What will happen after the collapse of the ruble. Factors of ruble growth. Should we expect the ruble to depreciate in the near future?

There is a limit to all good things, and the ruble is no exception.

As in previous years, rising inflation in the United States signaled to the feasting stock market bulls that it was time to stop the fun. As soon as the broad market index S&P 500 broke through 2,800 points and analysts set its next target at 3,000, someone decided to pay attention to the collapse of bonds and take advantage of the opportunity, pulling everyone else with them. Perhaps the phenomenal collapse in the 10-year Treasury yield from 2.88% to 2.64% in just one day on Monday reflected the flight of investors from the high-risk segment of equities to the safe segment of fixed income instruments. The dollar, by the way, remains behind the scenes of these historical processes. Everyone naturally rushed through the narrow door to the exit. As a result, the S&P 500 is down 10% from its all-time highs. On Tuesday, futures indicate that US indices will drop sharply at the opening of trading on Wall Street. The day before, the Dow Jones Industrial Average fell more than 1,100 points, which in absolute terms was the largest one-day decline in history. Asian indices took the baton from US indices: Japan's Nikkei 225 lost almost 5%, and other markets in the region also recorded significant declines. DAX 30, FTSE 100 and CAC 40 futures are each down about 3%. There are attempts to buy back securities that have fallen in price.

Need I say how the ruble will behave in the face of global risk aversion? I think not. There can be only one question here - how strong the fall of the ruble will be. We believe that the ruble simply will not be allowed to fall much before Putin’s re-election, despite the increased interventions of the Ministry of Finance. We “drew” for ourselves “concrete” levels in the region of 60-61 per dollar. The soured mood also determines the dynamics of oil, the direct driver of the ruble exchange rate. Oil futures prices continued to decline in Asia on Tuesday following the collapse in global stock markets. Earlier, oil also followed stocks to a 3-year high. The Ministry of Finance of the Russian Federation, which will increase daily purchases on the market in February to 15.7 billion rubles ($280 million at the current Central Bank exchange rate) from 15.1 billion rubles (about $265 million) in January, has left no doubt that the ruble will decline. In total, the department will allocate 298.1 billion rubles for the purchase of foreign currency from February 7 to March 6, 2018 inclusive, compared to 257.1 billion rubles in January.

Another upcoming negative for the ruble will be the Bank of Russia's rate cut this Friday. In a Reuters poll of experts on Monday, no one indicated a pause as a likely decision - 18 of 20 economists surveyed expected a cut of 25 basis points to 7.50 percent, two - 50 basis points to 7.25 percent.

“I expect a rate cut of 25 basis points. On the one hand, the publication of the US Treasury analysis on sanctions against Russia supported a moderately optimistic mood Russian market and together with low inflation at the end of January, it allows the Central Bank to carry out a more significant reduction in the key rate,” said Natalia Orlova, chief economist at Alfa Bank.

Let us remember that Orlova harshly criticized the December decision of the Central Bank to cut the rate by half a percent and said immediately after the meeting that the regulator would pause in February. A further narrowing of the US-Russia spread will give foreigners less incentive to invest in high-yielding Russian OFZs, especially if the ruble goes downhill.

- 1. Availability of a family reserve fund in foreign currency, and not just in rubles
- 2. Cash flow in foreign currency - investing in conservative PAMM accounts with a deposit in dollars and a yield of 30 to 47% per annum

Recently, the Central Bank of the Russian Federation set the task of turning money into candy wrappers, despite the direct prohibition in the constitution (see below) and The Ministry of Finance has already started devaluing the ruble- deliberate depreciation of money through direct purchases of foreign currency on the domestic market. At the same time, they are going to make purchases even using reserve funds, just so that the ruble does not strengthen.

The bottom line is that the state earns mainly in foreign currency (most of the GDP is revenue from the sale of hydrocarbons), and distributes debts (budget) in rubles. And a great idea came up, since on paper we have a budget deficit, let’s depreciate the ruble a little (by only 10%), patch this hole and we won’t need to take unpopular measures and reduce social obligations. Well, to hell with it, every Russian will become 10% poorer, but the budget indicators are normal.

