When I was younger, I took part in one of the first post-cold war student exchanges between the U.S. and Russia. A few days after I arrived there (during a very hot summer in the Eastern Urals), the Ruble (the version they were using at the time) collapsed from something like 1500:$1 to 5500:$1 and it became impossible to convert currency.
It finally "stabilized" somewhere around 5500-6000:$1 but the exchange markets still wouldn't function. Finally, running out of currency, our hosts did the exchange with their personal funds, hoping that the dollars we were giving them would turn out to be a good investment later. I didn't really understand at the time what a huge risk they were taking, and how much money, relatively, they were converting for us.
It's one of many generous things that happened during that exchange that's given me a perpetual fondness for the Russian people, even if sometimes I share in many of the grim feelings for the national politics.
In Moscow we could use Dollars more or less at most places, but deeper into the country it was harder for the Russians to use dollars so the local economy was Ruble only.
If the Ruble continued to fall, and someday the exchange markets reopened, they could buy more Rubles with the dollars they exchanged with us. This is important because while the exchange rate continued to worsen, their income stayed relatively the same. If they made (pulling a number out of thin air) $10,000 a year, or R15m at the start of our trip, they were only making $2,800 a year at the end even though the number of Rubles they made stayed the same.
If the Ruble continued to fall, say to 8,000:$1 they'd end up making less than $1,900 a year. However, if they bought USD from us at 5500:1 it meant that if it fell, they could buy back 8,000 Rubles for each dollar later, keeping them closer to $2,800 exchangeable dollars.
If the Ruble reverted back to the original rate (1500:$1) then they'd lose their shirts because they just gave us their currency at less than 1/3 value.
Just as importantly, if they were making about $10,000/year, exchanging $400 or whatever with an American kid meant that half their monthly salary was locked up in nonexchangeable USD. The USD had value, but it was non-liquid at that moment.
IIR they weren't able to exchange the dollars until later that year and there were caps on the amount that could be exchanged at once. The next year we repeated the exchange program and I believe some of those dollars we exchanged with them were brought with them to use here.
A few years later, in 1998 the Ruble was reformed on a 1,000:1 basis.
Things were devaluing so fast that people still had Kopek coinage sitting in coin jars that were unspendable and stacks of low denomination currency (1 Ruble to 500 Rubles) that while spendable, were incredibly inconvenient.
Now your hosts were nice but they were not completely altruistic either.
Despite often being illegal, Soviet Union had a history of people holding a portion of their savings in foreign currency(just look up Bulgakov's Master and Margarita or Ilf and Petrov's Golden Calf for early references).
So if your local currency is in a free fall you would be well advised to convert your local roubles into hard currency.
I rememember very well the day that my father exchanged 10,000 roubles for $1,000 in the late 1980s from an American tourist.
The official rate was ~1.3 dollars for 1 rouble (rouble was officially more valuable than dollar!) at the time, but the catch was you could only exchange a few hundred at a time in very special circumstances. (I believe this is how it is in Venezuela right now too, other places with currency controls).
So your hosts were making a nice gesture but also being smart in times of uncertainty because historical precedent was that their roubles would become worthless not come up.
Yes, that's the idea as far as I understand it, too: Rouble just dropped 4x, so it made sense that it might recover somewhat. That must have been in 1998 (I am Russian)
I remember accounts of Westerners in Russia at the time. Supposdly the official exchange rates were rubbish and you could get 10 times as many rubles for your $ from most taxis.
It is interesting to watch the effect of the Russian ruble collapse on Bitcoin markets... It is causing an influx of Bitcoin buyers on Russian exchanges: over the last 14 days, BTC is up +11% from 19000 RUB to 21000 RUB with most of the uptick happening in the last 24 hours (https://bitcoinwisdom.com/markets/btce/btcrur) despite being down -13% from 380 to 330 USD on American markets (https://bitcoinwisdom.com/markets/bitstamp/btcusd). There is an opportunity for arbitrage! The ruble is collapsing so fast that even buying at 21000 RUB is a steal (worth 310 USD as of Dec 16 21:00 UTC). And the collapse will likely continue in the next few days and weeks, so the arbitrage opportunity will grow bigger.
Edit: @potench preev.com is an inaccurate indicator of the BTC/RUB rate because it is basing its calculation "based on the USD Bitcoin price" per its footnote, so of course it will never show a big deviation from the BTC/USD rate. For the true rate you need to look at the real-time bid/ask spread on a BTC/RUB exchange such as btc-e.com which is why I linked to https://bitcoinwisdom.com/markets/btce/btcrur or you can also look at https://btc-e.com/exchange/btc_rur: bid/ask is 20855/21099 RUB as of 22:09 UTC, so the arbitrage opportunity is approximately 2000 RUB.
If people think such a scenario can't easily happen again, then they're wrong about that. A small number of major bitcoin holders mostly determine the price.
