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RBC June 6, 2017 - Stepan Demura

You had to buy ether. The bucks will also collapse, followed by the ruble. Who do I think there will be no special problems with gold. Cryptocurrency has been written on the water with a pitchfork. He sleeps in a shirt on the way.

What is happening with the weather in Moscow? Could this have been foreseen somehow?

It depends on which sites to use. The correct forecast hung on Gismeteo.ru. The hydrometeorological center is somewhat different.

I am interested in the medium-term perspective of the common share of Rosseti.

I can't help you, because this is the first time I've heard that there is such an action. I just don’t deal with Russian stocks at all. Nowadays, advertising goes through all business stations and business channels - FGC UES. Probably related.

Unfortunately, Stepan, or fortunately, does not comment on the Russian market.

Probably luckily [laughs].

Your vision of the dollar exchange rate after Putin's 2018 elections. And in general in our market. Sberbank, for example.

I would not like to upset you, but Putin's election, or not Putin's election, has nothing to do with the dollar-ruble exchange rate in principle. This is defined by a completely different dynamic. And this dynamics is associated with the dynamics of the carry trade. Which is determined by (1) the availability of cheap financing, and (2) the expectations of investors as to how cheap this financing will remain for some time. If there is an appetite for risk, everything is bought. Including such a junk [junk bond] as the Russian ruble bond. Because, according to the credit rating, this refers to the junk, and the dynamics is almost the same as the junk bond. That is, junk bonds.

We do not offend the Ministry of Finance [RF], these are just the ratings.

So called. These are questions for Fitch, Moodys, and the like.

If there is no appetite for risk, fear prevails in the markets, then high-risk assets are not popular. Accordingly, the demand arises not for rubles, but for dollars. That's all.

Now, as we can see, the index of Russian bonds (including government bonds) is still growing (see the chart "RGBI government bond index"). Doesn't think to fall. Accordingly, even with a sufficiently significant drop in oil (or, as it is politically correct to say - oil corrections; not a fall, but oil corrections), the ruble behaves quite stable and does not react in any way to oil dynamics.

The game is on greed for now.

As always - fear and greed.

While greed prevails.

There is no fear.

Fear is not yet known.

Fear is lost.

What is the reason for such a low volatility of the ruble?

Take a look at "RGBI Index" - Russian government bond index. See how he behaves. It stands in a very narrow channel, in the range. Either he is consolidating before the last dash upward. Either he has already turned around. This will become clear very soon. Accordingly, the same dynamics of the ruble. One to one. It has nothing to do with oil.

At what price of oil in rubles is the RF budget deficit-free?

Honestly, I didn't ask the question. Since all these tales of our monetary and financial authorities about a deficit-free budget, what is the price of oil ... you understand, again, there are no unambiguous dependencies or connections between oil prices and the ruble. If you mean the cost of a barrel of oil, google it. Surely, someone did such calculations. How can I tell you? Out of curiosity, yes, they probably make sense. If you are a curious person. I cannot answer your question.

Our budget is a thing in itself. We have it reviewed periodically very often. Not so long ago, it was revised downward. If there are any disasters in the market, it will be revised again. Accordingly, the oil price [in rubles] will change. Therefore, I would not focus on this gray matter.

I hope the question was practical, not purely theoretical.

And practice - you have no direct connection between oil, the ruble, and the budget. There is an approximate connection. Someone says 2800, someone says 3000 rubles per barrel.

How do you view investing money in gold coins? When is it convenient to do it at a good price?

I would not consider now, for now, temporarily, investing in gold. Apparently, we went to 1375, further, perhaps, 1450. Then there will be an attempt at new lows in gold. Therefore, now I would not buy metal in any form. I would have waited, after we went to the new bottom from 1450, and there I would have taken.

You assumed there would be parity. When do you expect him? Is there any correction in your reasoning? This year, next?

You are all so finicky. 1.03, which is not parity? When it was promised at 1.40. I think parity.

Actually, no, not parity, of course. There will be parity. I think it will be significantly faster than even I can imagine. Simply, the form of correction has changed a little. Consolidation, politically correct. Between 1.03 and 1.18, it takes the form of a flat correction. That is, we are now waiting for another strengthening of the euro. Then, in principle, everything should end, and we will happily fly down.

I wouldn't even talk about parity. 0.87 is the first target.

But, first, we might go down to 1.16-1.17. So don't be in a hurry to sell the euro. You can, I think, sell higher soon.

What do you think about the scandal in Qatar, your oil forecast?

I don't know how these things are related. I have said many times that fundamental analysis has nothing to do with markets at all. Especially to the oil market. In my opinion, the last 10 years, as I open my mouth about oil, confirms this thesis in every possible way. The scandal in Qatar - I don’t know, but there in the noble family again something was not divided. They allegedly paid a billion to extremists, but not to those extremists. I didn't pay attention to it at all. Share something there. Let them divide. This will not affect the oil and gas market.

