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S&P Cuts Russia To Junk, Ruble Plunges To 6-Week Lows - Full Text

Tyler Durden's picture




 

With the Ruble having plunged 3 handles today alone, it appears perhaps more than a few could see this coming...

  • RUSSIAN FEDERATION RATINGS CUT TO JUNK BY S&P
  • RUSSIAN FEDERATION CUT TO BB+ FROM BBB- BY S&P; OUTLOOK NEG

Putting it below investment grade for the first time in a decade. Of course, this happens just 6 days after the news first leaked that S&P would pay a $1.5 billion settlement to the US DoJ over downgrading America: one wonders just what else was in the small print?

The downgrade comes on a day when The Russia Agriculcural Bank failed to sell 10Y bonds into the market. Russian stocks (ADRs) and the Ruble continue to slide on this news.

 

 

 

Here are a few countries that are now rated higher than Russia...

 

Full text of S&P report:

Russia Foreign Currency Ratings Lowered To ‘BB+/B'; Outlook Negative

OVERVIEW

  • In our view, the Russian Federation’s monetary policy flexibility has weakened, as have its economic growth prospects.
  • We are therefore lowering our foreign currency sovereign credit ratings on Russia to ‘BB+/B’ from ‘BBB-/A-3' and our local currency sovereign credit ratings to ‘BBB-/A-3' from ‘BBB/A-2'.
  • At the same time, we removed these ratings from CreditWatch, where they were placed with negative implications on Dec. 23, 2014.
  • The outlook is negative, reflecting our view that Russia’s monetary policy flexibility could diminish further. We could lower the ratings if external and fiscal buffers deteriorate over the next 12 months faster than we currently expect.

As a “sovereign rating” (as defined in EU CRA Regulation 1060/2009 “EU CRA Regulation”), the ratings on the Russian Federation are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar (see “Calendar Of 2015 EMEA Sovereign, Regional, And Local Government Rating Publication Dates,” published Dec. 30, 2014, on RatingsDirect). Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation.

In this case, the reason for the deviation is a significant change in our perception of Russia’s monetary flexibility over the 2015-2018 forecast horizon and the effect we expect Russia’s weakening economy to have on its financial system. As a result, we have revised downward our expectations on key macroeconomic indicators.

The next rating publication on Russia is scheduled for April 17, 2015, according to our calendar.

RATING ACTION

On Jan. 26, 2015, Standard & Poor’s Ratings Services lowered its long- and short-term foreign currency sovereign credit ratings on the Russian Federation to ‘BB+/B’ from ‘BBB-/A-3'. We also lowered the long- and short-term local currency sovereign credit ratings to ‘BBB-/A-3' from ‘BBB/A-2'. In addition, we removed these ratings from CreditWatch, where they were placed with negative implications on Dec. 23, 2014. The outlook on the long-term ratings is negative.

At the same time, we revised the transfer and convertibility (T&C) assessment on Russia to ‘BB+’ from ‘BBB-‘. We affirmed the long-term national scale rating on Russia at ‘ruAAA’.

RATIONALE

The downgrade reflects our view that Russia’s monetary policy flexibility has become more limited and its economic growth prospects have weakened. We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy.

We believe that Russia’s financial system is weakening and therefore limiting the Central Bank of Russia’s (CBR’s) ability to transmit monetary policy. In our opinion, the CBR faces increasingly difficult monetary policy decisions while also trying to support sustainable GDP growth. These challenges result from the inflationary effects of exchange-rate depreciation and sanctions from the West as well as counter-sanctions imposed by Russia. We project Russia’s real GDP per capita growth to average less than economies with comparable levels of per-capita income over our 2015-2018 rating horizon.

In December 2014, the CBR increased its key interest rate by 750 basis points over five days to 17%. This was to stem the sharp depreciation of the ruble and curb inflation. The ruble briefly appreciated against the dollar but has since continued to depreciate, reaching about 66 rubles to the dollar (as of Jan. 26, 2015), compared to about 35 a year ago. The interest rate on interbank loans increased substantially, to well above the key rate–although it has since moderated. We see such movements in financial instrument rates as strong indicators of a weakening monetary transmission mechanism. We expect that credit to the economy will be curtailed, which will likely further undermine growth.

We also understand that during 2014 the Russian public had been converting rubles into foreign currency, thereby fueling depreciation. Given the pass-through of more expensive imports to domestic prices generally, we now expect that inflation will rise above 10% in 2015.

We anticipate that asset quality in the financial system will deteriorate given the weaker ruble; restricted access of key areas of the economy to international capital markets due to sanctions; and economic recession in 2015. Asset quality deterioration may not be immediately apparent in reported figures, however, due to temporary measures introduced by the CBR that allow Russian banks to apply more favorable exchange rates when valuing foreign-currency denominated assets and apply more flexible provisioning policies.

We project that the economy will expand by about 0.5% annually in 2015-2018, below the 2.4% of the previous four years. We see this muted projected growth partly as a legacy of a secular economic slowdown that had already begun before the recent developments in the Ukraine. It also reflects a lack of external financing due to the introduction of economic sanctions and the sharp decline in oil prices. Ruble depreciation will subdue GDP per capita in dollar terms, which we forecast at $8,600 in 2015. We also expect that declining domestic purchasing power as a result of exchange rate depreciation and rising inflation will likely hamper Russia’s growth prospects.

Balance-of-payment pressures have hit the economy; Russia is experiencing a severe terms-of-trade shock (see “Standard & Poor’s Revises Its Crude Oil And Natural Gas Price Assumptions,” published Jan. 9, 2015). We nevertheless expect that Russia’s current account will remain in surplus over 2015-2018 due to import compression (a consistent drop in import demand).

In our view, balance-of-payment pressures center on the financial account. Private-sector net capital outflows averaged $57 billion annually during 2009-2013; they increased to $152 billion in 2014. Stresses could mount for Russian corporations and banks that have foreign currency debt service requirements without a concomitant foreign currency revenue stream.