This fact should probably piss me off, but in fact I prefer to have a concrete plan of action, rather than a reason for whining on social networks. In this article, I described 4 strategies on how to reduce the impact of the upcoming transformation of money into candy wrappers on your life. And in other articles you will find information on how you can also make money during a crisis!

From whining to devaluation details

The current 2017 is expected to be one of the most difficult years for the Ministry of Finance of all :). As in 2016, the National Welfare Fund and the Federal Reserve Fund will be used to cover the deficit.

Specifically, the budget talks about 1.8 trillion rubles of already empty funds. According to experts, if nothing is done, already in 2017 these reserves will be completely exhausted.

The Ministry of Finance has made an attempt to influence the current situation and replenish the Reserve Fund due to the difference in the price per barrel budgeted ($40) and the current price, which is currently $55.

Bare numbers - Russia's budget is confidently going to the bottom

At the beginning of the year it was predicted deficit 3.16% of GDP, equivalent to 2.745 trillion rubles. Now there is an opinion that this figure could significantly decrease to 2.9%. If we implement the much-advertised new “temporary program” to purchase foreign currency at the current oil price of about $55, part of the deficit will be covered.

Such actions will lead to the fact that now excess profits will be spent on replenishing reserves, and not on the current needs of the state.

The possibility of purchasing foreign currency from the Reserve Funds is not excluded. Such a step indicates that a scenario is being considered in which the currency will become cheaper.

Due to the difference in the exchange rate between the ruble and the dollar, it is quite possible to cover a significant part of the budget. Most analysts say this. But f actively this will not lead to stabilization, but will only serve as a tool for temporarily patching holes in the budget.

In fact, this will not lead to stabilization, but will only serve as a tool for temporarily patching holes in the budget.

At the moment, the government has no other opportunity to take real measures other than to reduce the value of the ruble. And this is all due to the fact that sanctions remain in force and there are no opportunities to obtain profitable loans from outside.

Thus, at the moment, the investment market in all respects resembles a sinking ship, which is slowly but surely approaching the bottom.

For state profits, citizens will pay in rubles

Budget revenues from the raw materials sector come from the sale of hydrocarbons, and revenue is generated in foreign currency. The lower the ruble exchange rate, the easier it is to cover the budget deficit with petrodollar revenues.

At the moment, for the state, the fact that intentionaldepreciation of the ruble (devaluation) will lead to a drop in the standard of living of Russians - this is a secondary issue , because foreign goods will be purchased for foreign currency, and accordingly the cost in rubles will increase by an order of magnitude.

The devaluation of the ruble will lead to a drop in the standard of living of Russians - but now this is a secondary issue

In other words, these actions will logically lead to the fact that while the country gets richer, the population will become poorer. The devaluation of the ruble is needed only by the government, but everyone else will receive everything they were promised, but in different money (with less purchasing power).

Ruble forecast for 2017 - what exchange rate to prepare for

Initially the budget was set up based on the base rate of 67 rubles per 1 dollar. At the beginning of the year, the ruble exchange rate remained quite confidently at around 55-62. This fact was not missed by the Ministry of Finance.

This suggests that The “temporary program” was launched long before this, and only now it was publicly announced as a new program.

Now there are more and more frequent statements from high-ranking officials that the exchange rate should drop by 10% from the current one. No justifications have been given as to why exactly by 10 percent, but it is easy to assume that the ruble is artificially brought to the value specified in the budget.

The ruble is artificially adjusted to the value specified in the budget.

Should we expect the ruble to depreciate in the near future?

The analysts’ dispute about the date of the depreciation has not yet been resolved for two global reasons:

On the eve of the presidential elections, the government will do its best to create the appearance of stability of the national currency, prices for food and consumer goods. From this point of view, the depreciation should take place in the foreseeable future.
Considering all the actions taken to replenish the budget, the exchange rate at around 55-60 rubles per $1 should remain as long as possible in order to collect the necessary amount of currency to cover the deficit. Otherwise, actions aimed at purchasing the dollar supply using the Reserve Fund will be absolutely useless.

