
Apple Stops Online Sales in Russia Over Ruble Fluctuations - coloneltcb
http://www.bloomberg.com/news/2014-12-16/apple-stops-online-sales-in-russia-over-ruble-fluctuations.html
======
bane
When I was younger, I took part in one of the first post-cold war student
exchanges between the U.S. and Russia. A few days after I arrived there
(during a very hot summer in the Eastern Urals), the Ruble (the version they
were using at the time) collapsed from something like 1500:$1 to 5500:$1 and
it became impossible to convert currency.

It finally "stabilized" somewhere around 5500-6000:$1 but the exchange markets
still wouldn't function. Finally, running out of currency, our hosts did the
exchange with their personal funds, hoping that the dollars we were giving
them would turn out to be a good investment later. I didn't really understand
at the time what a huge risk they were taking, and how much money, relatively,
they were converting for us.

It's one of many generous things that happened during that exchange that's
given me a perpetual fondness for the Russian people, even if sometimes I
share in many of the grim feelings for the national politics.

~~~
markcerqueira
"Our hosts did the exchange with their personal funds, hoping that the dollars
we were giving them would turn out to be a good investment later."

Sorry, but I got lost reading this. Mind explaining it a little more
thoroughly?

Your Russian hosts gave you Rubles for your dollars right?

~~~
bane
Yes.

In Moscow we could use Dollars more or less at most places, but deeper into
the country it was harder for the Russians to use dollars so the local economy
was Ruble only.

If the Ruble continued to fall, and someday the exchange markets reopened,
they could buy more Rubles with the dollars they exchanged with us. This is
important because while the exchange rate continued to worsen, their income
stayed relatively the same. If they made (pulling a number out of thin air)
$10,000 a year, or R15m at the start of our trip, they were only making $2,800
a year at the end even though the number of Rubles they made stayed the same.

If the Ruble continued to fall, say to 8,000:$1 they'd end up making less than
$1,900 a year. However, if they bought USD from us at 5500:1 it meant that if
it fell, they could buy back 8,000 Rubles for each dollar later, keeping them
closer to $2,800 exchangeable dollars.

If the Ruble reverted back to the original rate (1500:$1) then they'd lose
their shirts because they just gave us their currency at less than 1/3 value.

Just as importantly, if they were making about $10,000/year, exchanging $400
or whatever with an American kid meant that half their monthly salary was
locked up in nonexchangeable USD. The USD had value, but it was non-liquid at
that moment.

IIR they weren't able to exchange the dollars until later that year and there
were caps on the amount that could be exchanged at once. The next year we
repeated the exchange program and I believe some of those dollars we exchanged
with them were brought with them to use here.

A few years later, in 1998 the Ruble was reformed on a 1,000:1 basis.

Things were devaluing so fast that people still had Kopek coinage sitting in
coin jars that were unspendable and stacks of low denomination currency (1
Ruble to 500 Rubles) that while spendable, were incredibly inconvenient.

~~~
sireat
Now your hosts were nice but they were not completely altruistic either.

Despite often being illegal, Soviet Union had a history of people holding a
portion of their savings in foreign currency(just look up Bulgakov's Master
and Margarita or Ilf and Petrov's Golden Calf for early references).

So if your local currency is in a free fall you would be well advised to
convert your local roubles into hard currency.

I rememember very well the day that my father exchanged 10,000 roubles for
$1,000 in the late 1980s from an American tourist. The official rate was ~1.3
dollars for 1 rouble (rouble was officially more valuable than dollar!) at the
time, but the catch was you could only exchange a few hundred at a time in
very special circumstances. (I believe this is how it is in Venezuela right
now too, other places with currency controls).

So your hosts were making a nice gesture but also being smart in times of
uncertainty because historical precedent was that their roubles would become
worthless not come up.

------
mrb
It is interesting to watch the effect of the Russian ruble collapse on Bitcoin
markets... It is causing an influx of Bitcoin buyers on Russian exchanges:
over the last 14 days, BTC is up +11% from 19000 RUB to 21000 RUB with most of
the uptick happening in the last 24 hours
([https://bitcoinwisdom.com/markets/btce/btcrur](https://bitcoinwisdom.com/markets/btce/btcrur))
despite being down -13% from 380 to 330 USD on American markets
([https://bitcoinwisdom.com/markets/bitstamp/btcusd](https://bitcoinwisdom.com/markets/bitstamp/btcusd)).
There is an opportunity for arbitrage! The ruble is collapsing so fast that
even buying at 21000 RUB is a steal (worth 310 USD as of Dec 16 21:00 UTC).
And the collapse will likely continue in the next few days and weeks, so the
arbitrage opportunity will grow bigger.

Edit: @potench preev.com is an inaccurate indicator of the BTC/RUB rate
because it is basing its calculation "based on the USD Bitcoin price" per its
footnote, so of course it will never show a big deviation from the BTC/USD
rate. For the true rate you need to look at the real-time bid/ask spread on a
BTC/RUB exchange such as btc-e.com which is why I linked to
[https://bitcoinwisdom.com/markets/btce/btcrur](https://bitcoinwisdom.com/markets/btce/btcrur)
or you can also look at
[https://btc-e.com/exchange/btc_rur](https://btc-e.com/exchange/btc_rur):
bid/ask is 20855/21099 RUB as of 22:09 UTC, so the arbitrage opportunity is
approximately 2000 RUB.

