Struggling Russians Turn to Day-Trading to Pay the Bills
(Bloomberg) -- When Natalia Orlova isn’t working a $400-a-month job at a Moscow factory that makes Cold War-era space rockets, she’s glued to the trading app she uses to speculate on oil.
Lately, the 54-year-old has made a small fortune as crude jumped to 3-1/2 year highs, some of those gains linked to America’s latest sanctions on Russia. Like tens of thousands of Russians, Orlova says day trading is the key to surviving economic gloom: she just bought a new Infiniti and is saving up for an apartment for her two grandsons.
“Financial markets are the one place where you can really change your life and pull yourself out of poverty,” Orlova said at a café near her three-room 1950s apartment in a western suburb of Moscow, smiling as she points to the tablet she’s just pulled out of her floral purse. “Since yesterday evening, I’m up 1.5 million rubles ($24,000).”
She's doing extraordinarily well -- the majority of Russians whose jobs don't pay the bills would have to work years to earn that much. Whether it’s trying their luck on markets, driving Ubers, mining Bitcoin in Siberia or seeking stardom on YouTube, more and more Russians are taking second jobs just to stay afloat.
In fact, as Russia limps out of the longest recession of Vladimir Putin’s 18-year rule, nearly four of every 10 families are struggling to afford food and clothing, according to a survey conducted by the Higher School of Economics, one of Russia's top universities.
Making matters worse, the U.S. slapped penalties on the owner of aluminum giant United Rusal Co., sending the ruble plunging 8 percent in April, the most for any month since 2015. That threatens to stoke inflation, which only last year fell below 4 percent after years of runaway price growth.
“People are still struggling. In real terms, wages aren’t even close to levels they were at before the crisis,” said Lilit Gevorgyan, principal economist for Russia and the CIS at IHS Markit in London. “Many have an official full-time job and then at the same time they engage in entrepreneurship activities which aren’t necessarily reported or regulated.”
Despite the wild ups and downs, day trading has grown in popularity among Russians, many of whom are tired of trying to live off official wages and watching bank savings dwindle in real terms. The Moscow Exchange opened 250,000 new day trading accounts for citizens last year, taking the total to almost 1.4 million. Individual traders are behind about 37 percent of equity volumes and 7 percent of currency turnover.
In many ways, their timing is great given the volatility stemming from Putin’s erratic foreign policy and his deepening rift with American counterpart Donald Trump over the war in Syria and allegations of Russians meddling in elections abroad. On April 9, the first trading day after the U.S. updated its blacklist of Russian oligarchs and companies, the Moscow Exchange registered 4,000 new clients, four times more than normal.
The bourse is even offering training and organizing competitions for day traders to keep tabs on their activities and prevent amateurs from suffering big losses, although it says their presence still isn’t big enough to really influence price swings.
Yet with the sheer unpredictability of geopolitics, the chances of getting burned are high. Like most investors, Alexander Semenyakov, a Moscow-based computer programmer who trades Russian stocks in his spare time, was caught off guard by the latest sanctions. He lost half the money he made last year when the benchmark stock index slumped 8.3 percent in response.
“Luckily I don’t invest all of my savings,” Semenyakov said. “The market is very harsh at the moment. A lot of people have lost money.”
He still thinks he’s better off investing though. Russians’ disposable income is just starting to recover after two years of declines since the collapse in oil prices in 2015.
Risking It All
So many of the nation’s 144 million people now rely on the so-called gray economy that almost a third of wages are derived from unregulated activities, according to Higher School of Economics estimates. One in five sought additional sources of income in 2017, up from 17 percent the year before, it said.
Orlova has gotten used to putting everything on the line. After making her first trading fortune speculating on shares of Yukos oil company when one of its biggest shareholders was arrested in 2003, she sold the small kitchenware stand she was running by a Moscow subway station to invest all her money in markets.
That paid off handsomely for a while—until her entire savings were wiped out during the global financial crisis in 2008. The same happened during Russia’s 2014 market crash. Both times she made do with wages from her part-time job as an administrator at the Khrunichev Space Center that builds Proton rockets, until she could get herself back on her feet and jump in all over again.
With the female retirement age of 55 around the corner, Orlova said investing is the only way to support her daughter, a poet, and three- and eight-year-old grandsons. In the last quarter of 2017, exchange data show the babushka made 4.5 million rubles.
“I need to leave them something because I don’t know how they will survive without me,” Orlova said.
©2018 Bloomberg L.P.