On the other hand, external factors can also affect the exchange rate. The ruble exchange rate is directly proportional to the price of hydrocarbons: when the value of “black gold” falls, the ruble also becomes cheaper. Therefore, it is not yet entirely clear when and by how much the artificial reduction in rates will begin.

The instrument for the collapse of the ruble will again be the TV

In a panic, people will not only help to veil the artificial devaluation, but will also suffer from their own actions, because many will definitely run to exchange rubles for dollars at an unfavorable rate. And the higher the demand, the higher the price of the dollar will be.

The instrument for the collapse of the exchange rate will be the television.

Accordingly, everyone will be screwed for the second time after the Ministry of Finance purchases at low prices and pushes the currency up, then there will be news stories that the ruble has suddenly begun to fall in price, even more than expected

What will happen when the ruble collapses

The depreciation of the currency will undoubtedly lead to an increase in prices for consumer goods and products, because the share of imports of goods, according to the most conservative estimates, is 35%. This will happen not as a result of the rise in prices of goods on the world market, but due to the depreciation of the ruble, because all purchases are made in dollars or euros. Accordingly, the difference in artificial devaluation will be reflected in the cost of household appliances, spare parts for imported machines, cars, and so on.

Regarding food products, it seems that the situation will be less dire, because the country, according to TV :), is pursuing a policy of import substitution, which covers a certain share of imports.

But in reality this share is so insignificant ( analysts talk about 3-5% of total imports), What a significant increase in the price of goods cannot be avoided . In addition, domestic producers can unreasonably adjust prices to the statistical average and higher, because although control exists, in reality it is ineffective. Remember how a couple of years ago the price tags rose literally while you were reaching the checkout in the supermarket?

A significant increase in the price of goods cannot be avoided.

The real income of the population will not grow in the foreseeable future. After the depreciation, inflation will be serious, and the indexation of wages and pensions will clearly not cover it. Therefore, from patching holes in the budget through artificial devaluation, almost all segments of the population will suffer, and the percentage of the poor will increase significantly.

Such actions will have a particularly painful impact on pensioners. Last year, indexation was so meager that in relation to inflation this amount can simply be rounded to zero.

4 ways not to lose your savings during ruble devaluation

In order not to lose your earnings from the fall in the ruble exchange rate, let's consider several scenarios and a basic strategy:

Availability of a family reserve fund in foreign currency(the government buys currency to later make the ruble cheaper, we do the same). My choice is USD.
Cash flow in currency- in my case, this is the purchase of Internet projects in the West (requires serious investments), as well as a more affordable option - investing in conservative PAMM accounts with a deposit in dollars(!)
Alternate airfield + investment at 154% per annum - cryptocurrencies, in particular - Bitcoin (read details below)
Profitable real estate- I wrote about this in detail earlier in the article, as well as

1. Availability of a family reserve fund in foreign currency, not just rubles

If you have savings, part of them(!) can be converted into foreign currency. You should not transfer all the money, as you may need it when the exchange rate is not the most favorable and you will lose.

And if you have rubles in storage, then the coming months will be the most favorable time for exchange, because the exchange rate against foreign currencies is currently optimal. There is no need to be afraid of losing due to differences in exchange rates, because if the government is talking about deliberately undervaluing the ruble, this will happen within a year . So don’t miss the moment, otherwise it will be too late.

If the government is talking about deliberately devaluing the ruble within a year, this will happen.

2. Cash flow in foreign currency - investing in conservative PAMM accounts with a deposit in dollars and a yield of 30 to 47% per annum

Essentially, a PAMM account is currency trading, but you yourself are not involved in making transactions. Everything is done for you by specially trained people - traders who risk not only your money, but also their own. Essentially, you attach yourself to an experienced trader and invest your money to receive a certain percentage of income - and from then on, you make your profit from his profit.

I chose for investing this PAMM account with the broker Alfa-Forex(daughter of Alfa Bank). Firstly, I know the manager and his competencies, and secondly, his strategy is clear to me and it is built on protecting the deposit from loss.