~~~
techrat
Bitcoin, however, was still a worse investment over the Ruble for all of 2014
(So far.)

[http://qz.com/312598/bitcoin-is-the-worst-investment-
of-2014...](http://qz.com/312598/bitcoin-is-the-worst-investment-of-2014/)

~~~
modeless
Barely! The ruble is down 50% YTD and Bitcoin is down 54%. But also consider
that in 2013 the Ruble went down 6% and Bitcoin went up 800%.

~~~
AlexMax
That's actually even more distressing. You want stability out of a currency,
not wild swings.

~~~
Sevrene
Indeed, but keep in mind they are talking about investment, not currency. Wild
swings are great for investment, as long as it swings up eventually.

~~~
techrat
Even in terms of investment, you want steady, constant growth... not
unpredictable swings.

------
DenisM
When a currency is devaluating but interest rates are low, the banks can
borrow at low rate, sell rubles for dollars into sliding market, wait for
ruble to slide more, then repay the loan with cheaper rubles and make a big
profit. The trouble is they also accelerate the slide, courtesy of the low
rates. The central bank rate increase was likely done to head off that
particular danger. Of course there are many other factors pressing the ruble
down as well, which central bank can't control, but at least they are trying
to prevent worseing the situation with their own hands.

Long term high interest rates plus high cost of import supplies will likely
strangle the economy though. Increased demand for domestic goods due to higher
import prices is a good thing, but one needs capital to operate most
businesses. When interest rates are high you can't borrow, and when political
situation is flaky fewer people will want to buy equity.

~~~
vegabook
at 17% the interest rate paid by the RUB shorts amounts to 0.046% per day,
whereas just today trough to peak USDRUB moved 35%. In this environment unless
you "do a Sweden/Slovakia" and ramp rates to 1000% by preventing offshore
banks from funding onshore (a form of capital controls), a measly 600bps hike
is meaningless.

~~~
JumpCrisscross
USBRUB moving 3500bps today tells us volatility is high. It does not indicate
that we can expect an average move of 460 bps per day going forward. Carry
trades perform horribly amidst increasing or ambiguous volatility. Their
leveraged structures make sharp adverse swings game overs.

~~~
vegabook
sure - but we're talking RUB specs who are in it for a 5 day move. Nobody is
expecting annualized vol of 566% (35% * sqrt(262)). RUB has been moving
several chunky percentages daily for 2 weeks at least, and is down 50% against
the dollar 3 months. 17% annualized doesn't make an iota of difference in that
kind of market.

Where it _does_ make a difference is that long end bonds (OFZ 28s) are now
yielding 15%. That's 15% for 13 years ;) Chunky yield in the long end. That
will tempt the long term investors in (IF big if, they don't impose controls).
Care to catch the falling knife?

