There was a time when I was supposed to hate Russia. We were all supposed to hate Russia.
It was back when I was a kid, in the 1970s and ’80s. Russia – well, technically, the Soviet Union at that point – was country non grata. Russia was the imposing bear to our freedom-loving eagle. Communism versus capitalism. Mutual destruction. Cold War. Spies. Olympic rivals. Reagan and Gorbachev and all that.
Nowadays, it seems the American mood toward Russia has morphed – or, at least, the Republican view has morphed – if one is to believe a December poll conducted by The Economist and YouGov. Thirty-seven percent of Republicans now hold a favorable view of Russia’s Vladimir Putin, nearly quadruple the amount just six years earlier.
On a narrower level, more than half of Trump supporters think our new president holds favorable views of Russia… and that’s where we have an opportunity as investors.
Welcome to what I am calling the Year of Russia.
Later this month, Donald Trump assumes the mantle as Leader of the Free World. And one of the biggest winners will be Russia.
The bromance between Trump and Putin is almost cloying. Trump has said on several occasions that he wants to reset America’s relationship with Russia in a more positive light, and he has taken every opportunity to praise Putin.
In turn, Putin, a former KGB official who is an expert at mental manipulation, has praised Trump as “brilliant and talented.” Putin even went so far as to refrain from imposing tit-for-tat sanctions on America after the Obama administration expelled numerous Russky diplomats in the wake of alleged Russian interference with our recent presidential election. He did so knowing that Trump will, almost assuredly, immediately reverse Obama’s decision and allow Russian diplomats to return to American soil.
All that is just preamble to the main event, however: Russia’s return to the fold.
The Power of the Russian Bear
Russia has been on the outs with the global community since the Crimea crisis – a crisis that the West cast in the wrong light for its own needs. Under the Obama administration, America pressed hard to slap Russia around as punishment for reclaiming Crimea from Ukraine. The U.S. and Europe (largely under pressure from the Obama team) imposed economic sanctions on Russia, prompting Putin to retaliate with his own sanctions.
Thing is, much of Europe was never really fond of the sanctions – and that’s according to the various people I have talked to in Europe and in Russia as part of my travels over the last two years.
Europeans know their history. They know Crimea had been Russian territory since the late 1700s. Though they weren’t particularly fond of the civil war in Ukraine and Russia’s involvement, they do understand the reclaiming of historical lands, a character trait of Europe that has continually reshaped that continent for centuries.
More relevant to today, they know that Russia is an economic power that slow-growth and unemployment-addled Europe needs as a trading partner. Russians buy a ton of European goods, particularly from Germany, while Russian tourists spend billions annually on vacations and shopping in Greece, Spain, Italy, Germany, France and the U.K.
Europeans and Russians want the sanctions gone, and they both know the only reason the sanctions still exist is because of American pressure to keep Russia boxed in economically.
That, I am betting, will change very quickly after Trump takes up residence at 1600 Pennsylvania Avenue.
The 2017 Blockbuster
My bet: Donald Trump calls for an end to sanctions on Russia before his first 100 days in office are over.
Europe will eagerly and excitedly agree… and trade flows with Russia will ramp up quickly.
Those of us invested in Russia will win big as the Russian ruble trades higher against the dollar and as Russian stocks, now among the cheapest in the world, rebound.
The ruble is already up nearly 8% since Trump’s victory. That’s a significant move in the currency market. Meanwhile, Russia’s main stock market index, the Micex, is up more than 9%.
I’ve been recommending buying the Russian ruble for pretty much the past year, and I even opened my own ruble account.
I recommended a particular Russian investment that is up 13% so far, and based on historical rebounds the Russian stock market has experienced after various crises, I expect that investment could see triple-digit gains once sanctions are lifted.
Every time Russia has an economic crisis, the local market gets annihilated. And every time that happens, the Russian market rebounds smartly when the crisis passes.
We are now approaching that inflection point. If Trump does indeed call for the end of sanctions – and that seems all but assured – Russian stocks are going to have a blockbuster 2017.
Get in now, while prices are still ridiculously cheap.