Should You Really Buy Russian Stocks?

Should You Really Buy
Russian Stocks?
By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/should-you-really-buy-russian-stocks
Economist Robert Shiller
developed the cyclically adjusted
price to earnings ratio also known
as the CAPE ratio.

His rationale in doing so was to
develop a tool that looked at
current price compared to earnings
over ten years which he says
would be a normal business cycle.

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The point it to get a more accurate
assessment of what a stock should
be selling for than just with the
standard price to earnings ratio.

Using this approach one finds that
US stocks are strikingly overpriced
but just where can you find
bargains using this tool?

It turns out that Russia comes in
first place using the CAPE ratio.

But should you really buy Russian
stocks?

Here is what cnbc says about
the case for buying Russian
stocks.

“while the u.s. has the highest
cape ratio, “the lowest cape ratio
of the 26 countries [analyzed] is
russia,” shiller said tuesday on
cnbc’s “trading nation.”

the yale professor of economics
and nobel laureate added that “i’m
thinking about” investing in russia
“when [the ratio] is this low.”

at this point, shiller’s data show
that the cape ratio for the u.s.
currently comes in at nearly 31,
which is higher than ever before
save for the dot-com bubble and a
brief period in 1929.

So now we are at a CAPE ratio
similar to just before the stock
market crash that ushered in the
Great Depression.

Does Shiller suggest we put all of
our money in the Russian market?

He says a few selective
investments offshore would be a
good idea but taking everything
out of US markets would not be
good.

Russian Fundamentals

Russia emerged from the USSR
and communism a quarter of a
century ago and now has moved
back into an authoritarian era.

Military adventurism by its leader,
Vladimir Putin has resulted in
punishing sanctions by the EU and
USA.

And the global oil glut has made
Russia’s energy exports hugely
less profitable.

Russia does not have a vibrant
and growing economy but one
based on commodities, primarily
natural gas and oil.

profitable investing tips wrote
to beware the commodity
curse of boom and bust cycles.

“brazil rode high during its
commodity boom and has been
licking its wounds ever since.

venezuela bought friends in the
caribbean with discounted oil and
now its citizens cannot find milk,
diapers or toilet paper in the
stores.

beware of the resource curse of
boom and bust cycles in
commodity dependent economies.

Take a look at the more recent
World Investment Report of the
United Nations for information as
to where the smart money is
going.

Then you can pursue investment
in commodity rich countries and
often pick up bargains when the
nation is going through the bust
phase of their economic cycle.

After all, the world always needs
raw materials and the world
economy always cycles up and
down.

Just don’t buy in at the top of a
commodity boom only to lose your
money in the bust.

Beware the resource curse when
investing.

Should You Really Buy Russian Stocks?

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Should You Really Buy Russian Stocks?