~~~
foobarqux
Can you elaborate on the impact of capital controls? Are bond investors not
able to trade out of their positions?

~~~
vegabook
The imposition of capital controls signals a country that is willing to trap
money within its borders. That very fact is scary, and scary requires
compensation. While that usually does not apply to what are classed as "long
term" investors (direct purchasing of real assets in the country, purchasing
of equities or bonds usually for a minimum time period, but NOT derivatives),
it still requires an additional risk premium such that bonds will then need to
be cheaper still (yield more) to compensate.

The more relevant short term argument that I am referring to, is that if they
were to "squeeze" the offshore market by disallowing or limiting the lending
of RUB by local banks to offshore banks, then they could easily engineer a
massive squeeze on the rouble offshore. That is all those people who are short
RUB would suddenly find that "rolling" those positions (that is, borrowing RUB
so you can sell it), suddenly costs a fortune. This is even true in FX
forwards because ultimately these are a derivative of interest rates. If it
costs you a fortune to "fund" the RUB, then the converse is that it pays you a
fortune to lend RUB to the market. If it pays you handsomely simply to lend
short-term RUB to the market, there is no reason to buy long term bonds, whose
price must "compete" with the front end of the yield curve. In short: high
short end rates will deter purchasing of any instrument with a (significantly)
lower yield in the long end of the yield curve. If we were to get the above
mentioned RUB squeeze to anything like 100% or higher, imagine how silly it
would be to buy a long end bond at 15% (even though yes yes, long term it
might still be a good investment - but that would require a long discussion
about the implied path of future rates. Humans have proven themselves to be
very short termist in markets and thus it is likely that long term bond prices
would fall, dramatically in that scenario).

So to answer your question directly, bond investors still would be able to
trade out of their positions (though in a disorderly market even that cannot
be taken for granted), but at a very low price.

~~~
foobarqux
Thanks, super informative. I appreciate it.

------
mikhailt
A company makes a smart decision to pause sales in order to ensure they're not
selling their products at a loss due to the drop on the value of rubies....

One shouldn't expect otherwise.

~~~
JumpCrisscross
Putin has an annual press conference coming up soon. Many anticipate a
softening of his stance on Ukraine, in a bid for loosening sanctions. I am
more fearful of him introducing ham-fisted capital controls. Apple may be
similarly cautious.

~~~
foobarqux
Shouldn't we all be afraid of the opposite, namely war, like with Japan 1941?
After all, one of the major reasons for trying to retain control of Ukraine
was for the energy resources and pipelines; the rout in oil has shown how
important energy is to the Russian economy and I would expect that losing
control of Ukrainian energy assets would permanently impair the Russian
economy.

~~~
lmm
War is the worst case scenario for everyone. I don't think even Putin would
leap straight there, though if you think it's a possibility then yes it's a
bigger thing to fear than capital controls.

If the Russian economy is already overdependent on oil money, they should be
looking to diversify, not to acquire more energy assets.

~~~
fred89
[https://en.wikipedia.org/wiki/Russo-
Georgian_War](https://en.wikipedia.org/wiki/Russo-Georgian_War)

------
valgaze
Heard a story on the radio this morning about a couple in Argentina that cooks
meals for tourists in their home. They stopped processing areservations in
pesos b/c they couldn't confidently predict the price even two months out. Now
they only deal in dollars

These people:
[http://www.npr.org/blogs/parallels/2014/12/16/370979773/arge...](http://www.npr.org/blogs/parallels/2014/12/16/370979773/argentinas-
approach-to-inflation-ditch-the-peso-hoard-u-s-dollars)

~~~
osipov
Apparently bitcoin is very popular in Argentina for that exact reason:
[http://www.economist.com/blogs/schumpeter/2014/06/bitcoin-
ar...](http://www.economist.com/blogs/schumpeter/2014/06/bitcoin-argentina)

~~~
forgotpasswd3x
You know your currency is fucked when Bitcoin is seen as the more stable
option.

------
bigdubs
Another facet of this is an increase in buying in rubles to turn a cratering
currency into real value before it's worthless.

~~~
draugadrotten
Yes, this is exactly what happened today. Many Russians were buying anything
they could for their cash.

[http://www.cnbc.com/id/102273163](http://www.cnbc.com/id/102273163)

------
TorKlingberg
There may be people buying iPhones for rubles, selling them online for other
currencies, and then exchange it back to rubles for a profit. If that is
indeed happening, I imagine apple would want to stop it before other markets
are affected by side imports.