We estimate Russia’s gross external financing requirement for 2015 at close to 85% of current account receipts (CARs) plus usable reserves. We expect that some of this requirement will be accommodated by dollar sales by the CBR, potentially exerting additional downward pressure on CBR reserves. Our figure for CBR usable reserves deducts from the CBR’s reported foreign currency reserves:

  • Investments made by the CBR on behalf of the government;
  • The CBR’s foreign currency swaps;
  • Funds received under repos with nonresidents; and
  • Accounts of domestic banks that are counted as reserves.

By this definition, we forecast that reserve coverage of current account payments will decline to about three months by 2017, from seven months in 2014.

That said, Russia maintains a net external asset position. We expect a narrow net external asset position of about 9% of CARs over the 2015-2018 forecast horizon (liquid external assets held by the public and banking sector minus external debt).

On Nov. 10, 2014, the CBR modified its exchange rate regime. It moved from an operational band–with regular interventions on and outside the borders of the band against a dual currency basket–to a freer float, with foreign currency interventions permissible in case of financial stability threats. This change should afford the CBR greater ability to conserve reserves. Historically, there is usually a strong correlation between the external value of the ruble and oil prices; this has once again been the case over the past 12 months.

To mitigate oil-price vulnerability, in 2013 the government instituted a fiscal rule that caps government spending based on long-term historical oil prices, while targeting a central government deficit of less than 1% of GDP. This rule is designed to lead to asset accumulation when oil prices are high, and to allow the government to draw on assets when prices are low, thereby reducing the pro-cyclicality of fiscal policy. We expect fiscal policy to significantly loosen as the sharp decline in oil prices, compared to historical prices, allows for higher deficits.

Ruble depreciation supported the government’s fiscal position in 2014 because about half its revenues come from hydrocarbons and are priced in U.S. dollars. The U.S. dollar oil price decline of 55% since the start of 2014 was only 10% in ruble terms. As a result, we estimate that the central government posted a small deficit of 0.5% of GDP last year. However, we expect a deterioration in local and regional government balances, which bear the brunt of the government’s increased spending on public-sector wages. Overall, we estimate that the general government will post a deficit of 1.3% of GDP in 2014 and an average annual deficit of 2.5% over 2015-2018. Support to the banks through the placement of RUB1 trillion (about 1.4% of GDP) in government bonds was approved in 2014 and is accounted for in government expenditure, though not yet utilized.

We view the modest general government net debt position as a rating strength, as we do its low interest burden as a percentage of revenues. The central government’s Reserve Fund and National Wealth Fund, together total about 14% of GDP (although we believe about 1% of GDP of this is invested in non-liquid domestic assets). In our opinion, the central government will progressively use these two funds to increase its support to the economy and the financial system. We understand that RUB500 billion (about 0.7% of GDP) will be taken from the Reserve Fund and put on Ministry of Finance deposit accounts with the domestic banks to improve their liquidity. In our view, this will add to the non-liquid portion of the government’s reserve assets, although we understand that at some point in the future these funds could be used for deficit financing.

We view Russia’s institutional and governance effectiveness as a rating weakness. Political power is highly centralized with few checks and balances, in our opinion. We do not currently expect that the government will be able to effectively tackle the long-standing structural obstacles (perceived corruption, the weak rule of law, the state’s pervasive role in the economy, and the challenging business and investment climate) to stronger economic growth over our 2015-2018 forecast horizon.

OUTLOOK

The negative outlook reflects our view that Russia’s monetary policy flexibility could diminish further.

For example, the imposition of exchange controls, if implemented, could further hamper monetary flexibility. We could also lower the ratings if external and fiscal buffers deteriorated at a materially faster pace over the next 12 months than we currently expect.

We could revise the outlook to stable if Russia’s financial stability and economic growth prospects were to improve.

* * *

We hope S&P chose the accelerated tax depreciation option for its office located at 4/7 Vozdvizhenka Street in Moscow.

 

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Mon, 01/26/2015 - 14:09 | 5706983 ebworthen
ebworthen's picture

S&P just earned brownie points with the S.E.C. and D.O.J.!

Mon, 01/26/2015 - 14:17 | 5706999 Manthong
Mon, 01/26/2015 - 14:17 | 5707025 JungleCat
JungleCat's picture

S&P accomplished its mission.

Good doogie ! Goooooood doggie.

Mon, 01/26/2015 - 14:34 | 5707105 SWRichmond
SWRichmond's picture

Yup.. Part of the settlement.  All companies are part of the government now, and are thus implements of foreign policy.  Fascism.

Arbeit Macht Frei

Mon, 01/26/2015 - 14:37 | 5707117 Soul Glow
Soul Glow's picture

Tail wagging the dog.  The governments are all part of the corporations now.

Mon, 01/26/2015 - 14:48 | 5707172 BaBaBouy
BaBaBouy's picture

They Don't Seem To Giva A Flying Fuck, Pining For Nuke War ?????????????

Mon, 01/26/2015 - 15:02 | 5707217 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

So Russia becomes more resilient BECAUSE IT HAS TO IN ORDER TO SURVIVE, while 'Merica becomes more delusional about it's invincibility because it's been able to weasel out of real trouble... so far.

Mon, 01/26/2015 - 15:06 | 5707248 PrayingMantis
PrayingMantis's picture

 

 

... and becoming more resolute ... >>> "U.S. 'Cannot Stop' Russian Nuclear Missiles — Deputy Prime Minister" >>> http://www.themoscowtimes.com/business/article/us-cannot-stop-russian-nuclear-missiles--deputy-prime-minister/514884.html 

 

 

Mon, 01/26/2015 - 16:08 | 5707581 BorisTheBlade
BorisTheBlade's picture

S&P, Moody's et al sold their integrity with giving away AAA's for junkiest financial turds ever to hit balance sheets. Their only way is downward to the point of absolute irrelevance.

