust management. Our experts can offer clients certain investment options, but decisions always remain with investors,” emphasized Victor Darienko.

Traditionally, at the end of each year, financial experts make various forecasts. The investment public is waiting for predictions and over time this event has even turned into a kind of entertainment - some will surprise more, some will shock, some, in order to evoke invigorating children's trust, dress up as Santa Clauses and Snow Maidens and talk about records or anti-records in the world financial markets. Well, I too will do this, of course, with a certain amount of shamanism and Santa Clausism.

So, let's start with the euro to dollar exchange rate. What can I say? Rotten sluggish market. In the first years of its life, the euro was still invigorated, there were two figures a day. What was the cost of the protracted fall from 1.18 to 0.82, and then, after the joint intervention of the world’s central banks, with songs and dances to 1.6. Over time, the volatility deflated, the euro became heavy and inactive, and again, like an old man and an old woman at a broken trough, it returned to where it started - to the level of 1.18-1.19. Forecast: torment until 1.12, then return to 1.15. The economic surge in the Eurozone will fizzle out, and M. Draghi will stand his ground - to drag out a soft monetary policy as long as possible. In general, the sad Italian song “Amore” is about unhappy love.

Where does the crisis begin?

Oleg Bogdanov: “The majority advises not to worry, they say everything is normal; No, not normal."

As you know, a crisis always creeps up unnoticed. Everything seems to be great, macroeconomic indicators are normal, even above normal, stock markets are on the rise, corporate profits couldn’t be better. And suddenly, bam, everything is a crisis. As the great master of words V.S. used to say. Chernomyrdin - it never happened, and here it is again. How can one discern in the dark the vague outlines of an old woman with a braid, who is probably coming into our financial world with the goal of ruining more than one young investment life?

Moscow in the fall of 1997. The market is on the rise, the sky is full of stars, money is flowing, the prospects are crazy, O. Bender is resting with his Rio. And a year later, in October 1998 - cold computers on the exchanges, dust, desolation, the surviving financiers closed their last stop loss at Sheremetyevo. Of course, economists later explained to us everything why this happened - high inflation, a lot of debt, poor government management, etc., etc. But all this was known in 1995, and 1996, and 1997. And no one told why the Russian market went down right from January 1998, although at that time Western markets only went up. Nobody told stories about how the spreads of LTCM (the world's largest fund) widened, how friends-partners did everything to ensure that these spreads spread even wider, so that the beloved fund of Nobel laureates was covered with a copper basin and covered the entire financial market. In general, this is partly what happened. Our Russian stock market died a heroic death in 1998 as a small element of a global trap for catching a beast called LTCM. Well, and then, of course, devaluation, inflation, and default with the new Government.

In 2007, when a funeral march had already taken place in the United States for one of the largest mortgage companies, New Century Financial Corporation, the stock market was showing new historical highs, the S&P500 was aiming for 1,500 points. And even the slaughter of investment giant Bear Stearns in March 2008 did not bring down the market; by May, the S&P500 indicators remained around 1,400 points. I'm not even talking about macroeconomic data. Everything was fine with GDP in the states, growth was about 2%, inflation was 2.8%, the Fed reduced the rate to 2%. There was complete optimism in foreign markets. In my opinion, it was in May 2008 that Russian indices reached historical highs. Oil then was generally about $150 per barrel. The apocalypticists were laughed at. After some 5 months, Wall Street began to go to the bottom. Lehman Brothers failed, if not for the Fed, a sad fate would have awaited all the largest financial institutions in the United States. The S&P500 lost 50% by February 2009. A recession has begun in the United States. And again, macroeconomics, perhaps with the exception of real estate prices, which began to decline in the United States, did not tell us anything about the impending catastrophe. At the heart of the sad events of 2008 were financial structures based on real estate, which collapsed for a variety of reasons and almost dragged the entire financial world into the abyss.

