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Author Topic: An article saying Russia governmen bond prices are a good bet, can an expat buy?  (Read 1222 times)

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Offline fjeagle

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Check out this article, can I buy being an expat Russian government bonds?

http://www.thevalueswan.com/is-a-19-interest-rate-on-russian-government-bonds-a-good-investment-yes/

Here is also a update that made me more understand Russias potential

http://www.thevalueswan.com/moodys-cuts-russia-debt-to-baa3-russia-pays-government-interest-on-debt-at-11-of-gdp/

What do you guys think?

Online andrewfi

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My first reaction is to say that if you need to ask the question here then the answer is bound to be in the negative. That's because there are risks to investment, in general, and knowledge is the best way to ameliorate that risk. An informed investor is a good investor.

Now that you are probably vexed with me here's the answer you wanted to hear, or part of it.

When you invest in a financial vehicle you expect to get a return n your investment. In general terms, the greater the risk the greater the reward. In today's zero/negligible interest rate environment 17% or so is a huge return and investments that have that as a hurdle rate  offer even greater returns. But, of course, in a transparent market that difference between a tiny return and a return several times the normal risk free rate indicates a huge degree of risk.

At the moment the markets are not transparent, returns are low and so even junk investments are paying out low returns. The risk reward ratio is hugely compressed and misleading millions of investors. So, the rates you look at here are hugely attractive.

However, given that you will be investing in, probably, dollars into a ruble denominated vehicle you not only have to consider the investment rate of return but also the exchange rate. A devaluation of the ruble will directly impact your returns from your investment. That makes the whole investment return kinda moot.

BUT, if your research suggests that the investment is fundamentally sound (or at least that the risk is proportionate to the expected reward) AND you expect the ruble to rise against the dollar then you are likely to make out like a bandit!

For example, if the ruble appreciates in value to where it was 12 months ago against the dollar then you will see a return on investment of very roughly 100% even if the underlying investment remains unchanged.

So, you are really making two bets.

My personal feeling is that the ruble WILL appreciate a lot over the next 12 months and I know that the Russian economy is fundamentally very sound.

I think some people are going to make a lot of money but the most sensible will be using money they can lose without ruining their lives. Of course, the gambling man, right now, would be borrowing as much money as he could and buying as many rubles as that would give him because only a small appreciation in the ruble will repay all loan costs. ;)

So, when thinking about this topic look at the two opportunities separately: currency AND the investment.


"For what else is the life of man but a kind of play in which men in various costumes perform until the director motions them offstage?" -Erasmus

Offline fjeagle

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My first reaction is to say that if you need to ask the question here then the answer is bound to be in the negative. That's because there are risks to investment, in general, and knowledge is the best way to ameliorate that risk. An informed investor is a good investor.

Now that you are probably vexed with me here's the answer you wanted to hear, or part of it.

When you invest in a financial vehicle you expect to get a return n your investment. In general terms, the greater the risk the greater the reward. In today's zero/negligible interest rate environment 17% or so is a huge return and investments that have that as a hurdle rate  offer even greater returns. But, of course, in a transparent market that difference between a tiny return and a return several times the normal risk free rate indicates a huge degree of risk.

At the moment the markets are not transparent, returns are low and so even junk investments are paying out low returns. The risk reward ratio is hugely compressed and misleading millions of investors. So, the rates you look at here are hugely attractive.

However, given that you will be investing in, probably, dollars into a ruble denominated vehicle you not only have to consider the investment rate of return but also the exchange rate. A devaluation of the ruble will directly impact your returns from your investment. That makes the whole investment return kinda moot.

BUT, if your research suggests that the investment is fundamentally sound (or at least that the risk is proportionate to the expected reward) AND you expect the ruble to rise against the dollar then you are likely to make out like a bandit!

For example, if the ruble appreciates in value to where it was 12 months ago against the dollar then you will see a return on investment of very roughly 100% even if the underlying investment remains unchanged.

So, you are really making two bets.

My personal feeling is that the ruble WILL appreciate a lot over the next 12 months and I know that the Russian economy is fundamentally very sound.

I think some people are going to make a lot of money but the most sensible will be using money they can lose without ruining their lives. Of course, the gambling man, right now, would be borrowing as much money as he could and buying as many rubles as that would give him because only a small appreciation in the ruble will repay all loan costs. ;)

So, when thinking about this topic look at the two opportunities separately: currency AND the investment.

I agree with what your saying but you did not answer the question, can anyone buy Russian ruble government bonds and if so what is the actual yield right now?


Online andrewfi

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You asked what I think, I told you what I think.

If you want more,  then here it is: If you can afford the risk just buy a pile of rubles and hold onto them. The upside as I noted above is much higher than the underlying investment, the risk is actually lower and if you don't know how to buy rubles then you really should not be considering doing either part of your outlined plan.

But the truth is that if you need to ask our advice here then you don't know enough to be able to make an informed decision anyway and so should not be gambling your money.

"For what else is the life of man but a kind of play in which men in various costumes perform until the director motions them offstage?" -Erasmus

Offline ECR844

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"FJ,"

If you had adequate resources to make such an investment, you'd have equivalent access to educated and experienced financial advisors who could answer your questions for you.

Offline Manny

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If you can afford the risk just buy a pile of rubles and hold onto them.

I did, sold some and bought again since.

As when the dollar was over $2/£1 a few years ago, it was a no brainer buy then.

You dont need to be an economist to call a no brainer buy, just read the news and know average rates. Opportunity will knock.

If American, few foreign investment banks will take your money due to your IRS rules. Unless you hide behind an IBC and don't use American banks.

Investing in a Rouble fund might be good news now as there is potential for a double whammy profit: The fund profit plus the Rouble gaining strength as it will. Risky though and not for the faint hearted.

Your articles are not far off the mark.

Offline civi68

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Emerging market bonds are the most riskiest asset class. When people invest in them, they are considered as part of the stock portion of their portfolio. Choosing one country's bonds is even more riskier and best avoided by individual investors. With the problems in Russia, these bonds are a big risk. There are better options out there such as an overall international stock index fund.
   I have investments in an international bond fund that has some emerging market debt. It did very well when the dollar dropped but overall, my international stock index funds and other funds did just as well or better. Too much return is based upon currency fluctuations with international bonds.
Mike

Online sparky114

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If you can afford the risk just buy a pile of rubles and hold onto them.

I did, sold some and bought again since.

As when the dollar was over $2/£1 a few years ago, it was a no brainer buy then.

You dont need to be an economist to call a no brainer buy, just read the news and know average rates. Opportunity will knock.

If American, few foreign investment banks will take your money due to your IRS rules. Unless you hide behind an IBC and don't use American banks.

Investing in a Rouble fund might be good news now as there is potential for a double whammy profit: The fund profit plus the Rouble gaining strength as it will. Risky though and not for the faint hearted.

Your articles are not far off the mark.

Agreed but buying into land and material items might be a good bet too.... :)
Today is only one day in a life of happiness

Mark