Mon, 01/26/2015 - 15:16 | 5707296 Max Steel
Max Steel's picture

S&P downgrades its own credibility as a rating agency again, below this-is-politicized-US-economic-warfare junk status

Mon, 01/26/2015 - 15:44 | 5707449 pendragon
pendragon's picture

brother can you spare a kleenex?

Mon, 01/26/2015 - 17:48 | 5707994 Max Steel
Max Steel's picture

sure !

Mon, 01/26/2015 - 15:22 | 5707328 general ambivalent
general ambivalent's picture

Tail wagging the dog returning to its own vomit.

Corporations control the government only to the extent that the hidden government desires other to do its bidding. Number 3 and Number 2 are clear. Who is Number 1?

Mon, 01/26/2015 - 14:28 | 5707082 me again
me again's picture

Napolean and Hitler wondered also. But we know the answer. Russia exports valuable basic commodities people need; they have almost no debt. The Western Capitalists are ganging up on them; your enemies; they will fail. russia will prevail.

Mon, 01/26/2015 - 14:30 | 5707097 taraxias
taraxias's picture

Ah, now I get it, sell Russia buy.......Greece. 

What a farce. 

Mon, 01/26/2015 - 15:11 | 5707276 TheFourthStooge-ing
TheFourthStooge-ing's picture

And don't forget to load up on mortgage backed securities. With a AAA rating, they're guaranteed winners. Nothing could possibly go wrong.

Mon, 01/26/2015 - 15:27 | 5707355 SWRichmond
SWRichmond's picture

even the equity tranche , bitches

Mon, 01/26/2015 - 15:01 | 5707223 KnuckleDragger-X
KnuckleDragger-X's picture

Russia should peg the Ruble against the Yuan just to screw with everybody.......

Mon, 01/26/2015 - 15:03 | 5707242 Sudden Debt
Sudden Debt's picture

Their internal cost structure is dropping while their income increases by this action and it actually makes them stronger.

America’s strong dollar is the biggest issue as America’s export products (agriculture) are being priced out of the market.

And the car market will also bleed as import cars are now 10% cheaper in the last month

 

Mon, 01/26/2015 - 15:48 | 5707453 angel_of_joy
angel_of_joy's picture

What exports are you talking about ? GMO corn & wheat, maybe ? Hormone fed beef & chicken ? Boeing planes ? That's about it...

Tue, 01/27/2015 - 00:49 | 5709420 Villageidiot777
Villageidiot777's picture

Yes, I would not be too proud of my country, if the export products are worse than those made in china.

Mon, 01/26/2015 - 14:26 | 5707064 New World Chaos
New World Chaos's picture

Just one more nail in the coffin of their credibility.  Russia has ~11% debt/GDP, and an economy based on selling essential resources.  Their debt is rated junk.  America has ~80% debt/GDP (not counting massive entitlement programs which Russia doesn't have), and an economy based mainly on services, plunder, and reselling Chinese crap.  They have an investment grade rating.

Mon, 01/26/2015 - 14:33 | 5707099 readyforit
readyforit's picture

CNBC-

The ratings agency said the Russian Federation's monetary policy flexibility had weakened, as have its economic growth prospects.

*Somebody blinked.

Mon, 01/26/2015 - 14:31 | 5707100 crazzziecanuck
crazzziecanuck's picture

Well, it's Putin's fault for not bribi... I mean ... paying these rating agencies as the banks still do?  After all, they put their stamp of approval on MBS trash for years.

Does anyone outside the existing bubble system even care what these people do anymore?

Mon, 01/26/2015 - 14:52 | 5707147 New World Chaos
New World Chaos's picture

US rated AA+, France AA, UK AAA, EU AA+, Japan AA-, Iceland BBB-

Nothing political there.  Or maybe a bond is a good investment if it is guaranteed to be paid back with the bailout/QE infinite toilet paper printing press?

Mon, 01/26/2015 - 15:30 | 5707320 Max Steel
Mon, 01/26/2015 - 15:44 | 5707446 general ambivalent
general ambivalent's picture

Didn't Greenspan or someone say, 'We'll always be Triple A.'

I took that as a warning.

Mon, 01/26/2015 - 14:54 | 5707199 Bossman1967
Bossman1967's picture

that's rite American makes the rules and if you break them we will lower your ratings. yes I know rediculous but the rest of the world allows it to be this way so can we help this stupidity of the world really?

sarc

Mon, 01/26/2015 - 15:18 | 5707310 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

America has ~80% debt/GDP (not counting massive entitlement programs which Russia doesn't have), and an economy based mainly on services, plunder, and reselling Chinese crap.  They have an investment grade rating.

For some reason, I had read that as investment grade baiting.

But hey, we all know that investing in America couldn't possibly be any sort of trap. America = AAA = The Good Guys®, right?

Mon, 01/26/2015 - 15:31 | 5707373 nosoeawe
nosoeawe's picture
F&U Cuts Big Eared - Long Legged Mack Daddy the Jihadist To Junk, Obola Phones Plunges To 6-Week Lows - Full Text
  • Obola's RATINGS CUT TO JUNK BY F&U
  • White Haired Garden Gnome Yellen CUT TO BB+ FROM BBB- BY F&U; OUTLOOK Ugly
Mon, 01/26/2015 - 14:21 | 5707046 Son of Captain Nemo
Son of Captain Nemo's picture

As Timmah looks on after breaking the smelliest wind possible with a shit eating monkey grin!

Keep grinnin Timmah!!!

All that money you got will be going to moar protection for you and your loved ones sooner than you think -bitch!

Mon, 01/26/2015 - 14:34 | 5707065 hedgeless_horseman
hedgeless_horseman's picture

 

 

 

The beatings and fines will continue until your rating of us improves.

Where did the US Treasury learn such an effective tactic?

A Saudi Arabian blogger convicted of insulting Islam received the
first 50 of a sentenced 10,000 public lashes of his sentence on Friday.

 

Raif Badawi, a 30-year-old father of three, is founder of the blog
Saudi Arabian Liberals, which reportedly openly criticized the country’s
clerics
. He was first detained in June 2012, and sentenced in May 2014
to 1,000 lashes, 10 years in prison, and a fine of 1 million Saudi
riya
l, or about $266,000.