2018 What now? Macroeconomics is fine. That's for sure. Global growth rates are above 2%, in the States about 3%. Inflation is low, but this is good for investors. There are no distortions in the real estate market. Corporate profits are 80% better than expected. Everything is fine with the banks, they don’t take risks, regulators are closely monitoring this. So why are investors getting nervous? Where does this anxiety come from, which has sharply increased volatility and has already tipped the market by more than 4 percent a couple of times? Most people advise not to worry, everything is normal. No, not normal.

There are distortions and imbalances. Firstly, Trump with his reforms (taxes, infrastructure) seriously increased the budget deficit and, as a result, the supply of treasuries on the market. At the same time, the Fed is reducing purchases of treasury bonds, and other central banks are also thinking about how to reduce treasuries on their balance sheets. And now, even despite low inflation, Treasury yields have risen sharply. This is hitting the stock market. Indices are starting to decline, and this is a blow to the weakest link right now - ETFs and ETNs. The ETF market has grown from $700 billion to $5 trillion since 2008. dollars. This growth occurred in a 9-year bull market. Obviously, in this regard, the positioning of players and investors has many weaknesses. The long-only strategy of many funds can lead to serious losses if the market declines significantly. It is still difficult to even calculate the possible magnitude of the problem. One thing is clear - the problem exists, and cynical financiers will definitely make sure that for a simple average investor, who has lost fear for 9 years, at a certain moment the financial market becomes a place where dead men with scythes stand and silence...

Oleg Bogdanov: “If the Chinese join the sale of US government debt, chaos in the underlying asset for the global financial market will cause the most unpredictable movements and turbulence.”

The trade war between the US and China is escalating. D. Trump decided to raise the level of confrontation and on Tuesday announced that he had ordered the preparation of the introduction of 10 percent duties on Chinese imports worth $200 billion. Then the American president added on Twitter - and if the Chinese respond, we will impose duties on their goods even more by $200 billion. It is obvious that Trump’s decision to escalate the trade conflict with China will cause negative consequences for the Chinese economy, and the entire world economy.

If the first $50 billion package of 25% tariffs could reduce China's growth rate by 0.1%, according to UBS estimates, then a further increase in the volume of Chinese goods subject to tax would lead to a drop in China's GDP by 0.5%. The Chinese government expects the country's GDP to grow by 6.5% this year. A trade war could significantly change these estimates. The main question that economists and financial market players are asking now is how will China respond?

It must be said that, unlike the United States, the Chinese possibilities of a mirror response, that is, the introduction of duties on American goods, are very limited. The annual trade imbalance between the US and China is about $500 billion in favor of China. In other words, the Chinese will not find enough American goods to symmetrically respond to the United States to increase duties in the amount of $200 billion. This means that the options must be asymmetrical, but not go beyond the economic framework. Naturally, in this situation, everyone immediately pays attention to the Chinese portfolio in American government bonds (Treasuries).

Currently, the People's Bank of China has 1 trillion worth of treasuries on its balance sheet. 181 billion. From March to April, the portfolio decreased by 6 billion dollars. Without knowing the structure of the portfolio, it is difficult to determine for what reasons it was reduced - naturally, when a bond expires or due to the sale of bonds. In principle, while the Chinese portfolio remains unchanged, over the year it even grew by $35 billion, but this weapon can truly be called a financial thermonuclear bomb.

It is still noticeable that Japan is methodically selling American securities; there the Treasury portfolio is constantly losing weight; over the year it decreased by $82 billion to 1 trillion. 31 billion dollars. The Russian Federation also distinguished itself. In our own style, in April we cut our portfolio in Treasuries by as much as 50%, by $48 billion, and thus made global investments in American debt negative in 12 months. It is curious that Elvira Nabiullina, at a meeting in the State Duma during the Central Bank’s report on its activities in 2017, when asked why we sold treasuries and where the money went, she answered this way - I won’t say, you will only find out about this in six months.

