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Russians Who Invested in Kremlin-Touted 'People's IPOs' See Their Savings Vanish - washingtonpost.com

MOSCOW -- Anatoly Sisoyev always considered himself a patriot. As a child, he lost his father to an accident in the Soviet space program. As an adult, he served 30 years in the military, retiring at the rank of major. His son followed him into the army and was killed in Chechnya at the age of 18.

Through it all, he said, his faith in the Russian government never waned.

So when he heard radio ads two years ago encouraging citizens to invest in the initial public offerings of state-owned companies, Sisoyev lined up to buy shares, first in the oil-and-gas giant Rosneft and a year later in the nation's second-largest bank, VTB.

[...]

Now, as Russia confronts its worst economic crisis in a decade, the value of Sisoyev's shares has plummeted, wiping out most of his life savings. At 65, he is working as a part-time security guard because food prices are climbing faster than his meager pension. In a recent interview, he buried his face in his hands and fought back tears as he explained how he is trying to treat his sick wife by reading old medical textbooks because he can't afford a good doctor.

[...]

Swayed by years of steady growth -- and by an aggressive, state-funded marketing campaign -- hundreds of thousands of Russians ventured into the country's young stock markets to buy shares in the "people's IPOs." Now these first-time investors, many of them elderly pensioners like Sisoyev, are among those suffering the most as Russia's economic problems enter into a more painful phase.

Limited largely to the financial sector and the wealthy elite at first, the crisis is beginning to be felt by the broader population. Inflation, wage arrears and unemployment are on the rise, and in a recent survey, one-fifth of Russians said they or a family member worked for a company that had announced layoffs.



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Fri Dec 12th, 2008 at 04:39:25 AM EST
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