 

http://www.dailydot.com/politics/saudi-arabia-blogger-raif-badawi-insult...

 

 

Mon, 01/26/2015 - 14:11 | 5706990 me again
me again's picture

Still holding my Long Ruble Contracts; because I'm rutin for Putin but not just with my mouth. They're just touching my zero-zero point today; (no gain no loss). tomorrow will be important for me. Cheers.

Mon, 01/26/2015 - 14:16 | 5707028 Soul Glow
Soul Glow's picture

Fiat is for suckers.

Mon, 01/26/2015 - 14:40 | 5707128 LawsofPhysics
LawsofPhysics's picture

sure, but "no RISK, no reward" right?

Mon, 01/26/2015 - 15:47 | 5707461 pendragon
pendragon's picture

ouch. stops are for buses eh

Mon, 01/26/2015 - 15:51 | 5707487 angel_of_joy
angel_of_joy's picture

You moron ! If you'd ever bother to trade anything on any US market, you would know by now that you practically cannot use stops anymore. The algos out there would hunt and blow them away, to your absolute frustration...

Mon, 01/26/2015 - 15:58 | 5707521 pendragon
pendragon's picture

those algos are really hungry for your 1 dollar s&p short?

Mon, 01/26/2015 - 16:14 | 5707605 cheech_wizard
cheech_wizard's picture

In volume, those algos will go after pennies. 

Mon, 01/26/2015 - 17:20 | 5707895 angel_of_joy
angel_of_joy's picture

Fractions of pennies, in FOREX... But don't forget that you're talking to a dumb cat, so don't expect much...

Mon, 01/26/2015 - 17:59 | 5708025 cheech_wizard
cheech_wizard's picture

I was going to mention that to him, but I can't stand the sight of hairballs.

Mon, 01/26/2015 - 18:04 | 5708034 pendragon
pendragon's picture

must be tough being one of the sheep.

Mon, 01/26/2015 - 18:38 | 5708177 TheFourthStooge-ing
TheFourthStooge-ing's picture

You know, those snacks you find in the litter box aren't chocolates.

Mon, 01/26/2015 - 14:12 | 5706993 Soul Glow
Soul Glow's picture

Nobody cares about fucking ratings.

Mon, 01/26/2015 - 14:32 | 5707104 me again
me again's picture

Well, you're certainly nobody, and you don't care about them, so i guess that proves your point. The function of ratings is to discourage money managers at all levels, and in many cases, make it impossible for them to invest in rubles; it is an attack by the Western Capitalist, your enemies, against Russia and the Russian People, who have done nothing to justify it.

Mon, 01/26/2015 - 14:45 | 5707146 Soul Glow
Soul Glow's picture

Ad hom attack?

Well fuck you!  And I didn't read your post after you had insulted me because your joust proves you inept at forming an argument and rational thoughts.

But as for what I know about ratings and jawboning and such, what do you want, a thesis into Neo-Keynsian theory?

The defense S&P gave for their downgrading was a weakening Rusiian economy and a lack of financial flexability.  When the world is mired in depression how can S&P single out Russia?  Italy is fooked and their rating is higher.  As for flexibility Russia has as its largest trade partner, its neighbor, China - the largest economy in the world (never mind their data when all data lies).

Oh and yeah fuck ratings, nobody fucking cares.

WELCOME TO FIGHT CLUB

Mon, 01/26/2015 - 15:01 | 5707226 new game
new game's picture

as dad would say,"i give a shit" ha,...

Mon, 01/26/2015 - 15:53 | 5707499 popeye
popeye's picture

Yeah. If we read through the "rationale", S&P does not mention a risk of a sovereign default, so why the downgrade? Also no mention of Russias growing gold hoard (surprise surprise). This is so obviously a political move.

S&P has lost all credibility, and calls into question the integrity of all US corporates.

One can see why some folk are very keen to extract themselves from US-dominated structures (SWIFT, USD, IMF, World Bank, etc), when they are used for extortion.

Italy? What about Japan, AA-! Hahaha.

Mon, 01/26/2015 - 17:02 | 5707832 STP
STP's picture

Doesn't EVERYBODY love a good fight?  That's what makes this place hum, buck and spin!

Mon, 01/26/2015 - 15:46 | 5707427 FJF
FJF's picture

One exception (I'm sure that there are more) is the foreign exchange markets. And if it does recover, it will probably be because the Russian Central Bank had to come to the rescue by purchasing more rubles with their hard currency reserves. Hopefully, by the end of the year they will have no more reserves. That would be nice.

And one more thing....when you say "nobody cares", that's obviously not true. You obviously care, because, otherwise, you would just ignore the ratings cut.

Mon, 01/26/2015 - 14:17 | 5707024 Kaiser Sousa
Kaiser Sousa's picture

exactly!

guess they didnt get the fucking memo...

assholes.

Mon, 01/26/2015 - 15:08 | 5707253 noben
noben's picture

It's a foot race to the Exit, with the expected intended and unintended consequences.

The BRIICS+ need to decouple from the King Dollar System (USD, BIS, Bond market and rating agencies) by... "yesterday".

Their parallel system needs to be up and running... very, VERY soon.

The 5th Column (Agents and Helpers/Sayanim) in the BRIICS will seek to prevent or delay that, to allow TPTB maximum tactical advantage.

Mon, 01/26/2015 - 14:12 | 5706997 Chuck Knoblauch
Chuck Knoblauch's picture

Russia cut S&P to junk status last week.

Mon, 01/26/2015 - 15:25 | 5707340 Max Steel
Max Steel's picture
Russian Central Bank Bans Western Ratings Agencies

http://www.zerohedge.com/news/2015-01-19/russian-central-bank-bans-weste...

Mon, 01/26/2015 - 14:13 | 5707000 Son of Captain Nemo
Son of Captain Nemo's picture

So let them downgrade it to "junk"!...

Russia and China already have a SWIFT exit!