It is not as significant as you would like people to believe. Look at bitcoin over a period longer than 12-18 months, and given it has only existed for a little over 5 years this is a resonable time frame, and you are talking about it being $50 to $350 with a peak of $1200. So apart from a small period of time (probably 8 weeks maximum) the vast majority of bitcoins have held, or increased, their value.
Yes, it's minor compared to the currency I used to have. The number of MXN could have gotten you 1470 USD in 1994 would have only bought you 338 USD by the middle of 1995:
$1200 to $350 and almost certainly back to $1200 at some point. Compare that with a government issuing a new currency and rendering the previous one invalid.
$1200 to $350 and almost certainly back to $1200 at some point.
You can't afford think that way. I did, and it took me a long time to realize that I was being insane while I was doing it. Unless you're planning for a timescale measured in "decades," you're setting yourself up to get burned.
Out of all the persuasive arguments I could make, consider this: There are better ways to double your money than bitcoin. Within the next decade, you probably won't see something like the leap from $6 to $600 again. I'll be happy to eat my words about that. Personally, I don't see how you'd even get to 10x your investment. $350 to $1200 would be 3.4x ROI. And while that's a good return, there are other ways to grow a nest egg from $20k to $68k without gambling it. And if we can't publicly admit that bitcoin is essentially gambling, not investing, then we should at least admit that to ourselves.
EDIT: One point I'd like to underscore is that the price of bitcoin is mostly determined by the major holders. If any of them lose faith and pull out, that will trigger others to pull out. Also, they have a lovely tendency to dump a lot of money into the market, which jumps the price, which causes other people to pour money in. Then the major player sells, capturing all of that money that everyone else poured in. You see? It's a predatory game, and you don't have to take my word for it. Examine the graphs and you'll see "jump-sells" like that over and over again.
If you don't care what happens to that $20k, then do anything you want with it. But if you do, the EV on bitcoin is probably worse than, say, learning to play poker semi-professionally.
Why would that be certain? The only reason Bitcoin is more valuable than the seanflyonCoin that I just invented is that people trust it. If people stopped trusting Bitcoin its value would go to near 0 and stay there.
It seems utterly reasonable to me. What could be more reasonable than wanting your medium of exchange to be out of the control of incompetent, corruptible governments? What could be more reasonable than wanting your medium of exchange to be based upon open-source, community-edited code, that anyone can review, contribute to, and build on top of? What could be more reasonable than wanting your medium of exchange to be available to anyone, anywhere, anytime, regardless of political orientation, without asking anyone's permission?
Sorry but fiat currencies possess no advantages other than incumbent localised network effects. The world needs a true global currency and Bitcoin is it.
Until somebody invents a quantum computer with a sufficiently large number of Qbits. Then they can completely destroy the blockchain.
Alternatively, wait a few hundred years until you need several hundred terabytes to store the blockchain, which is required for transactions. That's going to be a problem.
Or you could switch to Bitcoin before realizing that currencies which deflate in value are a terrible idea.
(For the record, I support cryptocurrency. I just think Bitcoin has too many issues to be viable long-term. Nice proof of concept, but it needs to be refined).
>Until somebody invents a quantum computer with a sufficiently large number of Qbits. Then they can completely destroy the blockchain.
That wont be developed overnight, by the time it is a possibility people will be working on solutions. a quantum computer would impact a lot more than bitcoin, all cryptography would become useless.
>Alternatively, wait a few hundred years until you need several hundred terabytes to store the blockchain, which is required for transactions. That's going to be a problem.
With the cost of storage rapidly reducing then that probably wont be an issue in a few hundred years.
>Or you could switch to Bitcoin before realizing that currencies which deflate in value are a terrible idea.
Currencies that inflate have had their share of problems and we certainly have not found a way to solve those problems or the issue of inflation/hyper-inflation. Any problems with delfationary currencies (which you do not detail) are merely hypothetical as no real deflationary currency has existed before.
>Deflationary currencies reward saving over spending. Aka, you can just sit on your money and it increases in value.
>That's really bad for an economy.
The economy is hardly in brilliant shape right now. This process of Boom/Bust has been running for the last century or so and they still cannot control it (or properly understand it) and they have had a lot of time to try and master fiat currency, controls, regulation etc. You say that people saving is bad for an economy, but that implies that the only good thing for an economy is constant spending and growth. That is bad for an economy, the belief that only through constant growth can the economy work. At somepoint there is a plateau, the planet cannot support an infinite number of people, at some point the world economy will stop growing. according to current thinking that may as well indicate the end of the economic world as we know it.
It is time to try something new, it may go against what most people believe but it cannot be any worse than the current situation which is not working as evidenced by the economic slump of recent years.
| Alternatively, wait a few hundred years until you need several hundred terabytes to store the blockchain, which is required for transactions. That's going to be a problem.
It seems more likely to me that in a few hundred years, several hundred terabytes will come in your mobile implant than for hundreds of terabytes to be a storage problem.
There is a limit on information to area in space. Eventually, bitcoin is going to be impractical to store even if you have a very large storage device at absolute maximum capacity.