Although, in principle, if you look at it from the point of view of globalism and US dominance in recent years. We were told that shale gas will never come to Europe. There were such comrades foaming at the mouth. The Poles are buying, the Germans will now buy American shale gas. In Europe, the competition for the Americans is just Qatari gas. Perhaps this has something to do with the fact that American shale producers quickly take a significant share of the market. This includes Gazprom's share in the European market. Therefore, if we are to play behind-the-scenes games, then it is quite possible that this is one of the movements.

Plus, it is in the interests of the Americans to prolong the instability and war in Syria. Therefore, in my opinion, they are now acting very correctly. By their actions, they are extending the war in every possible way, so that, God forbid, a gas pipeline from Qatar to Europe does not appear there.

Did you see Trump doing a sword dance in Saudi Arabia?

I danced well. Man. And, most importantly, no security.

There were so many people with weapons.

Imagine, so many weapons, and the US President is dancing without security [a hint that the Russian President always and everywhere appears surrounded by a crowd of guards - he is very afraid for his life]

It seems to me that he was a little bit, not that he was depressed - he was confused. He smiled guiltily.

Yes, no. Normal guy. We're just not used to normal people [laughs].

He dances not like Obama. Obama would hardly have been invited there.

These are people with different genotypes. Someone dances better, someone [inaudible]

When are the promised 100 rubles per dollar?

Nobody promised a hundred. Promised 97 and 125.

One hundred, you probably took the figure - it was said that nothing would be done up to 100 rubles per dollar Nabiullin.

I think you need to be patient a little. Because the main thing in the market is goals. A year ago, the targets were 1150-1200 for the RTS and 56-57 for the ruble. Here, crawled the same. Accordingly, it took a little longer to crawl to these goals. I think that quarter or two, as usual, are calm.

In my opinion, we are approaching the historical highs in the markets. How historical? For 20-30 years. The tops of the big supercycle. Sometimes it takes longer, sometimes less time than you predict.

Do you need 100? I think in 2017, towards the end of the year, we will see 100.


Most likely.

A question about the American banking sector (Goldman Sachs, Bank of America, JP Morgan) amid Thursday's congressional hearings. How will the banking sector react to this?

Why should he even react to this? And then, in my opinion, he said everything on May 3 at a hearing in Congress, where he said under oath that there was no evidence, no ties with Russia, and he did not feel any pressure from Trump. If he says something different this time, the question immediately arises that a person likes to lie a little.

The sources of the so-called Democratic mail hacking have already become public knowledge. There was no break-in. One of the staff of the headquarters of the Democratic Party leaked all mail to WikiLeaks. Then he was killed very quickly. An investigation into his death is underway. As for the hacking of the FBI servers, the CIA - there were none either. All information has been leaked to WikiLeaks by staff.

What will he say? If he says something that contradicts what he said before, or starts to say something stupid, this will characterize him. And it will add even more fuel to the fire, which is currently burning the Democratic Party together with the so-called "free" press [smiles].

What do the banks have to do with it?

If you have American bank stocks, then I would be very worried. Because the banking sector has already made the first downward wave. Now there is a correction. It may well be completed in a day or two. The third wave will go down. No matter what anyone says.

Once again. Market dynamics and news background are generally independent things. It has been said many times that ...

Sometimes there are coincidences.

Investor sentiment does not determine market dynamics. The dynamics of the market itself determine the perception of the news by investors. I understand - [it's] hard to understand. Because you are told that the opposite is true. But, in fact, it is, unfortunately, so. Hard enough and unpredictable.

Isn't it time for big investors to make small suckers out of small ones? That is, to drain cryptocurrencies.

Again this evil puppet [puppeteers], smart money. Again this nonsense. Again. There is a third wave. Everybody goes there. Look what happened to high-tech companies in 2000, in 2007, what is happening now. Compare this to the price of Bitcoin. Compare the dynamics. It is the same. This is called mania.

This mania lasts until the last fool who buys. Since Bitcoin is now gaining popularity, and ordinary investors, retail is climbing there and starting to ask questions - the end of the mania is very close. We are at the far right end of the logistic curve.

When the time comes for Western investors to exit our bonds?

The mania that currently prevails in the markets, namely complete disregard for risk, is not over. In my opinion, the only way to determine the completion of mania is to use wave analysis. Because when the divisions are complete, they are complete. That's it, let's go down.

On the Russian government debt index (see the "RGBI Index" chart), one more subdivision upwards is possible. As soon as this exit begins... and the exit will be huge and powerful, because even our Central Bank admits that now only OFZs have a record high percentage of foreign investors. They say 31%. It should be understood that this is 31% of the total OFZ issue, and not the liquid part of this issue. I believe that 50-60% of nonrez [foreigners] are sitting there [in liquid OFZs]. In terms of both percentage and the number of positions, 2014 pales in comparison with what is happening now.

Will it be closer to 1998?

In 1998 there was a default. There will be no default now. Because there is still a big airbag.

I mean the dynamics of the [dollar] rate.

Dynamics - yes.

If the last time [in December 2014] against Nabiullina the ruble went by 20-23 rubles, when she raised the rate, now it will be 40 [rubles].

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