It is clear that if the Chinese join the process of selling American government debt (as was the case in the summer of 2008 with the bonds of Fannie Mae and Freddie Mac), then serious problems will begin with borrowing from the US Treasury, especially against the backdrop of a growing budget deficit and a shrinking Fed balance sheet. There will be distortions in the yield curves of various bonds. By the way, an inversion between 7-year and 10-year Treasuries is about to begin, which has not happened since 2009. Chaos in the underlying asset of the global financial market will cause the most unpredictable movements and turbulence in all markets.

Algorithms and the end of the world, or is there life after hype?

Once upon a time, in the mid-90s, when computers were mostly still black and white, and a page on the Internet took a minute to refresh, we had a large computer in one of the halls at the Moscow Stock Exchange. It was like a sacred cow, traders approached it, crowded, looked into it, but not everyone was allowed to touch it, only a select few could touch the keyboard, press mysterious keys and miracles appeared on the screen - various color graphs and numbers. This computer had the Reuters platform.

Select trading gurus who understood charts and were admitted to Reuters carried rulers. Periodically, one of the gurus ran up to Reuters, opened the chart, put a ruler on the monitor, whispered something in admiration, his eyes widened, and his face began to glow. Then the guru quickly ran into the room to his black and white computer and began feverishly trading. These were the first algorithmic traders in Russia. I won’t say that they earned some crazy money from their trading, but the effect of the shaman and financial sorcerer was especially mesmerizing, primarily on non-professional investors. Even then they were ready to give all their money to these “demons”; a ruler and mathematics already meant more than a hammer and sickle. And they began to make an industry out of this passion.

Everyone began to study technical analysis. Trading on Wall Street had a special effect on the mind, when 10 minutes before the closing of trading the magical computer birinyi turned on, the sell program began to work and the Dow Jones quickly lost 100 points. After such magic, the number of followers of the “moving average and stochastic” sect grew by an order of magnitude. Over time, 80%, or even 90% of traders and investors began to work only using technical analysis, programs for algorithmic trading and special systems appeared, where everything is controlled by robots and these robots are also controlled by robots. Gradually, mathematics began to displace humans from the trading process and even from the decision-making process. Now the released macroeconomic data are analyzed by robots and decide what to do with positions.

Now the entire financial world is moving from line to line, from support to resistance, strictly within the trend, from one moving average to another. Everyone has approximately the same load in their programs, everyone reacts the same way. Until the system gives a signal, you cannot sell. I think that even if a thermonuclear war breaks out, many computers will simulate “buy the dips.” And if a sell signal arrives (it is clear that everyone will receive it), then only the local “watchman Vasily” will be able to stop the wave of sales, who will turn off the lights on the exchange.

Trading in the markets is now developing in a paradigm - from protracted slow growth to lightning-fast flash crash. These days, investors love algorithms, robots, and conspiracy theories. Once, at some forum or seminar, a very young girl came up to me and somewhat indignantly began to ask - why don’t I use Bollinger and Stochastic? I told her that I use it, but less and less as I get older and mostly on holidays. She didn't understand me.

The consciousness of investors has completely stopped responding to obvious economic facts. They want hype and they get it almost everywhere - in trading stocks, cryptocurrencies, bonds, etc. But is there life after the hype, after “the watchman Vasily” turns off the switch and makes the end of the world? - there is no answer to this question yet.

The Copper Riot and the Fiscal Rule

Oleg Bogdanov: “ Our collective Ministry of Finance is reminiscent of Ostap Bender, who affectionately says to the population: “Well, why do you need so much money, Kisa?».

Everyone knows that Abraham gave birth to Isaac, and Isaac gave birth to Jacob... etc. It is not known who gave birth to the Ministry of Finance and the Central Bank.

Although no - the first Central Bank was organized by Riga citizen Johan Witmacher and this Central Bank was the Central Bank of Sweden. It was in 1657 that Stockholms Banco arose, the predecessor of the current Swedish bank Sveriges Riksbank, and at the same time the first paper money in Europe was created, and the so-called “fractional reserve banking” system was used for the first time, when invested money is used to issue loans.