The blockchain length is only growing linearly with time, but that's because it can only process O(1) transactions per hour. It'd be growing exponentially if either the monetary velocity or the size of the real economy was growing exponentially.
This is an issue that only a small percentage of people will ever care about as long as the system works well enough (eg annual inflation circa 3%). Even if people were to care, why is Bitcoin guaranteed the victor?
> A small number of major bitcoin holders mostly determine the price.
Wrong. Your assertion is easy to debunk: if this was true, then, since they hold many bitcoins, why don't they make the price go up to increase the value of their assets? Why do they let it fall from $1200 to $350? Answer: because they can't willy-nilly make the price go up or stop the fall.
The reality is that anybody who is wealthy (the millions of high net worth individuals in the world, which is a lot more people than the ~1000 guys in the world holding 1000+ BTC each) can somewhat influence markets, up or down, but nobody can really "determine the price".
The price bubbled to $1200 because Mt. Gox was buying bitcoin for months leading up to that point. This is very well documented. It fell because it was such a large bubble, at the time, that there was no sense letting it do anything except deflate.
Now we're reaching a point that might be a somewhat reasonable valuation for the currency. But my stance here is that even this "low" valuation is extraordinarily precarious. If someone with tens of thousands of coins decides to pull out of the market, they will trigger others to follow suit. Similarly, if someone else decides to buy tens of thousands of bitcoins in order to trigger another bubble, that's quite possible too. Remember, 10,000 coins is "only" ~$10M, which isn't much when compared to the billions that a lot of funds manage. And if someone spaces a large number of buys over a long timescale, it'd be easy to give the impression that the entire bitcoin scene is experiencing healthy, sustained growth, even though that growth is mostly artificial.
This is doubly a problem when you hold a privileged position like a bitcoin exchange, where you can use your position to either manipulate the markets directly or to be privy to info that others don't have. Which, by the way, is totally legal. Even if it's not legal in the US, it's legal in other countries. As far as I know, no one knows who's behind the BTC-e exchange. They're very popular, and they can use that position to do whatever kind of manipulation they want. And since the price at every exchange affects every other exchange (arbitrage), there's no way to avoid being manipulated.
In an unregulated market, you, as one of the multitudes, can't win. Others will always have access to information that you don't, such a whether the growth you're seeing is artificial. You can't win unless everybody wins. And when it comes to BTC, that outcome is far from certain. Especially when people are trying to prey off you.
Wrong. Your assertion is easy to debunk: if this was true, then, since they hold many bitcoins, why don't they make the price go up to increase the value of their assets?
I think the point the parent was getting at is that it doesn't take much buying/selling to really move Bitcoin's value.
Why wouldn't they make the price go up? They could, but what good would it do? You need to sell Bitcoins to realize a return and selling will push the price down.
That's a misleading comment. Sure, if you bought BTC on January 1st, 2014, maybe, since this would have been timed perfectly to align with the peak of the Bitcoin bubble.
But if you bought BTC only 60 days earlier (November 1st, 2013), it was at $200, so you would have a +65% return rate as of today, easily beating the ruble, or virtually any of the world's currencies for that matter: http://bitcoincharts.com/charts/bitstampUSD#rg60zigDailyzczs...
>so the arbitrage opportunity is approximately 2000 RUB.
That is actually pretty striking. There aren't many abritrage opportunities in the 5%+ return range that last for very long. I assume such opportunities always exist since Bitcoin markets are far from perfectly efficient, but these spreads are pretty big.
Unless you've already established accounts at several different exchanges, you really shouldn't try anything based off of an HN comment. Please be careful not to deposit funds which are then frozen because your account is new. That type of thing. New accounts are subject to much scrutiny.
In particular, be very careful when your motive is greed (or "to seize an opportunity," to use a euphemism). Bitcoin isn't subject to regulation. Exchanges essentially play by their own rules. And when the world is going nuts, that means exchanges have the ability to do pretty much whatever they decide is the right choice. If they decide to temporarily halt withdraws, and you're caught up in that net, you could potentially lose a lot, even if it doesn't seem like it.
Try not to risk more than, say, 20% of whatever you can afford to lose. Even if you think you can afford to lose it, the reality of losing it might kick you in the stomach harder than you probably realize.
EDIT: Also, if you absolutely insist on taking crazy risks like this, here's a tip: estimate the transaction fees, and then double it. That gives you a margin of error. Your transaction fees are usually what eat up much of your potential profits in this kind of thing, so if you pretend like they're double, you can avoid making some extremely risky decisions.
In fact, I'm just going to urge you to avoid this altogether. It's not fun to be in a position of staring at a financial chart and willing it to go up, knowing that if it doesn't, you're screwed. It's also not fun to sell, thinking you're screwed, when in reality if you'd just waited a little bit longer you would've been fine. Or when you resent yourself for selling too early and "not making as much money as you could have." This kind of greedy standalone thing will wrap your emotions around a pole, and it's way too easy to convince yourself you're the kind of person that can handle it.