Thirdly, an account in dollars. I do not invest in ruble PAMM. I do not consider them, because due to inflation, part of your profit will be burned, the current dollar inflation is slightly more than 2%.

Trading terminal - Meta Trader 4 (in my opinion, it is more secure than Meta Trader 5, since it allows, for example, making locks - multi-directional trading within one terminal).

The strategy uses balanced castles, price averaging, serious technical analysis to determine entry points, maximum losses on one transaction do not exceed 1% of the deposit.

At the same time, there is no pursuit of sky-high profitability, you can make 30-47% per annum without any special risks, and the maximum possible drawdown if everything goes wrong, war, hurricane, famine, etc. is 10-20% of the investment.

Monac account capital is $9,000

One of the important details of the account is the manager’s capital, which he himself risks. In many accounts, the manager invests 100 - 500 dollars and carries out risky operations on the market, making money on gullible investors (read: fortune seekers). When luck leaves the trader, the deposit is drained and then a new account is registered for new Pinocchio.

90% of PAMM accounts are lost in the first year of operation. The main problem is high risk and lack of deposit protection mechanisms, and main mistake for beginners when investing in PAMM - the pursuit of maximum profitability. Such accounts are usually the first to be merged.

3. Protection against ruble devaluation in cryptocurrencies and yield of 154% per annum

The alternate airfield is cryptocurrencies, in particular Bitcoin. At the time of writing, the Bitcoin rate has increased by 154% over the year. It is not subject to inflation, it cannot be devalued, controlled or new coins issued. Bitcoin transactions are anonymous and irreversible, capital freely crosses state borders.

How to legally purchase bitcoins (without overpayment):

The simplest option is to register on the BTC-e exchange (exchange for other currencies there)
best bitcoin rate can be found in monitoring all exchangers, for example, you can buy the BTC-e USD code and use it to instantly top up the balance of your account on the exchange
after exchanging on the exchange, you can either leave them in your account or withdraw bitcoins to your wallet, which can also be create for free on xapo.com(they also have super secure cold storage for your bitcoins)

How the Central Bank put a big bolt on the Constitution of the Russian Federation

So, by depreciating the national currency (devaluation), the government is trying to solve the problem of covering the budget deficit. Officials are not interested in the fact that the purchasing power of citizens will decrease significantly.

Article 75 (Part 2) directly states that The Central Bank should help strengthen the ruble, and not vice versa. But the Central Bank is currently guided exclusively by target GDP indicators and the Budget, but the fact that in fact the shortage is compensated at the expense of ordinary people is a secondary matter.

Article 75 (Part 2) of the Constitution directly states that the Central Bank must help strengthen the ruble , ensure its stability

The main conclusion is how to protect yourself from exchange rate manipulation and future devaluations of the national currency

Use different currencies for savings and investments (dollars / cryptocurrencies, etc.)
Create / buy cash flows in foreign currency
Invest in profitable real estate- rental rates and asset prices, as a rule, follow inflation (except for the story of the US mortgage crisis, but there the nature of the crisis is completely different)

- 1. Availability of a family reserve fund in foreign currency, and not just in rubles
- 2. Cash flow in foreign currency - investing in conservative PAMM accounts with a deposit in dollars and a yield of 30 to 47% per annum

From whining to devaluation details

Specifically, the budget talks about 1.8 trillion rubles of already empty funds. According to experts, if nothing is done, already in 2017 these reserves will be completely exhausted.

Bare numbers - Russia's budget is confidently going to the bottom

Such actions will lead to the fact that now excess profits will be spent on replenishing reserves, and not on the current needs of the state.

The possibility of purchasing foreign currency from the Reserve Funds is not excluded. Such a step indicates that a scenario is being considered in which the currency will become cheaper.

In fact, this will not lead to stabilization, but will only serve as a tool for temporarily patching holes in the budget.

Thus, at the moment, the investment market in all respects resembles a sinking ship, which is slowly but surely approaching the bottom.

For state profits, citizens will pay in rubles

The devaluation of the ruble will lead to a drop in the standard of living of Russians - but now this is a secondary issue

Ruble forecast for 2017 - what exchange rate to prepare for

This suggests that The “temporary program” was launched long before this, and only now it was publicly announced as a new program.