At the same time, Sweden was at war with Russia. In 1658, a truce was concluded, which was signed by the boyar Ordin-Nashchokin on the Russian side. It is curious, but it was Ordin-Nashchokin who in 1655 organized the first bank in Russia called “Zemskaya Izba”. The bank, however, was later closed, and boyar Nashchokin began to engage in, as they say now, financial “schematism” and proposed issuing copper money at the price of silver. Salaries were paid in copper, and taxes were collected in silver. There was a lot of copper - therefore, a lot of coins were minted. Naturally, the rate of copper fell to that of silver, reaching almost 1 to 30. The people began to rebel. As usual, they blamed Prince Miloslavsky for everything. Let's go to the King. The king first listened to the walkers, and then hanged the rebels, they say about a thousand people. However, in the end they left copper alone and returned to silver money. This is how the financial market and regulation began in Russia.

Now our financiers do not work with copper and silver, this is the business of numismatists. Nowadays, global concepts are in use - liquidity, foreign exchange liquidity, money supply, M1, M2, etc. However, what our financial authorities have been doing lately is somewhat vaguely reminiscent of the scheme of the boyar Ordin-Nashchokin. People's salaries are paid in rubles, taxes and the retirement age are raised, and the Ministry of Finance de facto collects taxes largely in dollars, since free rubles, according to the budget rule, are used to purchase foreign currency.

Vertinsky once sang: “I don’t know why and who needs this...”, so I don’t know either. The persistence of the Ministry of Finance is surprising. Back in the spring, Alexei Kudrin proposed increasing the cut-off level for the budget rule by $5 in order to avoid raising taxes and, consequently, slowing the economy. No, Kudrin was not heard. Now our Central Bank carefully, I don’t know by whose will, first, during periods of turbulence, suspends the purchase of foreign currency, and then, when it became obvious that the operations of the Ministry of Finance are only adding fuel to the fire, it generally stops these operations until the end of September. However, the Ministry of Finance stands its ground - the budget rule must be followed, we will still take foreign currency, if not on the open market, then from the Central Bank. That is, they will buy currency that the Central Bank already bought for rubles that came in the form of taxes from our exporters. In September, 426 billion rubles will be spent on these purposes. In fact, the Ministry of Finance will pour 426 billion rubles back into the Central Bank. This is the same as pouring a bucket of water back into the river, and the Central Bank will write to the account of the Ministry of Finance a certain amount of currency that is already on the balance sheet of the Central Bank. Do you get it? As a result, neither dollars nor rubles appear in the system. Rubles are absorbed into the depths of the Central Bank. It turns out that QE is the opposite, quantitative tightening, which is equivalent to raising the key rate, and this leads to a slowdown in the economy.

In general, it is not clear why, in the current conditions, when geopolitical confrontation can lead to the West freezing foreign currency transactions, buy this currency with such persistence? It seems to me that now our collective Ministry of Finance is reminiscent of Ostap Bender, who affectionately says to the population: “Well, why do you need, why do you need so much money?.. - Well, what will you buy, Kisa? Well? After all, you have no imagination. By God, fifteen thousand is enough for your eyes... You will die soon, you are old. You don’t need money at all...”

Fake news and robots

The modern financial industry is actively moving towards complete algorithmization of trading. Robots are now opening and closing positions, analyzing incoming macroeconomic information and regulatory statements. The number of ETFs that are managed passively, that is, by robots, has exceeded 50%. A person is being pushed further and further away from trading in order to exclude the psychological and emotional component from the process.

The idea is clear and probably economically justified. However, the algorithmic system itself cannot work in a vacuum, it must “suck in” and process external information, and here modern technologies encounter ordinary human vices (greed, vanity, incompetence, etc.), which force the robot’s brain to work at its full limit , the balls jump behind the rollers, the machine boils and starts buying, when it should be selling, fixing losses, taking off positions again and fixing losses again, in a word - the robot starts doing weird things.