Also realize that even if you do profit off of this, you can't really credit yourself for being clever. You'd be fooling yourself. At best, you can simply feel lucky. So there's not much skill involved in this, beyond putting in a lot of time to research how things work, etc, and then hoping the world ends up obeying your mental model, which rarely happens anyway.
When a currency is devaluating but interest rates are low, the banks can borrow at low rate, sell rubles for dollars into sliding market, wait for ruble to slide more, then repay the loan with cheaper rubles and make a big profit. The trouble is they also accelerate the slide, courtesy of the low rates. The central bank rate increase was likely done to head off that particular danger. Of course there are many other factors pressing the ruble down as well, which central bank can't control, but at least they are trying to prevent worseing the situation with their own hands.
Long term high interest rates plus high cost of import supplies will likely strangle the economy though. Increased demand for domestic goods due to higher import prices is a good thing, but one needs capital to operate most businesses. When interest rates are high you can't borrow, and when political situation is flaky fewer people will want to buy equity.
>the banks can borrow at low rate, sell rubles for dollars into sliding market, wait for ruble to slide more, then repay the loan with cheaper rubles and make a big profit.
don't forget that even according to Russian government 60% of currency trading is insider based, ie. those banks and big traders are tipped (it is Russia after all - 137th place out of 170 rated in world corruption index) when for example Central Bank is to perform a ruble supporting "intervention". SEC and Fed cozying up to Wall St have nothing on how things are done in Moscow :)
>Increased demand for domestic goods due to higher import prices is a good thing
That would probably be the case for any normal country, yet not for Russia. Due to food import sanctions self-imposed by Russia, the price of foreign foods has increased, and the domestic foods prices immediately followed it as a result thus directly increasing consumer felt inflation. And there is no way Russia can noticeably increase food production, at practically any food prices. Instead the only option is to buy in other countries like Brazil, which means paying dollars which would mean even higher ruble prices for these foods on Russian market.
Like during 199x years, for the next several years Russians will be back to dollars (and "black" accounting/contracts/salaries/offshoring) while government would implement significant obstacles to such "dollarisation" of the economy. Which means an immense business opportunities for BTC and other forms of money infrastructure allowing to perform "point A" - rubles in Russia - to "point B" - dollars in a Western country - and which are less subject to the [Russian] government control.
It is kind of surreal - i was inside USSR when it collapsed due to the low oil prices of 198x. I didn't understand it back then. Now i watch this, similar, collapse of smaller, Putin's, version of USSR from comfortable "orchestra" seats (Silicon Valley) and can't stop wondering how things haven't changed a bit.
Edit: to the "twelve40" below - i lived in the USSR/Russia the first 28 years of my life. One can write a huge number of PhD dissertations on the problems of Russian agriculture - legal, social, historical, economical, climate-related, psychological, etc... About the same question is why Russia can't produce a good car, at any prices :)
Medvedev. Just admitted very recently that a country occupying half the globe with 130m population can't even grow enough apples. They need to be imported from Poland. The same is true with everything else. Are you kidding me? And then Over 50% of the Russian budget comes from gas and oil exports. The country gdp size is the same as Spain's... So all it really took was to drive oil prices below 60usd a barrel. And the Russian economy is ruined. Wow...
>a country occupying half the globe with 130m population can't even grow enough apples. They need to be imported from Poland. The same is true with everything else. Are you kidding me? And then Over 50% of the Russian budget comes from gas and oil exports.
Agriculture everywhere is a 1. low margin 2. labor intensive enterprise that requires 3. careful planning, 4. careful execution combined with 5. good stable investment climate and 6. property rights protection. In the relatively harsher climate of Russia the 3. and 4. becomes extremely important while Russians are among the worst people in the world when it comes to the 3. and 4. The 5. and 6. in Russia are among the worst due to its people's general contempt for entrepreneurship and due to dis-functionality and corruptedness of its government at all levels. While when it comes to oil/gas, piping it from the ground beats apple growing by the orders of magnitude wrt. the 1. and 2. :), and the 3. and 4. are partially solved by having foreign companies perform the complex drilling (and kicked out of the country after that :), and giving such high margins the 5. and 6. are solved in oil business by merging with the state which isn't an option for farmers. In short - having oil/gas is a big misfortune for Russia in the long run.
> giving such high margins the 5. and 6. are solved in oil business by merging with the state which isn't an option for farmers.
Also, let's not forget the last time merger of farming with the state happened in Russia. The problems with 3 and 4 wound up causing a significant number of deaths.
Whatever. Each and every country in EU produces much, much more food it can consume. Poland produces 100% more food Poles can eat. The same is true for basically whole of EU and the USA. Of course Russia has its excuses, like "it is hard", but dude! Population lower than Pakistan or Japan with soooooo much land. Still can't do it. Apparently all they can do is dig up some oil and gas. Everything else needs to be imported. I understand Saudi Arabia is the same way, but they are on a desert! Pathetic... With all this land, all these resources, all this human capital 60% income dependant on oil and gas exports.
