'Unpatriotic' Goldman Dares To Suggest "Buy Russian Bonds"

Tyler Durden's picture


On the scale of 'unpatriotic' things to suggest, there is only one thing worse than a tax inversion for an American to do... suggest something positive about Russia, Russian markets, or Russia's economy. So it perhaps ultimately ironic that none other than Goldman "doing God's work" Sachs suggests Russian bonds are both cyclically and strucuturally under-priced.


Via Goldman Sachs,

Russia bonds are both cyclically and structurally underpriced

The main outlier both cyclically and in terms of what the market is pricing more in the long run is Russia. Cyclically, we expect a deep contraction in domestic demand that will allow the CBR to cut rates sharply. Longer term, we think there are good reasons to believe that the neutral rates should be priced lower rather than higher.

Due the tighter financial conditions and the destabilisation of inflation expectations in December in Russia, the slowdown of the economy is likely to be quite severe and sharper than we had originally thought in the late autumn. While wage growth had already fallen to close to zero in nominal, sequential terms by Q2 and seasonally adjusted wages in January were only 2.5% above the level 6 months ago, inflation over the same period in seasonally adjusted terms has been 12.3%, i.e., seasonally adjusted real wages have fallen by close to 10% in 6 months. While the savings rate initially absorbed a significant part of this slowdown with retail sales in Q4 up by 2.4% in real terms compared to July, this was largely due to purchases of discretionary goods being brought forward in anticipation of sharp price hikes, as the exchange rate was passed through. With those price hikes now behind us, this offset will turn the other way and, in our view, household consumption will fall very sharply and the contraction in retail sales in January is only the first indication of this.

We expect the consumer to slow down sharply in the coming month sequentially by 8% in Q1-15 and 3% in Q2-15 before stabilising in Q3 largely due to the overshoot in inflation. Similarly, investment in Q1 is likely to be affected by the much tighter financial conditions and, hence, fall sharply as well, but with financial conditions already easing we think the fall in investment will be quite short lived, in particular given that export markets are holding up. In this respect, it is interesting that the PMI manufacturing survey already stabilised in February. Thus, what we expect is a very sharp contraction in domestic demand that will leave the country with a sizeable output gap that will keep inflation very low going forward. Clearly, this is a very different cycle from the rest of CEEMEA.

We think inflation in Russia will fall to new all-time lows in 2016 of close to 4% and, hence, we do not only expect an 800bps cutting cycle in the next 8 quarters but we also think that the neutral rate in Russia has actually declined rather than risen.

Decomposing the bond curve into expectations of policy rates and risk premia as we do in the model is admittedly difficult. The rate cutting cycle is heavily dependent on the degree to which the Ruble is supported by oil prices. While the CBR has, in our view, no interest in a stronger Ruble, it also does not want to see it destabilised any further. Thus, the timing (but not so much the extent) of the rate cutting cycle is going to be quite dependent on oil prices not significantly selling off once more. In addition, geopolitical risk clearly remains elevated in Russia’s case. However, we interpret the recent rally in hard currency credit as the market pricing less risk of escalation in the coming months, following the second Minsk agreement, and we think that this is not yet fully reflected in the OFZ market.

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Sat, 03/14/2015 - 18:49 | 5889734 knukles
knukles's picture

Wait a minute.
Weren't purchases of all Russian financial instruments prohibited under recent embargoes?
Oh I get it!  Goldman is selling out their Rooskie positions?

Sat, 03/14/2015 - 18:51 | 5889747 fed_depression
fed_depression's picture

 Answer is no. I've been buying USD/RUB shorts for 17% interest which is now 15% and Russian bonds. You can get them. You can also buy Russian stocks. Rating of Russian debt as junk when US is double A is complete bullshit. Russia has hard assets and low debt to GDP. Yes Russia sells a lot of oil which is now down 50% and maybe it goes down 80%. But if oil becomes worthless everything is worthless so why worry?

Sat, 03/14/2015 - 18:59 | 5889765 walküre
walküre's picture

GS is starting the American invasion of RUS

Sat, 03/14/2015 - 19:08 | 5889786 cossack55
cossack55's picture

At first take I thought it said "buy Russian bombs".  I guess that is one way to de-fang a bear.

Sat, 03/14/2015 - 19:36 | 5889842 kaiserhoff
kaiserhoff's picture

Buy Russian blonds?

Sat, 03/14/2015 - 20:05 | 5889921 Muh Raf
Muh Raf's picture

Boris must have got a job at Goldmans which would explain his recent silence (was actually expecting him to turn up in Kiev as anonymous Jihaadi Alotov) because this 'analysis is clearly Alotovcrap aimed at the usual muppet clients.

