Bloomberg, December 17th, 2014
"Russian trade and financial linkages to the U.S. are small"
"...but Russian linkages to Europe are large"
"Small linkages" visualized, circa 1998
One hedge fund with linkages to Russia, leveraged 25x, monkey hammered the S&P 30%:
When Genius Failed. To Exist.
The last collapse of the Russian stock market began in 1997, and originated due to "linkages" to the Asian currency crisis which was spawned by the Japanese Yen carry trade having pushed "hot" money into the Asian Tigers. When that flow suddenly and violently reversed (sound familiar?), the entire shit show collapsed. The Russian Ruble collapsed partly due to these currency linkages and also because oil was collapsing to $10/barrel at the same time (sound familiar?), Russia defaulted in 1998.
That Russian default, caused the world's largest private hedge fund "LTCM" (Long-term Capital Management) to implode, since it was leveraged a mere 25x, which in turn caused Wall Street to implode (see above), so then Greenspan stepped in and lowered interest rates by a full percentage point overnight from 5.5% to 4.5% hence "saving the world" and igniting the Dotcom bubble which propelled the Nasdaq higher by 270% over 15 months from the low in October 1998, to the high in March 2000, upon which it collapsed 80% within two years. As it turns out, LTCM was founded by multiple PhDs in Finance from Harvard, MIT, and Chicago, two of whom were Nobel Prize Winners.
So let's get this straight: the global carry trade is orders of magnitude larger today than it was back then. Interest rates are already at 0%, the Yen just staged its biggest reversal in years (strengthening), global stock markets peaked in July, the Ruble has been cut in half, oil cut in half, no one has any clue how many banks and hedge funds today have exposure to Russia, and yet the "linkages are small"?
Dollar/Yen, then and now:
1997 Deja Vu. Literally.
Russian Stocks (dollar denominated):
Russian stocks with Brent crude
Guess which is which and then pretend that it matters:
Let's pretend that this isn't going to fuck up year-end bonus.
This year and every other year...