Mon, 01/26/2015 - 15:09 | 5707268 noben
noben's picture

There's a RIFT in that SWIFT.

Mon, 01/26/2015 - 14:14 | 5707003 me again
me again's picture

"Junk" that pays %17.5 on a bank deposit. I reccommend you open a Ruble account at a major Russian Bank; ASAP and plan to hold it for a year; so you can get a one year CD. Check with B of A foreign operations in Florida for details; or your local yokels. The Ruble will be higher at the end of year; so you will make more than 17.5%; much more. Cheers.

Mon, 01/26/2015 - 14:20 | 5707027 Chuck Knoblauch
Chuck Knoblauch's picture

Excellent point on the fixed income side. More sustainable than the Fed's US bubble economy.

Mon, 01/26/2015 - 14:30 | 5707088 me again
me again's picture

I have an unfair advantage; I actually know something about this shit.

Mon, 01/26/2015 - 15:08 | 5707233 New World Chaos
New World Chaos's picture

You also know they will declare gold backing in the not too distant future.  Might be a backdoor way to score some phyz?  Yes, I know only phyz is phyz, and the ruble will probably end up only partially backed.  Just thinking of a flexile route to phyz.  Beat the manipulators at their own game.  

Mon, 01/26/2015 - 15:18 | 5707309 RabbitChow
RabbitChow's picture

The ruble will regain a lot of ground.  The S&P rates the bank as if there are too many rubles around.  The solution is simply for Russia to sell their UST holdings and buy rubles.  That allows russia to reclaim rubles and get dollars out in the market, which then devalues the US dollar. 

gold backing is in the works too.  I suspect natural gas sales will be paid for in Rubles, Yuan, or other BRICS currencies, and of course, in gold.

Mon, 01/26/2015 - 15:35 | 5707397 FJF
FJF's picture

Is that right? You actually know something about shit? I can tell.

Mon, 01/26/2015 - 15:36 | 5707398 FJF
FJF's picture

Is that right? You actually know something about shit? I can tell.

Mon, 01/26/2015 - 15:49 | 5707481 pendragon
pendragon's picture

great until emergency exchange controls are introduced

Mon, 01/26/2015 - 15:01 | 5707227 Son of Captain Nemo
Son of Captain Nemo's picture

Check with B of A foreign operations in Florida for details; or your local yokels.

Quick question ma...

What are the risks that B of A (higher standards) will bend you over a chair with your Ruble investment when the "civil forfeiture" ain't enough?!!!


Mon, 01/26/2015 - 15:35 | 5707390 FJF
FJF's picture

Thank you for telling us what you are dreaming about. Truth is that by year end the rub[b]le will drop by 50% and you will suffer a rather large loss.

Mon, 01/26/2015 - 15:40 | 5707428 Son of Captain Nemo
Son of Captain Nemo's picture

"Truth is that by year end the rub[b]le will drop by 50% and you will suffer a rather large loss."...

Is that you MillionDollarBonus?...


Mon, 01/26/2015 - 16:33 | 5707693 malek
malek's picture

I think you're too early.

Mon, 01/26/2015 - 14:13 | 5707005 hotrod
hotrod's picture

Since when does S&P, GAAP, SubPrime, national debt,  traditional marriage matter anymore.

Mon, 01/26/2015 - 14:14 | 5707012 papaswamp
papaswamp's picture

s&P cuts deal with US govt, gets fined, now cuts Ruska to junk. Someone is trying very hard to start a war.

Mon, 01/26/2015 - 14:20 | 5707045 Soul Glow
Soul Glow's picture

There has been a financial war in earnest since 2008.

Mon, 01/26/2015 - 14:49 | 5707167 disabledvet
disabledvet's picture

So far it hasn't stopped Russia from "backing down."

 

We'll see.

Mon, 01/26/2015 - 14:23 | 5707068 Consuelo
Consuelo's picture

The situation is approaching a fish-or-cut-bait moment for the U.S.    The Wolfowitz Doctrine is running out of time and those turning the screws know that Russia can outlast their economic maneoeverings.   Which leaves little options left.   They are doing the mangy mut biting at your heels for the moment, hoping to 'soften' Putin up.   If that doesn't work, then perhaps another (major) False-flag operation could be employed.   After that?   Let's just say life as we know it would change drastically in very rapid order, regardless if it came to nuclear conflict. 

Mon, 01/26/2015 - 15:00 | 5707220 papaswamp
papaswamp's picture

I could see a Russian sub sneak into the GoM and torpedo a few deep water rigs and blame ISIS sympathizers. That would be enough to blow oil back over $100 in short order. Europeans will sit out any action until after winter is over at the very least.

Mon, 01/26/2015 - 14:16 | 5707014 Fun Facts
Fun Facts's picture

syndicate rating agencies do as they're told by the syndicate

Their function of course is to create a faux impression of trust, so they can abuse that trust to generate profits for the syndicate banksters and rape the donkeys, or in this case an entire country.

Any doubters need look no further back than 2008.

Mon, 01/26/2015 - 14:22 | 5707054 Chuck Knoblauch
Chuck Knoblauch's picture

You're naked as a centerfold.

Mon, 01/26/2015 - 14:15 | 5707015 Kaiser Sousa
Kaiser Sousa's picture

"pot, meet kettle..."

fuck S&PISS...

Mon, 01/26/2015 - 14:15 | 5707016 Consuelo
Consuelo's picture

Gawd how I love this...   Every 'smack' at Russia's face just serves to turn the skrews tighter and tighter, all the while those turning the skrews inflate themselves with more arrogance and hubris.   Pity actually, because they have no idea of what awaits.

