Russian Markets

Competition’s effect is the “market mechanism”. This example is from 1996 Russia.

Bill Browder is looking at stock in a Russian oil and gas company. The country’s companies have just become public, and though MNPZ has slightly smaller reserves than British Petroleum, it’s trading for 100x less. Why?

I was convinced that there must be some other explanation for the deep discount and spent the next several days searching for it.

Did the preferred shares have different par values? No. Was the ownership restricted to workers? No. Could the higher dividends be arbitrarily changed or canceled by the company? No. Did they represent only some minuscule part of the share capital? No. There was no explanation. The only reason I could fathom for why they were so cheap was that no one had showed up to ask about them-until I had.

Amazingly, I found that this anomaly wasn’t restricted to MNPZ.

Nearly every company in Russia had preferred shares and most of them traded at a huge discount to the ordinary shares. These things were a potential gold mine.

If there’s a name, there’s a market mechanism. If the invisible is now visible, there’s a market mechanism. If something is weird, new, unknown, secret, there may not be.

Pricing power evaporates with the heat of the market mechanism. Sometimes though, in the far reaches, someone can, find a gold mine.

Russian Reading List

There’s a financial advisor axiom that the best plan is the one you’ll stick with. For trainers, it is exercises done through a full range of motion. The best endocrinologists find an achievable plan, not an ideal one. There should be one for education too. With that in mind, here’s a list of Russian resources optimized for consumption rather than comprehensiveness.

We’ve done this before with books about China and related, history books that are business books.

The Rest is History (podcast). Some podcasts are better than books because the host(s) add context. Dan Carlin is great at this. Tom and Dominic do too, and their series on Vladimir Putin is excellent.

Red Notice. A finance thriller? Yep. Bill Browder spent decades opening, running, and closing a fund in Russia during the switch from communism to oligarchy.

Muppets in Moscow A 2022 book, h/t Marginal Revolution about Sesame Street in Russia.

Exporting Raymond. We love Phil Rosenthal’s Netflix travel/food show Somebody Feed Phil. This is the story of taking the show Everybody Loves Raymond to Russia.

Koylma Tales via Agustin Lebron called it “a collection of stories of people who lived in the Gulag, possibly the most revealing book on human nature I’ve ever read.” Takes place through the 1930s and 40s.

Sandworm: A New Era of Cyberwar and the Hunt for the Kremlin’s Most Dangerous Hackers. Forgot this source. “The true story of the most devastating cyberattack in history,” notes Amazon, “and the desperate hunt to identify and track the elite Russian agents behind it.” 2,000 reviews averaging 4.7.