>Of course Russia has its excuses, like "it is hard", but dude! [...] With all this land, all these resources, all this human capital ...
let me tell you a story. In 1996 a Dutch farmer came to Russia to farm potatoes. His plan seemed flawless - availability of a lot of cheap good for potatoes land plus his skills. He rented the land, planted and tended the potatoes on it. By the harvest time his potential harvest seemed very great. Almost miraculously great - like several times compare to the potential harvest from the nearby fields of the Russian individual farms and remnants of collective farms. And his potatoes were just better in size/shape and overall quality. Well, people from nearby villages and towns started to come to his fields en mass and harvest the potatoes for themselves. Including local police people coming and loading the potatoes into their official police SUVs :) A Russian national TV crew came and filmed a story about it right during daytime :) I'd say that was a Russian specific "force major" the farmer failed to plan for :)
at 17% the interest rate paid by the RUB shorts amounts to 0.046% per day, whereas just today trough to peak USDRUB moved 35%. In this environment unless you "do a Sweden/Slovakia" and ramp rates to 1000% by preventing offshore banks from funding onshore (a form of capital controls), a measly 600bps hike is meaningless.
USBRUB moving 3500bps today tells us volatility is high. It does not indicate that we can expect an average move of 460 bps per day going forward. Carry trades perform horribly amidst increasing or ambiguous volatility. Their leveraged structures make sharp adverse swings game overs.
sure - but we're talking RUB specs who are in it for a 5 day move. Nobody is expecting annualized vol of 566% (35% * sqrt(262)). RUB has been moving several chunky percentages daily for 2 weeks at least, and is down 50% against the dollar 3 months. 17% annualized doesn't make an iota of difference in that kind of market.
Where it does make a difference is that long end bonds (OFZ 28s) are now yielding 15%. That's 15% for 13 years ;) Chunky yield in the long end. That will tempt the long term investors in (IF big if, they don't impose controls). Care to catch the falling knife?
The imposition of capital controls signals a country that is willing to trap money within its borders. That very fact is scary, and scary requires compensation. While that usually does not apply to what are classed as "long term" investors (direct purchasing of real assets in the country, purchasing of equities or bonds usually for a minimum time period, but NOT derivatives), it still requires an additional risk premium such that bonds will then need to be cheaper still (yield more) to compensate.
The more relevant short term argument that I am referring to, is that if they were to "squeeze" the offshore market by disallowing or limiting the lending of RUB by local banks to offshore banks, then they could easily engineer a massive squeeze on the rouble offshore. That is all those people who are short RUB would suddenly find that "rolling" those positions (that is, borrowing RUB so you can sell it), suddenly costs a fortune. This is even true in FX forwards because ultimately these are a derivative of interest rates. If it costs you a fortune to "fund" the RUB, then the converse is that it pays you a fortune to lend RUB to the market. If it pays you handsomely simply to lend short-term RUB to the market, there is no reason to buy long term bonds, whose price must "compete" with the front end of the yield curve. In short: high short end rates will deter purchasing of any instrument with a (significantly) lower yield in the long end of the yield curve. If we were to get the above mentioned RUB squeeze to anything like 100% or higher, imagine how silly it would be to buy a long end bond at 15% (even though yes yes, long term it might still be a good investment - but that would require a long discussion about the implied path of future rates. Humans have proven themselves to be very short termist in markets and thus it is likely that long term bond prices would fall, dramatically in that scenario).
So to answer your question directly, bond investors still would be able to trade out of their positions (though in a disorderly market even that cannot be taken for granted), but at a very low price.
Well in the Bloomberg video (new link) the analyst says that projected "growth" for the Russian economy next year is -4% (so, not growth, but a contraction of 4%).
At 14% interest rates there's basically no way to afford capital investments. Unless you are buying a printing press to print more money.
I feel powerless over the ignorant political movement of people who, from my PoV, act like drones controlled by the media firing their ammunition and causing collateral damage. Be it Pro-/Contro Ukraine/Russia/America or Israel. We were good to each other, helpful and understanding and just because of a few leading politicians who can't go and fight each other on their own (without an army of soldiers dying for them), all of our lives shall suffer? I'm surely too blinded by the delusions of world-peace to come to grasp how people really are, but I hope to be misunderstanding before I give up my faith and let them destroy what we have build together.
I fear forums whom I enjoyed becoming places of distrust, hatred and battle space against the other political 'side'. Where admins and moderators use their given powers to torture the unwanted. I have only recently seen an Isreali woman marrying an Iranian man on television loving each other. And don't think that all people agree to what the politicians have to say.
