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From Russia With Ideas

Red Square New Years Eve

I’m back from Moscow, this year’s New Year’s trip, and just thought I’d share some of the investment related things I learned (with apologies to Ian Flemming for the title above). This photo was taken at 2am on Jan 1st in Red Square and St. Basil’s Cathedral in the snowy New Years Eve with celebrating Moscovites and yours truly.

Most of you who know me either personally or through the blog know that travel is one of my passions as I enjoy learning about the culture, history, religion, art and architecture in foreign lands – but it serves the dual purpose of allowing me to see what is happening outside the US that might positively impact my investment management activities.

I was in Russia a few years ago and there is a noticeable change between the mood then and now. Consumerism and economic activity seem to be on a significant upward trajectory now:

> Lots of Japanese and German cars as well as a number of Fords – not to mention the Bently and Lamborghini dealerships I saw;

> McDonalds, Starbucks, and Dunkin Donuts all over the place (oddly, unlike China, no KFC);

> I was talking to the bartender at our hotel and he was saying his favorite American beer is Corona (I decided not to tell him its from Mexico) and that he thinks its a bargain at 500 rubles ($18) for a six-pack;

> Russia has decided to operate within the rules of the WTO and, as an example, they no longer sell Russian “Champagne” but instead Sparkling Wine (Champagne only comes from that specific region in France);

> The GUM mall that sells designer clothes was packed with shoppers;

> The big news there was that President Medvedev was reducing the size of the government by 20% in an effort to improve the solidity of the country’s finances;

> Public safety seems to be on the rise – police and the military were very visible with Tom Ridge level scrutiny using metal detectors and pat downs for entrance into public buildings – but the security people were in general very friendly and courteous (unlike those at O’Hare and Dulles on this trip).

On the downside, you still can see some level of chaos of the third world, specifically with the problems at the airport during the recent ice storm, the problems with the legal system and justice as exemplified by the piling on of additional charges for the former head of an oil company to keep him in jail as he nears the end of his original sentence and the jailing of opposition politicians while I was there, the steady influx of Central Asian immigrants that are taxing the social welfare system, and the evolving accounting standards that have not-yet reached Western level.

All-in-all, you can see a very visible change that should continue to drive their economic activity and stock prices higher in coming years, particularly with near-$100 oil to drive cash into the economy.

In coming weeks, we will be reviewing investment opportunities into this growing Russian economy – we will look at Russian companies that have ADR’s traded in the US plus domestic companies that derive earnings from sales to Russia. Clients should begin to see these ideas come into play in their accounts as ideas are identified and entry points chosen.

Until then, if you are bored and want to see a bit more of Moscow in the Winter, you can check out my travel website at:

Click on this link to go to the travel website. Once you are redirected to that website, just click on the Moscow gallery link and it will take you to the set of photos.