Mon, 01/26/2015 - 14:18 | 5707040 Soul Glow
Soul Glow's picture

Tsipras's first meeting with a foreign ambassador since being elected Greek PM was with Russia's Andrey Maslov

https://twitter.com/NickMalkoutzis/status/559747858916990976

Mon, 01/26/2015 - 14:30 | 5707094 hotrod
hotrod's picture

GOOD

Mon, 01/26/2015 - 14:34 | 5707111 Vylahkinnen
Vylahkinnen's picture

Russia is already supporting far-right and far-left groups all around Europe. In France(Front National) and in Germany (AFD) for example. Although I have a different take on Russia than the usual ZH reader (who does not live close to the Russian border) it's just a way of gaining influence in Europe - not unlike the US does. Both of course don't actually give a fuck about Europe.

Mon, 01/26/2015 - 14:29 | 5707066 hotrod
hotrod's picture

Wadda ya think lifting the embargo with Cuba is about, and Os timed visit to India to induct the new ERA of TRUST,i  Hammerin Putin every which way possible. Most Relentless attack since they started after the cold war ended encroaching on Russia through NATO. It is incredible to witness the blatent attacks trying to set up Russia for the fall/war.

Mon, 01/26/2015 - 14:58 | 5707216 Bankster Kibble
Bankster Kibble's picture

Obama may be thinking of an end-run around Putin by doing deals in India.  Trouble is, Putin was already there and Obama is still playing a game of catch-up.  Meanwhile Modi is snickering into his sleeve - sure, he'll take American money and then make Russian deals.

Mon, 01/26/2015 - 15:03 | 5707231 papaswamp
papaswamp's picture

I heard nogotiations with Cuba suddenly came to halt.

Mon, 01/26/2015 - 15:01 | 5707232 papaswamp
papaswamp's picture

I heard nogotiations with Cuba suddenly came to halt.

Mon, 01/26/2015 - 15:03 | 5707234 papaswamp
papaswamp's picture

I heard nogotiations with Cuba suddenly came to halt.

Mon, 01/26/2015 - 14:23 | 5707070 fascismlover
fascismlover's picture

Subs lining up on the coasts is probably what awaits...all while using a blizzard for some cover.

Mon, 01/26/2015 - 14:18 | 5707035 Spungo
Spungo's picture

I agree with S&P on this one. Russia is basically a large oil company, and right now oil companies are getting destroyed. People can go ahead and lend money to Russia, but understand that it does carry certain risks at this time. Those risks will go down when the price of oil starts rising again.

Mon, 01/26/2015 - 14:25 | 5707077 Mike Honcho
Mike Honcho's picture

Google: Russian sanctions; it might provide a more well rounded opinion.

Mon, 01/26/2015 - 14:30 | 5707093 Chuck Knoblauch
Chuck Knoblauch's picture

I'd rather be an oil company than a narcotics distributor.

Mon, 01/26/2015 - 15:11 | 5707277 Zwelgje
Zwelgje's picture

or printshop.

Mon, 01/26/2015 - 16:27 | 5707672 cheech_wizard
cheech_wizard's picture

Speaking of printshops, those printers need ink. Specifically ink from SICPA.

Putin, make SICPA an offer they can't refuse (gold bullion would work for obvious reasons), and then cut off the ink supply to the US.

<cue asymmetrical warfare evil laughter>

 

Mon, 01/26/2015 - 15:22 | 5707334 noben
noben's picture

I think that Russia & Friends realize that Western companies are not lending Russia any "money", but fiat Debt instruments -- conjured out of thin air and from the ether of electronic pixels.

Said Currency and Debt that is loaned onto existence is based on the USD, still playing the Reserve Currency game.

The days of that King Ponzi are numbered, as the world is waking up and taking irrevocable countermeasures.

Hedge accordingly.

Mon, 01/26/2015 - 14:17 | 5707036 Minuteofangle
Minuteofangle's picture

Why downgrade? Russia can now successfully file a lawsuit potentially worth 1.5 billion against S&P under the Geithner bullying rule..their current account should look very good!

Mon, 01/26/2015 - 14:19 | 5707043 Jethro
Jethro's picture

Another salvo in the currency war. This is likely a reaction to prop up the Euro/Dollar in the face of the recent Greek overtures to Russia.

The S&P was captured after their last attempt to downgrade the FRN.

Mon, 01/26/2015 - 14:17 | 5707037 Consuelo
Consuelo's picture

"Outta my face please..."

 

 

Mon, 01/26/2015 - 14:20 | 5707041 No.Fifth.Turning
No.Fifth.Turning's picture

Which one doesn't belong?

a Astrologer
b Palm Reader
c Economist
d Fortune Teller
e lemon

Mon, 01/26/2015 - 14:23 | 5707052 Skateboarder
Skateboarder's picture

Hey, that's a trick question!

Mon, 01/26/2015 - 14:19 | 5707042 buzzsaw99
buzzsaw99's picture

If you want this year's homecoming parade in my town, you have to pay for it... [/Mayor Carmine De Pasto]

Mon, 01/26/2015 - 14:19 | 5707044 GoldenDonuts
GoldenDonuts's picture

This weekend the Greeks lose their mind and decide to default on Europe and the European central bank decides to print 1.2 trillion euros.   How exactly do gold and silver go down?

Mon, 01/26/2015 - 14:23 | 5707055 me or you
me or you's picture

S&P? This is a joke, right?

Mon, 01/26/2015 - 14:23 | 5707071 buzzsaw99
buzzsaw99's picture

When I was insolent I was placed in a burlap sack and beaten with reeds... [/Dr. Evil]

Mon, 01/26/2015 - 14:26 | 5707072 buzzsaw99
buzzsaw99's picture

In the spring we'd make meat helmets... [/Dr. Evil]

Mon, 01/26/2015 - 14:23 | 5707056 SheepDog-One
SheepDog-One's picture

Russia 'junk' pays their depositors 18%....while western AAA+ pays depositors 0%.

Mon, 01/26/2015 - 14:37 | 5707115 agent default
agent default's picture

Russia will not default on you because of insolvency, they will default of you because they are tired of the West meddling in their affairs.

Mon, 01/26/2015 - 15:28 | 5707356 FJF
FJF's picture

Russia should also leave other countries alone!!!!!!

Mon, 01/26/2015 - 17:11 | 5707855 STP
STP's picture

Yeah, they should follow Amerika's example!

