Education

Graduated from the Faculty of Mechanics and Mathematics of Lomonosov Moscow State University, the Financial Academy under the Government of the Russian Federation and the University of Chicago Booth GSB.

He has a Certificate of Professional Competence of Supervisors and Employees of Banks and Investment Firms (Cyprus), as well as a qualifying FFMS certificate 1.0.

In 2003 he was elected a member of the honorary academic community Beta-Gamma-Sigma US.

Labor activity

For more than 25 years he has been engaged in economics and management. For six years he worked as an executive director of Troika Dialog.

He founded and headed the board of the Renaissance Investment Management group, was the executive director of the Renaissance Credit bank.

In 2009, he created the Third Rome investment company and was its managing partner; he successfully sold his offspring in 2013.

In 2015, he headed the Economic Policy Program at the Carnegie Moscow Center. In 2018, he became a visiting expert on the Economic Policy Program at the Carnegie Center.

He has investments in information and technology projects. These are tourism, B2C marketing resources and market places where he invests money or (more often) knowledge.

CEO of Movchan Consultants.

For his work he was awarded a number of awards and prizes. In 2006, Forbes magazine named him the most successful head of a management company in all of Russia; and RBC in the same 2006 - "Person of the Year".

His project, Renaissance Investment Management, was also recognized financial company of the year.

Twice became the winner of the competition of business journalism "Presszvanie".

Publications

Widely known as the author economic stories, for example, about how “Slaves ruined Rus'” or about the “Resource Curse of Ancient Rome”. He is the author of columns for Forbes, Slon.ru and Vedomosti. He regularly writes for Snob, speaks at Dozhd, and writes various essays on financial and economic topics and more.

Family status

Married, has four children. Wife, Olga, cardiologist. The eldest daughter is married. The Movchans have four children, the youngest, Leo, is only 5 years old.

Parents devote almost all holidays and long weekends to the creative development of their son, showing him the world. And when the family stays in the city, they go together to the dacha in the village of Lesnoy Ruchey, in the Chekhov district.

Hobbies

Favorite hobby is archery. Also, do not mind playing chess or smoking cigars. As he himself admitted in an interview, he periodically likes to get up at 5:30 and sit in his office to work, until about 9:30, until his son comes running. This is 4 hours effective time.

He does not go to clubs, prefers museums and spends a lot of time with his wife. Together with Olga, they are engaged in ballroom and sports dancing: they started many years ago with classical dances, then they got carried away with tango, then Argentine tango.

“The long-term trend of rising key rates will change our world,” Andrey Movchan, economist, CEO of the Movchan's Group investment group, guest expert of the Economic Policy program of the Carnegie Moscow Center, spoke on October 11, 2018 at the conference “Investment Strategies at the Breakdown of the World Economic Model”, organized by the investment company "Veles Capital".

Good afternoon

I am very grateful to the organizers of the conference for the invitation to speak, and even more grateful for the kind consent to film me, since, unfortunately, I am not in Moscow now. It is a great pleasure to speak before you, and a very interesting topic that I was asked to talk about is the topic of long-term investment trends in the economy.

They talk about it now a lot, they say it in different ways. Any forecast, of course, always has both the right to exist and a fairly large degree of potential error. Therefore, I will only talk about very large trends and those things that we can really talk about more or less confidently, because we have statistical data and we understand how these processes are developing.

In general, financiers and economists are probably talking about five stable trends that have been present in world markets over the past decades, if not centuries. They are well known to everyone, I do not think I will tell you a big secret.

The poverty level is decreasing, labor productivity is growing, the birth rate is falling, life expectancy is growing, the share of labor in the final product is falling, and the share of capital is growing through the use of technology, through automation.

All these trends have been present for a long time, they will not change in any way, and it is probably not very interesting to talk about them. It is more interesting to talk about what is literally happening right before our eyes in the fundamental financial practice that will change our world, perhaps for the rest of my life as a not-so-young person and most of the lives of young people, will determine the nature of investment markets in the entire economy of the world.

This is a pattern change in the process of determining refinancing rates central banks. It sounds strange, but if you look at the chart of changes in the key rates of the central banks of the world, it is easy to see that before the sixteenth year, the rate had been falling for almost thirty years. Prior to that, it had been growing for almost forty years, and before that, it had also been falling for thirty years.

The long-term trend of rising key rates that has begun will change our world and determine the nature of investment markets in the global economy

Changes in the direction of movement of rates are extremely rare. It happened twice in the entire 20th century. Now we are exactly at the moment of such a change: the rate is growing and, apparently, will grow for at least a decade. And, perhaps, now these cycles will be lengthened. Today the rates are very low compared to the average rates that were before.

The average rates in the previous cycle were somewhere between 6-6.5%, we have a rate of 2.25%, if I'm not mistaken, or something like that - the American refinancing rate, and of course, it will take quite a long time to move forward. But it is already clear that we do not live in the world to which our generation is accustomed.