Sun, 03/15/2015 - 06:19 | 5890638 GetZeeGold
GetZeeGold's picture



Goldman Dares To Suggest "Buy Russian Bonds"


Heh heh.....do I look like a Muppet bitch?

Sat, 03/14/2015 - 19:03 | 5889774 knukles
knukles's picture

I stand corrected. Thank you.
(So Goldie must be bailing, no?)

Sat, 03/14/2015 - 19:04 | 5889781 kaiserhoff
kaiserhoff's picture

With both hands and both feet.

Sat, 03/14/2015 - 19:07 | 5889785 knukles
knukles's picture

OK  The Swami has a quesiton. 
If I deal in Greek debt, do I have to shave my back?
Kinda related but off color (crazy train stuff)


Sat, 03/14/2015 - 19:12 | 5889797 kaiserhoff
kaiserhoff's picture

No, but if you marry a Greek, you have to shave her mustache.

Spooky article.  Almost as spooky as Joan Rivers.

Sat, 03/14/2015 - 19:22 | 5889815 knukles
knukles's picture

So last night somebody has a weird link somewhere here on the Hedge which I mindlessly follow and it's a whole Louisville Slugger on Obama's lack of background, sealed files, etc.  It pointed out that he's no noted women relationships prior to Mooch, etc.  And that what with Frank Marshall Davis and the other commie buds of his, he needed a woman to make him appear legit for the ascension.  A woman for an operation such as that, is called a "beard".  
So y'all want strange?


h/t to whom ever referenced this yesterday

Sat, 03/14/2015 - 19:35 | 5889840 kaiserhoff
kaiserhoff's picture

I had seen this.  The porn pictures of the Obama momma are amazing and real.  They appeared in a stag magazine years before he was prominent.

Of course, the lame stream media can't find any of this, anymore than they could find their arses with both hands.

Sat, 03/14/2015 - 19:56 | 5889898 knukles
knukles's picture

Why, you'd think that the MSM were complicit in the cover-ups, if ya' did a little bit o' research, wouldn't you?
Naaaaaah.  That couldn't be now, could it?

Could it?


Oh man, if it is we're in deep doodo.

Oh, sumptin's smellin' up a storm in here, momma.

Sun, 03/15/2015 - 09:42 | 5890812 spanish inquisition
spanish inquisition's picture

It's not like the MSM doesn't know whats going on..... 



Sat, 03/14/2015 - 19:00 | 5889767 kaiserhoff
kaiserhoff's picture

Hasn't Russia defaulted about as often as Brazil?

Oh, but this time is different.  Silly Kaiser;)

Sat, 03/14/2015 - 19:02 | 5889772 Cognitive Dissonance
Cognitive Dissonance's picture

While not as often, the USA has technically defaulted a few times as well. We just don't call it that.

Sat, 03/14/2015 - 19:04 | 5889778 kaiserhoff
kaiserhoff's picture

True dat.  I think the only thing we can be sure of is that Goldie wants out,

  preferably yesterday.

Sat, 03/14/2015 - 19:04 | 5889780 knukles
knukles's picture

What?  US defaulted?  How exceptional can that be?
Must redact history! Quick, to the electronic books!

Sat, 03/14/2015 - 19:08 | 5889787 kaiserhoff
kaiserhoff's picture

Almost serious question.  If I buy some bonds I have an insurable interest, soooooooo

  As a hedge, can I buy an insurance policy on Vladie?

Sat, 03/14/2015 - 19:16 | 5889806 knukles
knukles's picture

You could do a life policy (key man life, like the banks do) policy on the Vladster. 
Betcha Lloyds (of London) would write a life policy on Vlad for you.
Betcha Lloyd (of Goldman) would write a credit event policy for you re: Change of Control.
Betcha Lloyd (of Goldman) would write a credit event policy on His Highness re: Change of Coontroll.

Also betcha that Goldman would (or like almost any AIG product, especially D&O) so much mitigating language that well, you get the picture.
Why not?

Is being in the right place at the right time akin to "Location, location, location"?  Like LBJ and Dallas?

Sat, 03/14/2015 - 19:23 | 5889816 kaiserhoff
kaiserhoff's picture

Thanks knucks.  Mucho comprehensive.

If nothing else, it might thicken my FBI file. 

Sometimes I just like seeing the black helicopters;)

Sat, 03/14/2015 - 20:44 | 5889985 Real Estate Geek
Real Estate Geek's picture

"To the electronic books!"

+1.  It's ironic how '1984' was the book that Amazon erased from customers' Kindles a few years ago.


