Yevhen Pentsak's advice: crisis will teach and cure, but not everybody and not now

Yevhen Pentsak (50) 27 April'09

Tags: crysis, investment portfolio, strategy, financial market, investment, investor, gold, hryvnia, euro, dollar, credit, Yevhen Pentsak

Russia, Ukraine and Kazakhstan are suffering from the "hangover" after the explosion of the credit bubble and the fall on raw materials; the fixation of the dollar rate will not stand long in Ukraine and the rate will be within 8-14 UAH throughout the year.

Last week turned out to be lavish with meetings with talented and interesting people. In particular, well-known financiers Vladimir Litvin (ex-deputy minister of Finance of Ukraine) and Rory MacFarquhar, economist of Moscow Goldman Sachs office visited kmbs. They kindly shared their opinions with the analysts of MBF (Master in Banking and Finance at kmbs) about the prospects for the future development of our country, expressing merely theirs own views, which may differ with the Government's position or the position of Goldman Sachs. In particular,

Rory MacFarquhar believes that Russia, Ukraine and Kazakhstan «suffer from «hangover» after the explosion of credit bubble and the fall on raw materials».

The expert does not believe that fixation of the dollar rate in Ukraine will stand long because of declining the National Bank reserves with 1 billion dollars per month rate.

Rory believes that one of the main causes of the crisis was the emergence of cheap Chinese production on the U.S. market. As a result, American families were able to save money and invest in market securities, deposits, real estate, etc. The demand increased so increased the price, and this situation brought new players to the market, and the «bubble» began to form. An extra bank capital appeared in the U.S., and they started to hand out mortgage loans to people that is a priori could not repay them. Prices rose and credits began to distribute to everybody left and right, without taking into account the borrower's rating. The capital was spent on the emerging economies without stopping at the USA market. The Asian markets had a conservative policy of foreign holdings because they have experienced the same crisis in 1997. Eastern and central Europe countries have felt “taste” of cheap money.

According to expert’s opinion, within a short period of time Russia external debt has increased tenfold, having reached $ 500 billion, 80 billion from this sum must be paid in 2009. Ukraine external debt is estimated at $ 40 billion, 10 billion of this sum must be paid in 2009. But cheap money disappeared from the market, and international corporations do not want to enter the Ukraine now.

There is a prognosis for 3.5% GDP drop for Europe and, in particular, for export-oriented Germany - at 5.5%. Therefore, only Germany, Japan and United Kingdom will have a possibility to get a capital because of well-protected property rights for investors. Russia and Ukraine certainly will not get any capital. That is why there is a prognosis for significant drop for GDP in Russia - 9%, and even more in Ukraine - 15%. (We will remind you that the World Bank predicts GDP drop in 9% under the optimistic scenario).

It is too expensive for a Western investor to hedge the risks of entering into Ukraine via the CDS (credit default swaps). And that is why the growth of Ukrainian economy will not recover soon. The expert believes that the most promising sectors of Ukrainian economy are agriculture and oil and gas production. Also he made the forecast at 8-14 UAH per dollar during the year. Analysts say that this crisis will teach a great deal in the short term, will enable to make the appropriate conclusions in the medium term and will not teach anything - in the future.

This week we had an opportunity to speak in kmbs with Matthias Hagmann, a leading London financial analyst. Mathias shared his analytical models of prognosing and investment strategies construction at global financial markets with audience during master class. He revealed a simple secret - what has brought him success as a manager of a large investment fund at the falling market in 2008.

«The trouble does not come alone. Markets fell in groups. After a bad Tuesday it is likely to have a worse Wednesday. You may earn on the crisis, but also you may lose big money», - writes Benoit Mandelbrot in his book «Not(obedient) markets».

«A progress is absent in the history of mankind. The democracy is a delusion. Humans are essentially primitive, emotional and rebellious. More intelligent, capable, strong and prudent humans take away a lion's share, while the weak one starve and die out, saving society from extinction», - said Vilfredo Pareto, the famous Italian economist.

Vilfredo Pareto is well-known by his principle: 80% of consequences are caused by 20% of all influences. In business this principle is formulated in the following way: 80% of sales are caused by 20% of customers. And in the original work of Vilfredo Pareto it was stated that 80% of the Italian land belong to 20% of owners.

I suggest to keep gold-currency portfolio in the following form:

  • 20% - in hryvnya,
  • 30% - in dollar,
  • 30% - in euro,
  • 20% - in cash or cashless gold.

(bilateral Pareto’s principle regarding hryvnya and gold: 20% in hryvnya, and the rest - in dollar, euro and gold; 20% - in gold, and the rest - in the currency).

The financial market game - is only a part of the game called life! A game should bring pleasure, otherwise why play this game?

I want to wish all the players to be winners at the crisis financial markets, to be among 20% of the richest people and do not forget about the other 80%! Perhaps they will not forget about you in other games, where they will be more successful!

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See also:

Мысли среди недели: индуктивные и дедуктивные методы исследования фондовых рынков

Очень часто мне приходится дискутировать о применимости тех или иных финансовых теорий к текущему анализу рынков, осуществление на его основе прогнозов и инвестиционных решений. Еще чаще мне приходилось наблюдать за спорами теоретиков и практиков на финансовом фундаменте. Меня всегда удивляло, почему они спорят? Ученые и исследователи используют общепринятые модели, описанные во всех классических учебниках, их знает каждый магистр по финансам. Почему выводы этих моделей не нравятся практикам?

Comments:

Matros 28/04/2009 10:58

Євгене, вітаю.
Читаючи статтю мене зацікавило, чи погоджуєтесь ви із "Найперспективнішими галузями української економіки ... сільське господарство та галузь добування нафти і газу"?
На чому, на вашу думку, може виїхати Україна? Чи будемо ми вузькоспеціалізованою країною через 10-15 років?

pentsak@kmbs.com.ua 30/04/2009 09:31

Дякую за запитання. Мені його задавали на зустрічі у KMBS (http://innovations.com.ua/uk/articles/4/19/955). Я думаю, що Україна повинна використати свою перевагу у наявності якісних земельних та інтелектуальних ресурсів. Тому я би ставив на сільське господарство та ІТ (софт девелопмент). Фармацевтична галузь в Україні також має хороші перспективи, але для цього знадобляться потужні прямі інвестиції. А продаж нафто і газоносних родовищ відбуватиметься своїм шляхом, хто має капітал - той вирішує.

getz@ukr.net 01/05/2009 17:15

Євгене, доброго дня.
чи не здається вам що прогноз дуже "розпливчастий" як для серйозного аналітика?
курс гривні за 1 долар: 8-14 протягом року. :-)

pentsak@kmbs.com.ua 01/05/2009 18:30

Доброго дня! Якщо ситуація слабо прогнозована, то й усі прогнозні показники виходять "розмитими". Зокрема, курс долара 8-14 грн. - це лише 70% інтервал довіри. Серйозність аналітика тут ні до чого. Звичайно, "серйозність" аналітика оцінюється припущеннями і моделями, якими він калібрує її параметри. Мої прогнози, побудовані на експертних оцінках топів та фін. менеджерів, також не є концентрованими навколо одного значення: 8,2-9,6 грн. до кінця року. Проте такі прогнози працюють.
Стосовно прогнозів аналітика, то доречною тут може видатись приказка: "better safe than sorry".

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