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Swan Lake: Russia

Posted by kdadmin on August 16th, 2014.

On day eight of my trek through western Austria, I found myself in Hallstatt, a tiny town stubbornly etched into a mountainside, lapping the shores of a lake by the same name.

And what lake! Imagine the most beautiful alpine lake you’ve ever seen, varnish it with Austrian culture, and you’ve got Lake Hallstatt. It’s a nearly windless lake, prone to fits of alpine rain, upon which tiny electric boats stubbornly flit hither and yon. As if captive to the ever-present swans, Lake Hallstatt could certainly be the backdrop for Tchaikovsky’s ballet, Swan Lake.

Based on Russian folk stories, Swan Lake offers a perspective into Russian culture that mass media seems to miss. If you’ve never seen it, click here. Or, download the score from iTunes or Amazon. In either case, this quick synopsis will help you get the most out of it.

Fast forward to Russia, 2014. It’s been 25 years since the Berlin wall fell, marking the end of Cold War I, and sending the individual Soviet republics into an economic tailspin. Some argue that Putin’s recent actions in the Ukraine were an attempt to bolster the military aspect of the economy, and may have started Cold War II, but that remains to be seen.

If we look at Putin’s current situation, it’s not good. An economy rife with stagflation, a military vilified for war crimes by the international community, a crippling number of imposed sanctions, Russian billionaires fleeing the country and taking their capital with them, and a stock market that trails the S&P 500 by a whopping 95% over just three years. (SPY is an ETF that attempts to track the performance of the American S&P 500. RBL is an ETF that attempts to track the performance of the Russian stock market.)

Swan Lake

Not to mention that Putin is in that late 50’s early 60’s male psychological period of “I’ve still got it” replete with bimbos and sports cars. Or, in Putin’s case, of imperialistic annexations of territory that will likely cost more to integrate than they could ever hope to produce in revenue for the state.

Put all of this together, throw in the Russian sense of national pride illustrated in Swan Lake, add international ridicule of Putin’s publicity stunts, and you have a recipe for economic disaster: prideful aggression with very little left to lose.

The point is simple: Do I understand where Putin is coming from? Yes. Do I appreciate his sense of Russian passion? Yes. Can I see how, when backed into a corner, he could lash out? Yes. Do I think his approach to politics will strengthen Russia’s economics? No.

So, do I invest my clients’ money in Russia? Not a chance.

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