Global Investor: The Irrational Fear of Putin

By Biggs, Barton | Newsweek International, June 18, 2007 | Go to article overview
Save to active project

Global Investor: The Irrational Fear of Putin

Biggs, Barton, Newsweek International

Byline: Barton Biggs (Biggs is a managing partner of Traxis Partners, which has a substantial position in Russian equities.)

Russian President Vladimir Putin is in the world's doghouse because he does not appreciate sanctimonious lectures or missile batteries on his border. He and President George W. Bush patched things up a bit at the G8 summit last week, but the tension remains. Ironically, we as investors should be grateful. As a result of this alleged increase in political risk, the Russian stock market and its oil stocks in particular have been falling even as both emerging markets and energy equities have climbed. After a week in Russia, I am convinced there is no business reason for this stumble; it's all about the media rhetoric.

There is a presidential election in Russia next year, and Putin will stand down. However, he has made it clear he will continue to be the power behind the throne. He is passionately committed to restoring Russia to its former position of pre-eminence as a world power, economically and politically. Putin wants to be the modern reincarnation of Peter the Great. Indeed, I am told that in his working office, behind his desk is a massive portrait of the Great Peter.

A poor, rapidly developing country often does best with a benevolent dictator. Democracies, and particularly messy coalition democracies, are ineffective in imposing the kind of discipline and sacrifices that bootstrapping economies require. Rather than criticize Putin's sometimes heavy-handed tactics, investors and America should embrace Russia and Putin. If we don't, China will. With luck, Putin's upcoming visit with Bush at the family compound in Maine will clear the air.

A year ago, emerging-market funds were invested more heavily in Russia than in the general Emerging Markets Index, but now they have reversed and are significantly underweight. The emerging-market indexes are up about 15 percent for the year. Russia, by contrast, is down about 10 percent and is the only index market that shows a loss. Russia is cheap in both absolute and relative terms, trading at about six to 10 times earnings, depending on which measure you use.

Russia is the ninth biggest economy in the world, with GDP growth of about 7 percent, huge reserves of oil and minerals, a large budget surplus, a strong currency and falling inflation. Productivity is growing at 10 percent a year, corporate profits at more than 20 percent, and believe it or not, corporate governance is improving.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Global Investor: The Irrational Fear of Putin


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?