Mon, 01/26/2015 - 14:45 | 5707156 RisingSun
RisingSun's picture

17% is nothing compared to 40%+ ruble decline and inflation of well over 10%.

Mon, 01/26/2015 - 15:50 | 5707489 pendragon
pendragon's picture

inconvenient truths - get with the program

Mon, 01/26/2015 - 15:50 | 5707490 pendragon
pendragon's picture

inconvenient truths - get with the program

Mon, 01/26/2015 - 15:28 | 5707358 noben
noben's picture

Don't forget the 20% decline of other "friendly" curencies.

Have you looked at the EUR or the CAD lately?

And how is Ukraine's robust currency doing?

Perspective and Balance, peeps.

Mon, 01/26/2015 - 14:22 | 5707057 agstacks
agstacks's picture

*S&P FINE OF 1.5 BILLION REDUCED TO 250 MILLION AS PART OF THE DOWNGRADE AGREEMENT

Mon, 01/26/2015 - 14:26 | 5707076 czarangelus
czarangelus's picture

With Russia selling UST to buy rubles, at this point, this currency harassment is nothing but a pure giveaway to Putin.

It's buy low, sell high, stupids.

Mon, 01/26/2015 - 16:08 | 5707578 Haager
Haager's picture

not that long ago Russia wouldn't had a chance if the US decided to pull the plug on the currency due to the (western implemented) restrictions of Russia's Central Bank. This weakness should be over thanks to Iran and China, maybe even Brazil and Turkey do help circumvent these problems.

This S&P-move sounds like a short-circuited desperate attempt to supress the ineviteble.

Mon, 01/26/2015 - 14:27 | 5707079 Gringo Viejo
Gringo Viejo's picture

S&P. The Street's piss boy.

Mon, 01/26/2015 - 14:28 | 5707080 Lin S
Lin S's picture

Could one (or more) of you kind souls engage in a little futue forecasting for me, please?  Because what I see is...

A. False flag attacks by Ukraine on Russian-speaking civilians, for which Kiev blames the DPR.

B. Western arming/training/funding of Kiev war machine and demanding MOAR WAR.

C. Western sanctions on Russia

D. Western attack on Ruble.

So my question is: how do you see this ending?  And also, what is your timeline for the end you foresee?

I keep thinking either A) the West gets spanked somehow (but I don't know how), or B) Russia becomes subjugated by the West.

Yet with nuclear weapons in the cards, I don't know how A or B comes to pass.

Prognostications, anyone?  I am at my wit's end here...

 

Mon, 01/26/2015 - 14:29 | 5707089 czarangelus
czarangelus's picture

Putin is minimally engaging an enemy in the process of destroying itself. I really don't see it coming to genuine war - after all, they were ultimately too chickenshit to attack Iran, and while Iran might not be weak, they're peanuts compared to Russia. OTOH.... bankers do have a tendency to burn down everything on the way out the back door with the loot. Hopefully the American people will be too smart to allow that this time.

Haha just kidding. Most people I talk to believe that Putin is on his way to Paris because Reasons.

Mon, 01/26/2015 - 14:30 | 5707095 Consuelo
Consuelo's picture

The phrase I like to use is: Incremental Escalation.

 

 

Mon, 01/26/2015 - 14:38 | 5707129 xiphius
xiphius's picture

Russia takes out Ghawar.

Mon, 01/26/2015 - 14:44 | 5707142 Chuck Knoblauch
Chuck Knoblauch's picture

Historically, the feminine will be conquered by the masculine. The west is feminine and the east is masculine. The west will be dominated by the east. Just a matter of time.

Mon, 01/26/2015 - 14:47 | 5707154 czarangelus
czarangelus's picture

Please read this and try again;

http://acc6.its.brooklyn.cuny.edu/~phalsall/texts/taote-v3.html

In a storm, firm branches become brittle and break, while soft branches bend and endure.

Mon, 01/26/2015 - 14:52 | 5707168 Chuck Knoblauch
Chuck Knoblauch's picture

What is the ratio of men to women in China now, 3:1? Does anyone really know? You cannot fight history or nature. Storms are masculine by nature.

Mon, 01/26/2015 - 15:24 | 5707341 SheepDog-One
SheepDog-One's picture

You've obviously never been married before.

Mon, 01/26/2015 - 14:35 | 5707108 Son of Captain Nemo
Son of Captain Nemo's picture

"We believe that Russia’s financial system is weakening (in our delusional mind of course) and therefore limiting the Central Bank of Russia’s (CBR’s) ability to transmit monetary policy", which  is our only lasting short lived vain attempt at control of their economy before we attempt a World War with them as our own economy continues to implode due to 6 prolonged and wasted years of worthless monetization of our own debt!...

Fixed it!


Mon, 01/26/2015 - 14:55 | 5707194 Chuck Knoblauch
Chuck Knoblauch's picture

We are told to believe ...

Mon, 01/26/2015 - 15:42 | 5707437 Berspankme
Berspankme's picture

should read "we believe Russia is not playing well with the NWO and we must downgrade"

Mon, 01/26/2015 - 14:34 | 5707112 Omen IV
Omen IV's picture

what is becoming obvious about these type of politically based actions - is the credibility of the West in all functional areas is suspect

Poland Minister says concentration camps in Poland were liberated by Fascist Banderites and not Russia

Lysenko - Bagdad Bob of Kiev - easily to verify reports that are major fabrication

Phony Reports by State Department - Psak

and now S & P with a Russia country rating  that has less than $100 Billion in public debt and less than 35% Debt / GDP is downgraded to junk

not Italy not Spain not France - the entire system is a joke

 

Mon, 01/26/2015 - 14:55 | 5707202 Chuck Knoblauch
Chuck Knoblauch's picture

West is behaving like a jealous woman.

Mon, 01/26/2015 - 15:00 | 5707225 Zwelgje
Zwelgje's picture

Who's getting old.

Mon, 01/26/2015 - 14:38 | 5707122 MauritiusGold
MauritiusGold's picture

Who cares what S&P thinks?!