We are better. If all fails, I still believe that: “Chaos often breeds life, while order breeds habit.” – Henry Adams
Regarding 'Chaos' - this seem like a good read: http://www.halexandria.org/dward165.htm
Leading countries co-operate to limit capital-flow to Russia and this albeit sounding implausible to me, has direct influence on the economic liquidity. Implausible because I don't know how it would be possible for countries and companies to co-operate on such a scale on a capital market, where most notably personal profit leads the market over political decisions. I would be much more curious on which companies initiated the financial war and how they orchestrated their strategies, than the actual outcome, from the PoV of a mathematically and technologically fascinated guy.
> possible for countries and companies to co-operate on such a scale on a capital market
Simple. Heads of State get together and decide to what they want to happen. They have a whole range of levers to pull to manipulate markets.
> where most notably personal profit leads the market over political decisions
This is 100% wrong. I trade Forex daily and (a) political decisions drive the market and (b) we follow the market not drive it. Statements from say ECB, FOMC and reserve banks around the world etc all dictate what the currency markets will do.
Reads like some manifesto, internal wondering monologue, ending with the sanctions compared to some huge companies' orchestrated scheme "which companies initiated the financial war and how they orchestrated their strategies".
Thank you nitrogen. I wasn't criticizing HN or it's readers.
Tl;Dr: Simply put, I just felt powerless over the suspicion driven hunt for people who might imply that they belong to a party, a side an ideology, a religion, or whatever is the 'currently trending enemy' of the day. Thus I wanted to reflect my feelings on that, because it's something that's not said often enough.
---
For those who still can't put me into drawer: I don't belong to a religion, don't choose a political party or take any active position in current or past political movements.
I think it was a depressive moment, one where I realized that the war is not only out there and far from where I live, but here and now. That it affects all of us. And is most frustratingly causing a split in once finely cooperating individuals and an ersatz valve for undirected agony on the other side. I've read comments from people in different forums who attack each other for tangential comments. (I mostly lurk around and only enjoy reading interesting or insightful comments)
The increasingly restricting laws that take the freedom we took for granted is a side-effect of our wars in foreign countries, but it's also causing a heat up of anti-surveillance protesters who'd like to reduce the symptoms of the war that targets them.
I couldn't voice otherwise it may not be one of my most insightful comments. Maybe it was an neede. I'm sorry that it doesn't mean nothing for viraptor or byEngineer. That's all.
A company makes a smart decision to pause sales in order to ensure they're not selling their products at a loss due to the drop on the value of rubies....
Putin has an annual press conference coming up soon. Many anticipate a softening of his stance on Ukraine, in a bid for loosening sanctions. I am more fearful of him introducing ham-fisted capital controls. Apple may be similarly cautious.
Shouldn't we all be afraid of the opposite, namely war, like with Japan 1941? After all, one of the major reasons for trying to retain control of Ukraine was for the energy resources and pipelines; the rout in oil has shown how important energy is to the Russian economy and I would expect that losing control of Ukrainian energy assets would permanently impair the Russian economy.
War is the worst case scenario for everyone. I don't think even Putin would leap straight there, though if you think it's a possibility then yes it's a bigger thing to fear than capital controls.
If the Russian economy is already overdependent on oil money, they should be looking to diversify, not to acquire more energy assets.
That presumes they have some idea of the short-term forward volatility of the rubble, which no one does right now. Otherwise they have no idea what the surcharge ought to be.
Furthermore, setting up such things is not cost-free, and if the high-volatility situation is temporary (which is very likely) it could well be that it isn't worth the cost, complexity and risk.
You base the surcharge on what the swap costs. The cost of the swap takes into account the market's idea of what the ruble is going to do vs. the dollar.
Basically, you make the customer buy insurance against the ruble losing value against the dollar. It's like charging a subprime borrower PMI.
That presumes they have some idea of the short-term forward volatility of the rubble
My guess is that your typo isn't too far from the truth. Everything we've seen lately with regard to falling oil prices is geared towards attacking the Putin regime. Eventually the Russian people will find themselves living in a North Korean-style pariah state... or else they'll wake up and take drastic action to keep that from happening. Either way the medium-term outlook for the ruble is pretty much toast.
Or maybe Putin is popular enough to survive changing course in Ukraine before the economy is completely trashed. Also do you have a source that oil prices are being manipulated to punish Putin? Seems likely but I haven't seen anything.
I've also seen it suggested that the oil price drop is a "stealth" sanction against Russia, but I don't follow the logic. Why do the Saudis want to sanction Russia? Unless one presumes some unspecified quid-pro-quo conspiracy between the US and the Saudis, I don't see it. I thrink driving the volatility up like this slows the investment rate in US shale oil significantly, and that's what the Saudis are doing.
Russia supports Bachar's regime. Bachar blocks Qatar's & Saudi oil/gas pipe from passing through Syria towards European market. Europe remains dependent on Russian gas(30%) and oil for another round. Saudis get angry and want to topple Bachar. Russia says no way. Saudis kick Russia in the groin economically by raising the oil production. Now it makes sense ? (lower oil price combined with other EU & US sanctions bring Russia on the brink of collapse: EU, US & Saudis high five furiously)
Nothing you said makes sense because the Saudis didn't increase production and at 12% of global supply do not have the capacity to change the price on the scale we're seeing without it being glad you obvious. The price is dropping because the Chinese and European economies are soft and becuase of increased supply from Libya in the short term along with the long term increases from the US, Russia, Canada, etc.