The ruble is artificially adjusted to the value specified in the budget.

Should we expect the ruble to depreciate in the near future?

The analysts’ dispute about the date of the depreciation has not yet been resolved for two global reasons:

On the eve of the presidential elections, the government will do its best to create the appearance of stability of the national currency, prices for food and consumer goods. From this point of view, the depreciation should take place in the foreseeable future.
Considering all the actions taken to replenish the budget, the exchange rate at around 55-60 rubles per $1 should remain as long as possible in order to collect the necessary amount of currency to cover the deficit. Otherwise, actions aimed at purchasing the dollar supply using the Reserve Fund will be absolutely useless.

The instrument for the collapse of the ruble will again be the TV

The instrument for the collapse of the exchange rate will be the television.

What will happen when the ruble collapses

Regarding food products, it seems that the situation will be less dire, because the country, according to TV :), is pursuing a policy of import substitution, which covers a certain share of imports.

A significant increase in the price of goods cannot be avoided.

Such actions will have a particularly painful impact on pensioners. Last year, indexation was so meager that in relation to inflation this amount can simply be rounded to zero.

4 ways not to lose your savings during ruble devaluation

In order not to lose your earnings from the fall in the ruble exchange rate, let's consider several scenarios and a basic strategy:

Availability of a family reserve fund in foreign currency(the government buys currency to later make the ruble cheaper, we do the same). My choice is USD.
Cash flow in currency- in my case, this is the purchase of Internet projects in the West (requires serious investments), as well as a more affordable option - investing in conservative PAMM accounts with a deposit in dollars(!)
Alternate airfield + investment at 154% per annum - cryptocurrencies, in particular - Bitcoin (read details below)
Profitable real estate- I wrote about this in detail earlier in the article, as well as

1. Availability of a family reserve fund in foreign currency, not just rubles

If the government is talking about deliberately devaluing the ruble within a year, this will happen.

2. Cash flow in foreign currency - investing in conservative PAMM accounts with a deposit in dollars and a yield of 30 to 47% per annum

Trading terminal - Meta Trader 4 (in my opinion, it is more secure than Meta Trader 5, since it allows, for example, making locks - multi-directional trading within one terminal).

The strategy uses balanced castles, price averaging, serious technical analysis to determine entry points, maximum losses on one transaction do not exceed 1% of the deposit.

Monac account capital is $9,000

90% of PAMM accounts are lost in the first year of operation. The main problem is high risk and the lack of deposit protection mechanisms, and the main mistake of beginners when investing in PAMM is the pursuit of maximum profitability. Such accounts are usually the first to be merged.

3. Protection against ruble devaluation in cryptocurrencies and yield of 154% per annum

How to legally purchase bitcoins (without overpayment):

The simplest option is to register on the BTC-e exchange (exchange for other currencies there)
best bitcoin rate can be found in monitoring all exchangers, for example, you can buy the BTC-e USD code and use it to instantly top up the balance of your account on the exchange
after exchanging on the exchange, you can either leave them in your account or withdraw bitcoins to your wallet, which can also be create for free on xapo.com(they also have super secure cold storage for your bitcoins)

How the Central Bank put a big bolt on the Constitution of the Russian Federation

Article 75 (Part 2) directly states that The Central Bank should help strengthen the ruble, and not vice versa. But the Central Bank is currently guided exclusively by target indicators of GDP and Budget, and the fact that in fact the shortfall is compensated at the expense of ordinary people is a secondary matter.

Article 75 (Part 2) of the Constitution directly states that the Central Bank must help strengthen the ruble , ensure its stability

The main conclusion is how to protect yourself from exchange rate manipulation and future devaluations of the national currency

Use different currencies for savings and investments (dollars / cryptocurrencies, etc.)
Create / buy cash flows in foreign currency
Invest in profitable real estate- rental rates and asset prices, as a rule, follow inflation (except for the story of the US mortgage crisis, but there the nature of the crisis is completely different)

2018 will be a turning point in the crisis for the Russian currency. In the coming months, the flows of foreign capital, which provide the ruble with very significant support in the conditions of economic sanctions and, will dry up. And next year their flight will begin. This is precisely the opinion reached by economists from the world's leading investment banks surveyed by Bloomberg.