Sat, 03/14/2015 - 19:40 | 5889854 sam i am
sam i am's picture


The Khazar tribe is concerned that Russia doesn't have extra funds to carry on the war with NATO in Europe.

Bankroll both sides and make them beat each other.

We have seen this before so many times:

Bankrolling the Bolshevik Revolution

World War I, the Bolshevik Revolution, and Corporate Socialism


Sun, 03/15/2015 - 01:46 | 5890503 blowing winter
blowing winter's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/ezLA00

Sat, 03/14/2015 - 19:07 | 5889782 Youri Carma
Youri Carma's picture
Jim O’Neill: There is Value in Russia https://www.youtube.com/watch?v=USPSHbgV8yU

Exxon is Goldman Sachs pick over Chevron, ConocoPhillips http://www.marketwatch.com/story/exxon-is-goldman-sachs-pick-over-chevro...

Exxon’s Russia Exposure Surges as Long View Outweighs Sanctions http://www.bloomberg.com/news/articles/2015-03-03/exxon-s-russia-exposur...

Sat, 03/14/2015 - 20:12 | 5889934 disabledvet
disabledvet's picture

Interesting call. Says they think Putin is still alive and their is no coup underway.

Think I'd wait until Monday tho.

Even if he is still in power he's going to have to do something.

I have no idea what that will be but I don't think attacking Estonia is sufficient here.

Sun, 03/15/2015 - 07:24 | 5890671 Flying Wombat
Flying Wombat's picture

Putin Dead? Coup? Probably Just B.S. - Moscow Webcam Shows Quiet Activity Around Kremlin

TND Exclusive: Eric Dubin


Of course, dead or alive, the Vampire Squid would still love all the muppets to buy GS' Russian bond inventory :-)

Eric Dubin (Flying Wombat)

Managing Editor,

The News Doctors

Sun, 03/15/2015 - 13:36 | 5891449 7.62x54r
7.62x54r's picture

I think Vlad is bunkered up, and the Ukraine is about to get slagged. Interesting times.

Sat, 03/14/2015 - 19:32 | 5889835 TeethVillage88s
TeethVillage88s's picture

Straight Newspeak, but Capitalism has no Patriots

- Peace is War
- War is Democracy
- Democracy is War
- war is Peace
- Austerity is Strength
- Low Wages are Strength
- Few Jobs with large Labor Pool is Strength
- Slavery is Strength
- Out Sourcing Overseas and Off-Shoring is Strength
- Decapitalization of Industry is Strength
- Low Investment in Capital Equipment & Facilities is Strength
- Corrupt VICHY DC is Strength
- Rewarding VICHY Wall Street banks for Accounting Control Fraud is Strength
- Putting more workers on Welfare and Decimating Retirement Assets is Strength

- Exponential Federal Spending Growth is what keeps the Economy Running

Why ask why?

Sat, 03/14/2015 - 20:14 | 5889938 disabledvet
disabledvet's picture

"Your wife is my girlfriend."


Its an unwritten rule of course...

Sat, 03/14/2015 - 19:44 | 5889865 Financial Paparazzi
Financial Paparazzi's picture


Investors afraid that there could be more humans in the company, demand a 100% Cylon administration.

Source: www.financialpaparazzi.com

Sat, 03/14/2015 - 19:57 | 5889904 tarabel
tarabel's picture



Can't have it both ways, people. If Goldman Sachs is the devil's tool, then any recommendation it makes-- even one you heartily agree with-- is going to head south for you.

Sat, 03/14/2015 - 20:32 | 5889965 Seek_Truth
Seek_Truth's picture

Or, as the good book says:

Those who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge people into ruin and destruction. - 1 Timothy 6:9

Do not wear yourself out to get rich;
do not trust your own cleverness.
Cast but a glance at riches, and they are gone,
for they will surely sprout wings
and fly off to the sky like an eagle
-Proverbs 23:4,5

Sun, 03/15/2015 - 00:28 | 5890427 tarabel
tarabel's picture



And I heard another voice from heaven, saying, Come out of her, my people, that ye be not partakers of her sins, and that ye receive not of her plagues.

Revelation 18 : 4

Sat, 03/14/2015 - 22:21 | 5890206 Joe A
Joe A's picture

That's right. GS has a history of taking positions against its own clients. Could also be part of a war financing scheme. You know, finance both sides to make a war possible and rake in the profits.

Sat, 03/14/2015 - 23:16 | 5890332 TeraByte
TeraByte's picture

GS conundrum: Do I lie, if I say I lie all the time.

Sat, 03/14/2015 - 23:50 | 5890384 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Oh, it's very much a signal to sell Russian bonds.

