“David, this is an excellent article. It clearly and simply illustrates why 'governance is everything'. In the short term corrupt regimes can bleed an economy yet keep most of the population on side. But eventually the cupboard is bare and economic reality asserts. Russia seems to be there now. Sadly autocrats revert to the time-honoured solution of external 'adventures' as Putin is now. For me as an investor, the message is to avoid the siren calls of the followers of CAPE who are saying Russia is cheap. Like failing companies with low a PE, countries can be cheap for good reason, and continue to cheapen.”

David Fuller's view

Thanks for the article for which I have attached links below, and also for your concise summary with which I completely agree.  If we were applying Robert Shiller’s cyclically adjusted price-earnings ratio to a democratically governed free market economy that was out of favour, I would take notice.  Unfortunately, Putin’s Russia remains a kleptocracy.  Moreover, the trend of its stock market has been greatly flattered by persistent devaluations which you can see on this 20-year chart of Rubles per 1 US Dollar.

I am sure that subscribers will appreciate the article by Sergei Guriev, kindly forwarded in the spirit of Empowerment Through Knowledge.  Guriev would certainly know what he is talking about and he has written this article at some personal risk. 

Incidentally, I am also posting a PDF version of the article because I do not know how long the link kindly forwarded will be available.  Also, some subscribers may have an access limitation with this link: http://on.ft.com/1pN3GB3.