Watchful Waiting in Russia On March 2, 1999, as one of a small number of investors in a fund that invests in Russian companies, I received a note from the fund's portfolio manager. His note conveyed a tone of watchful waiting. My thoughts follow. 1. The anti-West sentiment in Russia is universal. 2. The business barons are wounded but still influential. 3. The visible "reformers" are inconsequential. 4. The Russian populace's tolerance for misery is intact. 5. Russian government debt has to be and will be in default. 6. The role of international institutions (IMF) and foreign governments is inconsequential. 7. There was no mention of nuclear weapons, terrorism, internal crime, or corruption. 8. A three-way presidential race is on. 9. Trade is the most liquid part of the Russian equity market, but I would advise against investing now. 10. There may be some good investment projects in niche areas, but they are difficult to find. 11. The loss of the middle class and, perhaps, the financial infrastructure is a big loss. 12. The manager's tone is one of nostalgia, sadness. 13. Is the crisis bottom deferred or avoided? 14. What is, or should be, the present role of the manager? 15. How business functions today in Moscow, St. Petersburg, and elsewhere-my impression is that money in transit is stolen and political payoffs are more local. 16. When will the entire story of privatization come out? It has started. 17. Western government and business were duped . . . stupid and/or naive. Change? Many of us played a role, at different times, in developing the financial structure in Russia. I wish we had done it better. Dean LeBaron
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