Your citations directly contradict your fantasy that this revolves around Bashar or punishing Russia. Bloomberg says the Saudis raised production only half a percent to defend their market share from the U.S., Russia and Canada's continued increases, basically what I said above. The price doesn't drop 20% because one supplier who has 12% market share increased their supply 0.5%.
you are just trolling. the articles talk about cutting prices and increasing production by Saudi Arabia. you said there wasn't an increase of production and that SA is not able to move the price. false. move along. thanks.
you didn't ask for citations and I'm not your researcher here (youtube syria yourself). I gave you the sources that I wanted for the points you questioned initially. I should have ignored your entire comment when you called everything I said as fantasy without giving any citations or proof for your opinions. now go and argue to the next table.
> That presumes they have some idea of the short-term forward volatility of the rubble, which no one does right now
The derivatives market still exists and you can null out future FX risk by paying whatever the derivatives market is charging for it now and passing that cost onto consumers.
>Otherwise they have no idea what the surcharge ought to be.
Nonsense. The surcharge is the difference between the spot rate and the futures rate with which they hedge. They can easily predict (to a reasonable degree) the volume they need to hedge by estimating their market.
Possibly? I buy quite a bit of services from SaaS companies in foreign countries as a US citizen with my American Express, am charged in CAD and EUR without issue (converted to USD on my bill).
I thought the option to pay in your credit card's native currency abroad was basically just a scam where the shop makes up a ridiculous exchange rate on the spot to overcharge you.
It's a complete scam. It's called "Direct Currency Conversion" and it's a essentially the payment processor and merchant hoping the consumer doesn't know what's going on.
Amex disallows on their network but Visa and Mastercard do not. Unfortunately, Amex also has forex fees on most of their cards.
It may be a scam for most cards, but I work for a company that does multi-currency cards that settle in the currency of your choice and our exchange rates are better than anything offered by anyone else in the card space. Just a bit more than interbank ForEX rates.
What does that have to do with DCC though? Maybe I'm missing something but that doesn't sound like it has anything to do with DCC. Any card with no forex fee is offering you a rate at just above the interbank rate if you avoid DCC.
This would cover the currency rate the day of transaction but would not protect them against losses during the time that it would take the transaction to clear.
Certainly Apple is adjusting their prices, having said that, a company like Apple, with most of their revenues coming from non-USD currencies, I'm certain that they hedge a large portion of their non-USD revenues/gross margin. The extreme volatility in Russia calls for a revision in product prices, sales forecasting, and fx hedges.
Those articles all say that the pre-orders will surpass the US market's equivalent pre-orders. I can't find anything making it official that on an annualized basis China has officially passed the US for iPhone sales. Last year Tim Cook was stating that it would occur soon.
Apple's US unit volume is close to 50 million per year. For 2014, Chinese consumers are expected to buy close to 300 million smart phones, and Apple has close to 15% of that market. So I'd say it's a pretty tight race currently. Apple has a big problem in China however, they're getting squeezed substantially by the domestics (Xiaomi etc). In the US that's not happening, and Apple has held on to their strong ~45% market share.
"China could soon surpass the U.S. as the biggest market for Apple Inc.'s iPhone. A report on China's Tencent Monday said Chinese consumers preordered 20 million iPhone 6 and 6 Plus smartphones in the first weekend they were available for preorder.
"If those numbers turn into sales when the iPhone is released Oct. 17, China will have doubled the 10 million phones sold in the first weekend in the U.S., setting it on the path to be the world's biggest market for iPhones."
A large number of phones sold in the US (and presumably other early release countries) are grey marketed to China though. I dont see any reliable estimates on the size of the market today though.
In that time the US has added $3 trillion to its GDP, going from $14.5 trillion in 2007, to a present $17.65 trillion or so. It's likely the US has reclaimed its title as the largest economic zone. Given the US is set to expand at close to 3% for 2015, and is growing much faster than Europe, that gap is likely to expand in the next few years.
Except that AAPL and others will almost certainly have rolling hedges and be essentially unaffacted by this move until they purchase new stock for payment after hedge horizon and/or larger than the hedge size (unlikely since demand will have contracted). This is therefore most likely simply a decision by AAPL not to want to sell product "off market" even if their margins would be safe, or a pure treasury profit directive (benefiting from their hedges directly and not using them to subsidise Russian purchasers).
Counterparty risk might be a tad too high at this point. Ruble is not that prevalent for any major players to sell options against, and a local player might have liquidity issues.
Indeed. If anything, all online vendors should be scrambling to review their pricing right now. I would expect more complex industries (where you can't just take a zero off the price overnight) might be grinding to a halt while waiting for the situation to stabilise.