Mon, 01/26/2015 - 15:25 | 5707347 FJF
FJF's picture

Obviouslly the foreign exchange markets do. And when one more credit agency does a downgrade, things will get even worse for Russia.  Good work S&P (you are slowly restoring your credibility), as for Fitch and Moodys.....what's taking so long?????

Mon, 01/26/2015 - 15:42 | 5707433 Berspankme
Berspankme's picture

Yeah, you only get AAA rating when you have 18T in debt, 90 million working age unemployed and a fucking child in the white house. Great credibility

Mon, 01/26/2015 - 14:39 | 5707126 me or you
me or you's picture

It looks like soon Ukrainia soldiers plus their NATO supporters will get a big TOPOL-M over their heads.

Putin calls Ukrainian army ‘NATO legion’ with geopolitical aim to contain Russia
Mon, 01/26/2015 - 14:44 | 5707140 Son of Captain Nemo
Son of Captain Nemo's picture

It looks like soon Ukrainia soldiers plus their NATO supporters will get a big TOPOL-M over their heads. As the American sheep graze on!...

moy

Can this shit get anymore terrifying?!!!

Mon, 01/26/2015 - 14:40 | 5707138 bshirley1968
bshirley1968's picture

Let me get this straight, as I understand it, Russia can pay off its national debt and have billions left over.  They have enough gold to pay off their debt twice, full support and backing of China........and they get downgraded to "junk"?

A perfect picture of why they and the rest of us are pissed off.  Tired of a counterfitting bunch of clepto-psychopaths telling us how many of their worthless pieces of paper we can have, when we can have them, and what they are worth once we have them.  Russia is rated junk in dollars.  Looks like in rubles, they are just fine.  Time for Putiin to do what we all wish we could, tell the US to take their broken, worthless dollar system and stick it up their ass.

I know it would cause a war, but I am ready for Putin to tell Europe that if they want Russian oil and gas, they have to pay in Rubles.  Wonder what that would do to the value of the ruble and what it would do to the price of oil in dollars?  I also wonder which way the Saudis would fall?

On a personal note, this is like when somebody calls me about my "credit rating" or tells me it will "hurt your credit rating".  You know where I tell them to put their ratings?  Best thing "they" could ever do for me is quit loaning me money. 

Mon, 01/26/2015 - 14:53 | 5707187 Bankster Kibble
Bankster Kibble's picture

Does this mean Russia has nothing to lose and might as well default?  What the heck . . . why not.

Mon, 01/26/2015 - 14:58 | 5707207 RisingSun
RisingSun's picture

It is not about Russian government debt as much as  it is about their largest corporations debt, such as gazprom etc. Russian government needs $90 oil to keep them going...

Mon, 01/26/2015 - 15:31 | 5707372 cowdiddly
cowdiddly's picture

I don't guess the word Gazprom caused a synapse to fire off.

Mon, 01/26/2015 - 15:42 | 5707444 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

I don't have enough up arrows for that little tirade.  Nice work.

Mon, 01/26/2015 - 14:43 | 5707152 Babaloo
Babaloo's picture

De-dollarization continues!  Or not...

Mon, 01/26/2015 - 14:45 | 5707153 corbeau
corbeau's picture

Ah, ah, USZZZ---...

Mon, 01/26/2015 - 14:46 | 5707155 SmittyinLA
SmittyinLA's picture

S&P matters only to those that it legally matters to, without the "state mandate" there is no S&P. 

 

From Wiki on Freddie Mac on how ratings work 

Moody's gave Freddie Mac's preferred stock an investment grade rating of A1 until August 22, 2008, when Warren Buffett said publicly that both Freddie Mac and Fannie Mae had tried to attract him and others. Moody's changed the credit rating on that day to Baa3, the lowest investment grade credit rating. Freddie's senior debt credit rating remains Aaa/AAA from each of the major ratings agencies Moody's, S&P, and Fitch.[7]

Mon, 01/26/2015 - 14:46 | 5707164 rejected
rejected's picture

Like your Credit Score. The more you borrow the higher your credit rating regardless of how you manage to make the minimum payments,,, hook or crook

OTOH if you use Cash only your Credit Score sucks and you may not be able to purchase on credit even if you wanted to.

Under a Debt type monetary system,,, debt reigns supreme..... until default.

Those with the most debt have the highest ratings.... until default.

Add the luxury of owning the worlds currency (for now) and able to control the domestic corporate ratings agencies plus the illegal sanctions on Russia,,, this is no surprise.

Tue, 01/27/2015 - 07:41 | 5709834 Bopper09
Bopper09's picture

I was about to write something extremely similiar.  Oh, and for someone new to get credit built up.....  you'll never guess....  take out a $2000 loan (IF you keep a minimum of $2000 in your savings account), and pay interest payments on that 'loan' each month until it is payed off over at least 6 months.  Serious, this is my wife's option to build credit.  Pay them interest for a loan that you've paid for before taking the loan.

Mon, 01/26/2015 - 14:52 | 5707181 RisingSun
RisingSun's picture

Oh I guess Putlers conspiracy nutters on here really do enjoy losing money...shorting US market, betting on USD crash for years, waiting for that gold 5000 level,  investing in RSX and the great currency of Russian Rubles...Would continue the list, have to go Mr. Jones on line two gotta discuss fema camps and bilderberg with him now.

Mon, 01/26/2015 - 15:05 | 5707239 papaswamp
papaswamp's picture

Gold in Rbles has been an epically awesome play...and yen.

Mon, 01/26/2015 - 15:09 | 5707266 RisingSun
RisingSun's picture

Yes papa...because the average Vladimir and Irina in Russia gets paid in gold right?

Mon, 01/26/2015 - 15:28 | 5707361 TheFourthStooge-ing
TheFourthStooge-ing's picture

Yes RisingSüdi, because the average Daunis and Kuce in Latvia gets paid in potato, right?

http://i.imgur.com/Lct5rhI.jpg

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