Not because the Fourth Reich has any realistic chance of winning the upcoming war with Russia---it doesn't. The real plan is to make the inevitable Russian victory in the future war with the Fourth Reich as Pyrrhic as possible. Russia's going to have a serious problem selling its resources after the war if her biggest export market is reduced to an uninhabitable radioactive wasteland by bankster sabotage.

Sun, 03/15/2015 - 00:24 | 5890423 tarabel
tarabel's picture



I'm not sure I follow your argument at all. You posit a Russian victory but contend that it would be better to invest in the losers' economies rather than the winners.

Plus you infer that Russia can win against an opponent with 2-4 X the population and 15-20 X the economic strength without resorting to nuclear weapons.

So I do find myself in agreement with your initial point that it is a good idea to sell Russian bonds, no matter what sort of intellectual journey you undertook to arrive at that conclusion.

Sat, 03/14/2015 - 20:54 | 5890006 Omega_Man
Omega_Man's picture


Russia will not allow Goldman to have any Russian debt... perhaps soon they will cut them out of FX. Why allow these manipulators to have anything they can short or dump?

Putin is too smart for that game. 

Sat, 03/14/2015 - 22:34 | 5890218 Prometheus Unbound
Prometheus Unbound's picture

Last time I looked RU only had 18% GDP debt. You're a fucking tool if you're not buying their bonds as opposed to Greece. Or.. the USA. [etc].


Seriously: when did politics poison this well so badly? Russia is being smacked around, and it still has less GDP debt than most countries, and has been mining / stacking gold to the hilt.


Crazy Pants Land. Russia had many, many, many issues. I'm rather tired of the neocon / senators letters though: here's a "REVOLUTIONARY" thought. If Russia and China increase their infrastructure, education, knowledge and so on, I'm pretty damn sure the world would be more safe. Harry Potter in Russian and Chinese: at the very least, Scotland would get a tourist boost along the lines of Disney [fucking scum].

You know, what the sane fucking beasties have been doing while everyone else went fucking batshit insane.



Drum-roll: yeah, maybe this isn't about economics after all.

Sat, 03/14/2015 - 22:58 | 5890284 Prometheus Unbound
Prometheus Unbound's picture


Sat, 03/14/2015 - 23:07 | 5890302 iofera
iofera's picture

Which Zero's turn is it to Western Union Vlad money tonight?

And whoever the jackass is that thinks it's funny to send him rubles, knock it offa, alright? 

He wants dollars only!

Sun, 03/15/2015 - 05:34 | 5890610 Firewood
Firewood's picture

It has been patently obvious for some time, to all but the terminally disadvantaged, what the neocohen NAZI Nulandistan cull is all about.


"Russia has less than $700 million in debt, the US has over $18 trillion; Russian debt is about 15% of GDP, the US runs at over 100% of GDP; Russia runs a budget surplus, the US runs a burgeoning deficit; Russia has gold to back its currency, the US now only has the military to back its fiat and increasingly widely shunned “dollar;” Russia has the largest natural resources in the world, the US has depleted or ruined most of its natural resources. With which of these two countries does the rest of the world want to conduct business?"

Michael Noonan



Sun, 03/15/2015 - 08:32 | 5890730 Jonesy
Jonesy's picture

"Russian bonds are both cyclically and strucuturally under-priced."


That's right, because Putin is a CHAMP!

Sun, 03/15/2015 - 08:43 | 5890741 prudent_investor
prudent_investor's picture

Not only russian bonds is still a good long term investments

There are a lot fundamentally sound Russian stocks trading at ridicuolsly low valuation.

Just will give you an example:

URKA the leader among world producers of potash trades at 1/3 of the valuation of the second biggest potash producer.

Do not forget that costs are in rubbles but revenue in USD...so devalaution of ruble just make it even more competitive..



Sun, 03/15/2015 - 12:53 | 5891305 Chuck Knoblauch
Chuck Knoblauch's picture

Actual Russian bonds, or US corporate bonds denominated in Rubles and traded overseas?

Who are the real traitors?

Sun, 03/15/2015 - 13:38 | 5891458 gcjohns1971
gcjohns1971's picture

While I might otherwise agree, doing anything that Goldman recommends has never turned out to be beneficial before... so I will pass until their position changes.

Side Note:
What are the chances of Goldman, whose existence depends on fiat, honestly recommending a country planning a gold standard?

See what I mean?

Sun, 03/15/2015 - 20:46 | 5892671 iofera
iofera's picture

For Zeroes, Russian bonds are the most delicious, nutritious investment vehicle out there.

They're the box of Wheaties - the Breakfast of Champions! - of the financial world.

Except this is the box with Bruce Jenner on the front.

Do NOT follow this link or you will be banned from the site!