The robot receives external information from the media. The media employs people called journalists. It is they who are now the demiurges for all algorithmic systems; the amount of losses and profits depends on them to a certain extent. In the past, the 20th century, all incoming information was analyzed by a person; a professional could immediately make out inaccuracies, stuffing, and illiteracy in incoming messages. It's more difficult now. In algorithmic systems, various versions of information messages can be programmed, but in any case, the system must respond immediately and quickly.

Life is much more diverse than hard-wired circuits.

I remember somewhere in 2003 everyone was waiting for the results of the Fed meeting. At the appointed time, the text of the statement arrives, which differs significantly from expectations. The reaction was immediate, especially in the foreign exchange market. About 15 minutes later a correction arrives - the new text of the Fed statement is more complete. There is a backlash in the market. It turned out that then the Fed reset its decisions by fax and the journalist, who was sitting in a special room near the fax, did not wait for the entire sheet to come out, tore it off without the last paragraph and handed it over to other journalists for distribution. In my opinion, this was one of the first cases where fake news seriously moved the global market. Someone, apparently, drew the right conclusions from this case.

Fake news began to pour in in droves. News arrives. The market is starting to storm. Correction or clarification in 5 minutes. All global media began to sin with this. After the financial crisis of 2008, the process entered a new phase. Now journalists stupidly give unverified information with standard phrases - “from sources close to the negotiations”, “from a person close to the government”, and sometimes quite brazenly, with the following wording - “the media are reporting”. Who these people are, what their sources are, no one ever clarifies. It is important to cause an instant reaction in the financial market, to raise hype. It must be said that this type of fakes is typical for Western media, since the financial market there is developed and there are a lot of fish, or rather algorithmic systems, that can be caught with such bait.

In Russia the situation is somewhat different. In our country, fake news works either to raise the “nightmare, everything is lost” wave (expert forecasts such as “Bitcoin in a year will cost 100 thousand dollars” or “The ruble will fall to the dollar to 150” are especially popular), or according to a joke about Caruso. Oh, that Caruso! There is so much noise - “a good singer, a good singer”... And he is out of tune and burrs! - What, were you listening to Caruso? - No, Izya sang to me! In this case, there is usually a simple classic order with the goal of destroying a competitor or reducing the company's capitalization before a takeover. Although we cannot exclude simple, simple-minded illiteracy. This is now a common problem, generational.

Thus, we can draw a simple and bold conclusion - in order for the media not to interfere with the normal work and development of algorithmic systems, the media themselves need to be robotized, words translated into numbers, and encrypted. Then everything will be clear, simple and understandable. We received a set of numbers from the Fed and responded. I’m just afraid that in this case, someone, reading in the Fed’s text - “the inflation rate remains low” - will quietly write by the fireplace on a piece of paper - “Alex to Eustace...”.

Oleg Bogdanov: “Adviser to US President John Bolton was used blindly, then investors and speculators were used...”

Last week in global markets was perhaps the bloodiest since 2008, especially in the US high-tech sector. Shares of the striped swimsuit group FAANG (Facebook, Amazon, Apple, Netflix and Google) were plummeting and even entering bear market territory. The quarterly reports of Amazon and Google were disappointing, and I’m even afraid to imagine what will happen on the market if Apple’s reporting on November 1 does not meet the expectations of investors and analysts. It should be noted that this year only 20% of all asset classes had positive returns. This figure has never been this low, except for the period of stagflation in the 1970s and the global financial crisis.

Meanwhile, in Russia, on the Russian foreign exchange and stock markets, amazing events took place, which in local financial folklore will remain in the form of expressions like “a ride on Bolton”, “hard Bolton on the market”, “Bolton sell-off” or “Bolton with carving."