~~~
Kadin
> There may be people buying iPhones for rubles, selling them online for other
> currencies, and then exchange it back to rubles for a profit.

Why would you do that sort of roundabout route when you could just trade
rubles for other currencies directly?

Plus selling the phone back to get rubles doesn't seem like a smart move
unless you think you've timed the bottom and the ruble isn't going to slip
further against the dollar. Doesn't seem like people really think that.

At the moment, people would rather hold iPhones than rubles. I don't think
that's in an attempt to turn a profit, it's just because an iPhone (or a major
appliance, or a computer) is perceived to be a better store of value than
rubles. Which given how electronics depreciate, is a really bad sign.

~~~
oldspiceman
If Apple is slow to update its prices online you have a clear arbitrage
opportunity.

------
chvid
Around 1980 the USD central bank interest rates were raised to above 20%.

In the end of the 80es when the Swedes had their big banking crisis, interbank
rates were above 30% and the Swedish krona halved compared to the neighbouring
Scandinavian countries.

The late 90es had the Asian currency crisis where most South East Asian
currencies where more than halved against the dollar. That crisis more or less
led to the unfolding of the biggest hedge fund at that time (LCTM) which had
to be bailed out by the FED.

Thru the 90es the Russians defaulted and the ruble collapsed manifold.

I am curious on how Russians sees the current situation?

Is this the west/USA waging currency war against Russia?

Is this a return to "normal" with things being like they were in the 90es? Or
Russia being isolated as under the Soviet union?

I met a few Russians on my travels. And I always enjoyed the company of those
I got to know. My impression is that Russia has an young (age 20-30) emerging
middle class who are smart, reasonable and completely unlike the image we have
in the west of druken, violent crooks with bad taste.

I would hate to see Russia return to isolation.

------
lelf
If you missed this fun (or not) trivia fact: Apple is worth more than the
entire Russian stock market (as of the middle of November)
[[http://www.bloomberg.com/news/2014-11-14/apple-could-
swallow...](http://www.bloomberg.com/news/2014-11-14/apple-could-swallow-
whole-russian-stock-market.html)]

~~~
DMac87
These comparisons are almost meaningless - e.g. Apple is worth about the same
as Korea's stockmarket, almost as much as China's.

~~~
adventured
Rather than meaningless, it's amazing.

Apple is not worth anywhere near as much as China's stock market however. The
Shanghai Stock Exchange all by itself is worth several trillion dollars.

------
guelo
Because Apple products are expensive and are known to retain value over time
they are a good place for people to dump their rubles knowing that they'll be
able to sell the ipads and recoup their cash. But Apple doesn't want to be
left holding the bag of rubles.

~~~
oldspiceman
They hedge their currency risk so it's unlikely they have much exposure to the
Ruble.

~~~
jbooth
Any hedge they have is probably based on typical sales volume, this situation
is not typical.

------
dang
We changed the URL from [http://www.bloomberg.com/news/2014-12-16/apple-stops-
online-...](http://www.bloomberg.com/news/2014-12-16/apple-stops-online-sales-
in-russia-over-ruble-
fluctuations.html?hootPostID=6d80e7f3350c6b65d4f4721218e9b939), which is about
a side effect (Apple halting online sales), to the more general article about
the story, via
[https://news.ycombinator.com/item?id=8757165](https://news.ycombinator.com/item?id=8757165).

Edit: Ok, we'll change it back. Sorry for the mistake.

~~~
manticore_alpha
Great, now all the comments lost context. This is asinine. Don't modify the
submissions, or titles.

~~~
colinbartlett
It drives me crazy.

I know it's well intentioned, but this power in the hands of a few seems to do
more harm than good. Why not just let the populous up/down vote things as they
see fit?

I wouldn't have upvoted an article about the general ruble decline (it's not
news to me). I would (and did) upvote an article Apple halting Russian sales.

~~~
davidw
> I know it's well intentioned, but this power in the hands of a few seems to
> do more harm than good. Why not just let the populous up/down vote things as
> they see fit?

Err... this isn't a democracy and has never claimed to be one.

