As The U.S. Readies For Default, Russia Outperforms Most Of The World

Economic success, thy name is…Russia?

The Moscow News reports “Russia buoyant, August looms,” observing that “Russia is increasingly the outstanding emerging market, still gaining while others retreat on worries about US and European sovereign debt.”

So…the world asks…what’s the cause for Russia’s economic buoyancy?

A strong equities market.  A successful commodities play in the global markets.  A robust and successful harvest and industrial production year.

So, yeah, in other words, the answer’s not a sexy one.  But it IS creating one of the most successful emerging markets stories of 2011.

On the markets side, with returns of nearly 35% over the past 12 months, Russia’s stock markets have outpaced the BRICs (and, of course, most the world).  Furthermore, a reliance on “strength-through commodities” in both the world’s investment and export markets has driven a bullish Russian economy.  Finally, a record-breaking harvest (particularly in regards to June’s grain output), combined with a vigorous industrial sector, has created a particularly robust 2nd-half of 2011 for Russia.

 Of course…not all is market sunshine and economic good-news for the Land of the Tsars.

Most interestingly, August has been a historically a calamitous month for Russia. 1998’s 8th month saw Russia itself defaulting on its own debt.  2 years later, 118 died in the Kursk submarine disaster.  And just last year, a severe late-summer drought ravaged Russia’s crops, driving a year-long ban on specific commodities exports.

And it is, in fact, 2010’s disaster which is the most relevant point-of-focus for Russia’s future. As we head into the dog-days of this turbulent 2011, Russia’s gains could soon be lost, mostly due to the country’s under-investment in its own agriculture and over-reliance on the world’s imports.  This reality, combined with a slow-burning inflationary market, could slow down Russia’s climb to the top of the world markets.

Consequently, while August – and all its impending economic gloom-and-doom – could spell the end of Russia’s impressive economic performance of 2011, the world’s markets would do well to start paying more attention to the “R” of the BRIC countries. For as exciting as Brazil may seem…as interesting as India appears…and as seemingly inevitable the China growth-and-dominate story is…Russia’s got the economic gold for 2011.  Let’s see how it does on the back-stretch.

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