The fact is that last Wednesday, US Presidential National Security Adviser John Bolton spoke in Baku. In principle, no one was particularly interested in this speech, since before Baku, Bolton in Moscow at a press conference told everything that interested investors. And about sanctions against Russia, which the US administration continues to prepare, and about the fact that the US is not planning new sanctions in connection with the so-called chemical attacks in the UK. And here in Baku Bolton speaks out on this topic again.

It’s clear that traders and investors don’t even know that Bolton is in Baku and is saying something there. They look at the monitor, follow quotes, charts and see Bloomberg and Reuters news feeds. Similarly, algorithmic systems monitor price levels, other introductory information, and also news feeds, since they contain an algorithm of actions for certain sentences and combinations of words. In a word, they are like Pavlov’s dog waiting for a signal.

And then the signal comes. The line “There will be no additional sanctions against Russia - Bolton” appears on news feeds. Moreover, note that everything in this phrase is structured very competently - the emphasis in order of importance is on the first word and on the last. The mysterious academician Pavlov calculated exactly what and how to do so that the watchdogs on the financial market would start to drool profusely and other liquids. The reaction was immediate. The ruble strengthened by 1% in seconds, and the stock market soared by more than 2 percent. At this time, I was sitting at the monitor and thinking about how changing US foreign policy is now; that Trump’s expressiveness is transmitted to his subordinates; about what happened in a day that Russia could offer the United States; should we now change the assessment of our currency and market; Will the Moody's agency now raise Russia's rating? In a word, my whole life flashed before my eyes.

About 10 minutes later, clarifications began to appear on the news feed: “There will be no additional sanctions in connection with the chemical attacks in Salisbury,” “the US administration continues to work on sanctions against Russia,” that is, Bolton repeated everything that he had previously said in Moscow. There was no sensation. The picture became the same - the old woman and the trough. The ruble returned to its previous positions; growth in the stock market gave way to active sales, which continue to this day.

It is clear that Bolton was used, as they say in the intelligence services, blindly. Then they used investors and speculators. In general, the entire global market now resembles Professor Pleischner from the famous TV series, who was also used blindly. And this is no longer the same Pleischner who blithely walked around Bern and joyfully watched the animals in the zoo. Now is the moment when Pleischner raised his head and saw a flower in the window - it was a signal of failure.

By the way, about beauties. It's no secret that I have long been a crypto-skeptic and consistently defend my position. It just so happened that my enthusiasm turned into complete disappointment, the source of which was trading practice and the experience of various transactions, frankly speaking, a sad experience. So, just a year ago, one of my good friends from investment operations decided, on the wave of general cryptocurrency enthusiasm, to also dive into this abyss. No matter how much I tried to dissuade him, the decision was made and the money was allocated to purchase a portfolio of candy wrappers (cryptocurrency). But before taking this rash step, my friend decided to listen not only to me, but also to attend one of the many cryptocurrency conferences and parties taking place at that time. And now after this, so to speak, conference, we meet, and I notice that there is a slight shadow of concern on his face. What happened? The answer is I changed my mind. It turns out that this conference was a kind of roadshow for the placement of some tokens as part of a large-scale investment program. As it was sung in the famous song - “There were girls, Marusya, Rose, Raya ...” NEP's frenzy. It was the busty beauties, embroidered in gold, with balloons that embarrassed my friend. It turns out that he has a clear sign since the 90s - as soon as girls with slightly reduced social responsibility begin to appear in the business, then the business is over. And, as you can see, this signal helped my friend not to lose a lot of money.

Yes, a year has passed. Cryptocurrency tomatoes not only withered, but also began to become moldy. The losses are massive. Bitcoin fell by 80% from its maximum, and other cryptocurrencies fell even more. Complete destruction. Some console investors by saying, look what happened to the shares of Internet companies; at the beginning of the century they also fell by 80%, but then grew thousands of times. By the way, not everyone grew up, some simply disappeared or were absorbed by others. I think the comparison is incorrect. Dot-coms, unlike cryptocurrencies, were still real companies with real reporting, with an emerging business model, and they were traded on regulated exchanges. The bubble was inflated, deflated, and in the end, only the strongest remained. Cryptocurrencies have none of this, or almost none.