A company loses money when its costs exceed its revenues. If Apple has to pay Warner Brothers a sum contractually specified in dollars for each copy of "Pump Up the Volume" that it sells, it could easily lose money if the rouble falls more quickly than they can adjust prices.
Heard a story on the radio this morning about a couple in Argentina that cooks meals for tourists in their home. They stopped processing areservations in pesos b/c they couldn't confidently predict the price even two months out. Now they only deal in dollars
I spent 5 months in Argentina - this is extremely common practice. For anything of value (rent, cars, etc.) everyone uses dollars, because you wouldn't want to be stuck with mountains of pesos then have the value slashed in half again.
It's not so much that they can't predict the price it's that every dollar is worth significantly more on the black market as the official market rate. Compare the dollar blue (Blue) row with the offical bank rate (Oficial). 13.19 vs 8.57. Many people change every peso they earn to dollars immediately. (www.dolarblue.net)
I believe that the banks are mostly Dollar->peso conversions and are extremely supply limited or cutoff from going the other way, and the black market is a both ways market.
There may be people buying iPhones for rubles, selling them online for other currencies, and then exchange it back to rubles for a profit. If that is indeed happening, I imagine apple would want to stop it before other markets are affected by side imports.
> There may be people buying iPhones for rubles, selling them online for other currencies, and then exchange it back to rubles for a profit.
Why would you do that sort of roundabout route when you could just trade rubles for other currencies directly?
Plus selling the phone back to get rubles doesn't seem like a smart move unless you think you've timed the bottom and the ruble isn't going to slip further against the dollar. Doesn't seem like people really think that.
At the moment, people would rather hold iPhones than rubles. I don't think that's in an attempt to turn a profit, it's just because an iPhone (or a major appliance, or a computer) is perceived to be a better store of value than rubles. Which given how electronics depreciate, is a really bad sign.
I was reading an article that until recently, iPhones cost less in Russia vs the nearby EU countries so there were lots bought in Russia from other EU countries.
Yes, but there's a simpler explanation as well: they would probably rather not be paid in Rubles for concern that the Rubles will be worth significantly less by the time Apple is able to exchange them for USD (or whatever other currency) than the Rubles were when the price was set.
It's exactly what's been happening for some time in October-November, RUB was devaluing so fast, that it became profitable to buy iphones in Russia and sell them in Europe.
That time they've raised the prices to compensate without closing the shop altogether.
Around 1980 the USD central bank interest rates were raised to above 20%.
In the end of the 80es when the Swedes had their big banking crisis, interbank rates were above 30% and the Swedish krona halved compared to the neighbouring Scandinavian countries.
The late 90es had the Asian currency crisis where most South East Asian currencies where more than halved against the dollar. That crisis more or less led to the unfolding of the biggest hedge fund at that time (LCTM) which had to be bailed out by the FED.
Thru the 90es the Russians defaulted and the ruble collapsed manifold.
I am curious on how Russians sees the current situation?
Is this the west/USA waging currency war against Russia?
Is this a return to "normal" with things being like they were in the 90es? Or Russia being isolated as under the Soviet union?
I met a few Russians on my travels. And I always enjoyed the company of those I got to know. My impression is that Russia has an young (age 20-30) emerging middle class who are smart, reasonable and completely unlike the image we have in the west of druken, violent crooks with bad taste.
Because, in addition to jhallenworld's point that not all economically relevant companies are publicly traded, not all publicly traded companies are listed on exchanges in their own countries.
Because Apple products are expensive and are known to retain value over time they are a good place for people to dump their rubles knowing that they'll be able to sell the ipads and recoup their cash. But Apple doesn't want to be left holding the bag of rubles.
I know it's well intentioned, but this power in the hands of a few seems to do more harm than good. Why not just let the populous up/down vote things as they see fit?
I wouldn't have upvoted an article about the general ruble decline (it's not news to me). I would (and did) upvote an article Apple halting Russian sales.
> I know it's well intentioned, but this power in the hands of a few seems to do more harm than good. Why not just let the populous up/down vote things as they see fit?
Err... this isn't a democracy and has never claimed to be one.
This particular change was a mistake and we fixed it.
> It drives me crazy.
I can understand that, and it bothers me that even one user feels this way. Unfortunately, every time I sit down to reply, multiple paragraphs insist on coming out, and I haven't had time to edit them. I'll try to come back and post something later. (Edit: sorry, I guess it'll have to be another time.)
It finally "stabilized" somewhere around 5500-6000:$1 but the exchange markets still wouldn't function. Finally, running out of currency, our hosts did the exchange with their personal funds, hoping that the dollars we were giving them would turn out to be a good investment later. I didn't really understand at the time what a huge risk they were taking, and how much money, relatively, they were converting for us.
It's one of many generous things that happened during that exchange that's given me a perpetual fondness for the Russian people, even if sometimes I share in many of the grim feelings for the national politics.