The ruble may lose its investment attractiveness

According to survey results, foreign funds that have invested about $15 billion in Russian OFZs will lose interest in ruble assets in 2018 and will begin to close their investments, selling off Russian currency and curtailing carry-trade operations.

The main reasons for possible capital flight from Russia are: low price for oil, expansion of economic sanctions and an increase in the Fed interest rate.

Let us remember that thanks to the tough policy of the Bank of Russia, the ruble has become the favorite currency of speculators. Receiving loans in dollars and euros at an interest rate of approximately 1% per annum, banks and funds buy, the yield of which is 7.5% and higher. At the same time, a stable or even strengthening ruble makes it possible to withdraw them back after some time, receiving a very high foreign exchange profit by world standards.

However, as the Central Bank of the Russian Federation lowers the interest rate, and the Federal Reserve, on the contrary, increases it, it decreases, making investments in ruble assets less attractive.

Following the September meeting, the Fed clearly indicated that it would increase dollar borrowing costs in December and predicted a threefold tightening of monetary policy in 2018. In addition, the Federal Reserve has begun to shrink its balance sheet, reducing the excess dollar liquidity that flooded the markets after the crisis in 2008. Along with this, the Bank of Russia reduced the key rate to 8.5% per annum, which is the minimum for three years, and also stated that another rate reduction is possible in the coming quarters.

Arithmetic of the ruble carry trade for dummies

Meanwhile, pressure on the assets and securities of emerging economies is beginning to increase. The largest US exchange-traded fund investing in EM debt and currencies has seen a steady outflow of funds since July. During this time, clients demanded back $1.2 billion, forcing the fund to close positions.

It is very likely that demand will continue to fall due to the gradual withdrawal of global players from EM securities and geopolitical negativity towards Russia. This means that the ruble may soon lose its attractiveness for carry trades.

The real interest rate in Russia is one of the highest in the world. It is 5.3% per annum - this is exactly how much the key rate of the Central Bank of the Russian Federation exceeds the inflation rate. The Federal Reserve's interest rate is slightly lower than the rate of price growth, so in the United States the real interest rate is negative.

At the moment, the difference between the real interest rates of the Central Bank of the Russian Federation and the US Federal Reserve is 5.85 percentage points. If this difference drops to 3.5 percentage points, investments in Russian assets will lose their attractiveness.

In other words, for carry speculators to leave the ruble, the Bank of Russia does not even have to lower its rate. It is enough for the Fed to increase its interest rate five times, and inflation in Russia accelerates to 4.4%.

Currency risks for the ruble remain

At the same time, the risks of investing in the ruble have not disappeared. Dollar income in Russia depends on the dynamics of oil prices by approximately 60%. This is already enough to make the assets of some countries in Central and South-Eastern Europe look more attractive. The smaller interest rate difference, within 1-2%, is compensated by much lower currency risks.

For the ruble, one of the key risk factors remains the possibility of new economic sanctions from the United States, which completely prohibit investing in the Russian debt market.

The US Treasury Department has already received instructions to prepare the appropriate regulatory framework by March 2018. Need I say that if such sanctions come into force, they will be immediately stopped and a powerful outflow of capital will begin?

The risks for the ruble are not limited to sanctions alone. In addition to them and the fall in oil prices, risk factors are the situation with North Korea, Ukraine, as well as the future presidential elections in Russia.

conclusions

Some may find our calculations too gloomy. In this case, we advise you to pay attention to the long-term forecast of federal budget parameters prepared by the Russian Ministry of Finance. It is based on the chronic depreciation of the ruble.

According to the forecast of the financial department, the depreciation of the ruble will begin in 2018. The basic forecast assumes a depreciation of the ruble by an average of 10% every 5 years, but the dollar could overcome the mark of 70 and even 80 rubles much faster if the United States strengthens sanctions against Russia and extends them to investments in Russian government debt.