Yes, blockchain technology is gradually penetrating banking and other businesses, but it comes there as a tool for business, but not as a separate business. Cryptocurrencies have one big advantage - the idea of financial freedom, independence from banks and regulators. You can give a lot for this. And they give, they have already given a lot for this idea. However, as we know, it is impossible to live in society and be free from society. It is impossible to create a full-fledged monetary unit independent from the authorities, either on the blockchain or on any other modern technology, since independence and unregulation give rise to endless greed, which leads to complete anarchy.

Fed message

Oleg Bogdanov: “The last FOMC meeting threw many experts and investors into a stupor; I think few people expected such a situation.”

The last FOMC meeting, everything that was said, done, and predicted there, threw many experts, investors and speculators into a stupor. I think few people expected this situation.

First of all, American President D. Trump did not expect this. In just a few days, he began carpet bombing the Fed, calling on them to stop, come to their senses and not raise the interest rate or worsen the liquidity situation. But the FED, led by D. Powell, responded to D. Trump in the style of the hero from the famous joke, who in the maternity hospital said to his newborn and loudly screaming son: “Why are you yelling, Izya?” There is no turning back!

The Fed raised rates and left the text of the statement and forecasts without significant changes. American monetary policy makers have turned a blind eye to leading indicators that indicate a recession, they have turned away from poor macroeconomic indicators in China, and have chosen to ignore the obvious depression in the Eurozone. And they did not react in any way to the fall of their own American market.

Before the Fed meeting, many strategists were drawing up various combinations that the Fed could offer the market. As stock indices in the United States declined, the general consensus consolidated around the idea that the rate would be increased, but the text would indicate the risks of a recession and the forecasts would not include a rate increase in 2019, well, maybe just one increase. Some reputable strategists, such as the head of DoubleLine Capital Jeffrey Gundlach, said that the Fed should not raise the refinancing rate at all and their arguments were convincing. The unforgettable B. Bernanke, with any economic sneeze either inside the US or on foreign markets, immediately launched another quantitative easing program, and the idea of raising interest rates did not occur to anyone at the Fed until recently.

It is obvious that now, under D. Powell, the Fed is different. They are slowly but surely reducing the balance, they are gradually moving the rate up, as some representatives of the US Central Bank say - the rate may be above the neutral level for a couple of years. Rate forecasts for 2019 showed that only two FOMC members see the rate at 2.5% next year, six at 2.75%, four at 3.25%, three at 3.30%, and two members of the Open Market Committee as much as 3.6%. !

Thus, tight monetary policy is the general mood at the Fed. It is clear that formally they have the right to such an opinion; basic macroeconomic data, especially on the labor market, support the trend towards increasing rates. However, there is frankly weak data on real estate, statistics on mortgage refinancing show a decrease of 34%. But the Fed doesn’t see this or pretends not to see it. I am already silent about the global macroeconomic picture, which will soon resemble “The Last Day of Pompeii” by K. Bryullov. Of course, it can be assumed that if D. Trump had not written, I would even say, offensive calls on his Twitter (in the style of - crazy people, what are you doing), then the FED would have been softer. But if this is the case, then the voting result indicates how opposed the Fed is to the current US president.

Perhaps the Fed was demonstrating its independence in this way. There may be a desire to use a high rate to stabilize the curve in the Treasury debt market or to support the US dollar in the world market in order to curb capital outflow. Be that as it may, these are political games or some kind of strategic maneuver, it is obvious that the global asset market will become a victim of these intrigues. There is no one to hold him, and there is nothing to hold him yet. So, in accordance with the Fed’s message, investors in their entire camp, together with their Baron D. Trump, are heading far to the South.