GO PUTIN Russia Freezing Spending In Response to S&P Cut

Putin’s getting smart. It’s nice to see a head of State do something that makes sense economically. All signs point to the fact that whoever is running Russia’s economy – and it probably is not Putin – really knows what he, or should I say she, is doing. I believe it is Elvira Nabiullina who’s really running the show, and so far, she’s awesome.

First of all, despite a gigantic Ruble collapse to 78 Rubles to the dollar from 33 earlier in 2014 (we are now at 67), Russia has added to its gold supply. When your currency is in free fall, you don’t generally buy gold. You sell it in order to prop up the value of your currency. But Russia did not do that. Instead, it ate through some of its paper forex, which is to be expected. Nabiullina is intent on keeping Russia’s gold. That is huge, and very good for the Ruble long term.

Second, in response to the S&P (those geniuses who can’t predict a single economic crisis and gave Lehman a AAA rating just before it collapsed) cutting Russia’s bond rating to junk status, Putin (with Nabiullina’s advice I assume) announced a total government spending freeze.

Finance Minister Anton Siluanov announced Tuesday that the government has adopted an anti-crisis plan that will freeze the level of spending. The plan also sees the budget returning to a surplus as soon as in 2017 and the government preparing structural reforms “so that we do not burn recklessly through Russia’s sovereign reserves.”

Wow – a State actually freezing spending in response to an economic crisis instead of printing and bailing out. This is somethin’ else. I love it.

Russia may go through some turmoil until oil prices rise again, and they will, but Nabiullina, or whoever is really running the show, is setting Russia up to devour the West when its their currencies’ turn to collapse. With the ECB printing €50B a month and the US M2 money supply growing at close to 7% annually, oil will eventually turn back up.

When it does, the Russian bear will roar.  Right now its hibernating. But not for long.

For those interested in placing bets on Russia, the relevant ETF is RSX.

Peter Schiff’s 2015 Gold Prediction

I’m getting word and sentiment from multiple sources that I follow that 2015 will be the year of gold. Here is Peter Schiff‘s forecast for this year.

My followers will know that the highest-paying gold move, one that will pay close to 1800:1, is 2016 or 2017 GLD Call Options as far out of of the money as you can go. Put $1000 in January 2017 GLD Calls at $225, and if gold does what it did in 1980, you will be a millionaire by 2016.

That is not a move to put more than 1% of your portfolio in, just to caution you. If GLD does not reach $225 by 2017 you will lose the entire investment. If anyone is interested in a post on how options work, let me know and I’ll write one. For now check my article on this specific investment move at TheStreet.