After all, we built our fortunes, our careers, our businesses, built our economic logic during a period of falling rates. Then, when a long bond was better than a short one, because it will rise in price faster. When a stock goes up, not only because earnings go up, but also because the risk premium goes down and the discount rate you use goes down. And in general, life is easy, simple and good. This world gave birth to traders who, working inline with indices, showed very good results. It won't happen again.

We live in a period of long-term growth in key rates, in which risk premiums become prohibitively low, crises occur, and long-term debt becomes dangerous and toxic.

With rising rates, risk premiums become prohibitively low and crises occur. Long bonds give the worst return due to higher prices, debt becomes dangerous and toxic because you have to reborrow at more high rate, and in general the economy should behave somehow differently. How - we do not know, because we have never lived in it, and those who lived in the sixties and seventies, most likely will not tell us about it.

This is probably the first thing you need to pay attention to now and think about what to do when you think about where to invest for a long-term period of time. It remains to be seen how the rising rate will affect this.

Once again, if it's a long debt, chances are you'll lose money. If these are stocks that you expect to rise steadily over a long period of time, be careful: the steady rise can be mitigated by higher rates and the necessary increase in risk premiums as your rates rise.

Equity risk premiums are now very low. In the US market, this is less than two percent, and the average risk premium is 4-5% for the previous cycle. So we may well see very serious corrections in all major indices. And not only in emerging markets, but also in developed markets, all the more so since decoupling has occurred in the markets, and decoupling is serious, not only between America and the markets developing countries.

The decoupling is serious between tech and non-tech stocks. In general, the topic of technology stocks is very difficult today, because the hype is certainly present. Everyone is talking about investing in technology. This conference is dedicated, in particular, to technological trends.

And since everyone is talking about investing in technology, it means that the so-called “red ocean” is already there: everything is already there, prices are already high. And it is quite possible that it is simply too late to invest in companies at various stages of development that declare that they are engaged in technology, because it is very difficult to get a residual margin from this investment.

On the other hand, technology is developing rapidly, technology is the future and, of course, new unicorns will grow, and new companies will grow in value hundreds of times, simply because in each new section of this market there is room for create consumption, and in order to create high margins until a competitive market has formed there.

This is probably why the advice of a person who himself does not understand technology very much will sound like this: do not invest in technologies that everyone knows. Don't invest in the technology that you know now, because if you know about it (let's be modest), then most likely there is nothing to do there. Others have known about it before.

Don't invest in technology that everyone knows. Because if you know about it, then most likely there is nothing to do there. Others have known about it before.

Try to find places where topics are just appearing, and there, perhaps, niches will appear where there is still profit. And despite the fact that the markets, of course, and the technology markets in the first place, there will be a correction in the future, and the next correction is probably not far off. Again, 1.7 as a risk premium for shares is a very low value, practically corresponding to the crisis values ​​of such risk premiums. That's probably all that can be said in a nutshell about our attitude, about my attitude to the markets.

If you want to be on the conservative side of today's market, then investing in short debt is probably the safest and most conservative strategy. There are still a lot of different issuers and opportunities on the short instruments market. Fortunately, now the markets of developing countries have cooled down a bit and there is something to invest in, there is good companies, which show relatively acceptable returns. And even 5, 6 and 7 percent per annum in dollars is probably possible. By the way, the dollar is probably the best base currency in this case, because after all, in this unstable situation, as before in unstable situations, the dollar should show its best side, unlike smaller and more limited and in confidence, and in terms of currencies.

If you want to be on the conservative side of today's market, then investing in short debt instruments will be the safest and most conservative strategy. There are still a lot of different issuers and opportunities in this market.

But if you want to try something very risky, you can look for stocks outside the technology sector. Companies that are currently undervalued. I am sure that many very traditional companies will surprise investors in the near future by continuing to grow, develop and perform well in earnings growth, and therefore in their valuation growth.

But once again, in the technology sectors, we probably need to look at something new, because the old ones are already very fashionable, and a lot of money, including unreasonable money, unprofessional money, has flowed into them from industries bordering on fraud, such as crypto-currencies, to industries that are certainly very important and define the face of today, such as, say, social media, or artificial intelligence, or algorithmization of marketing processes. Yes, these are very important and useful parts of the market, but their ratings are very high.

Here's how I look at the markets and the future...

The adoption of decisions to increase budget revenues by increasing taxes and reducing social security is, in essence, proof that the authorities in Russia imagine the economy as a distributive model. The distributive model is based on the idea of ​​having a fixed wealth that needs to be protected and "correctly" distributed. Such a system naturally gravitates towards centralization, not only because the consolidation of wealth gives power, but also because it is much easier and more efficient to redistribute centrally than to leave redistribution to free agents - try to imagine a polygon with millions of vertices and compare the number of diagonals, passing through the center, with the number of segments connecting any two vertices to each other.

In the distributive model, wealth is not created - it is defended: from external invaders, from internal plunderers and from negligent users. The idea of ​​increasing wealth is absurd - it is fixed. Labor, business, public economic activity have only an auxiliary goal - they provide the state with the opportunity to share less wealth with society: "let them do at least something for themselves." If welfare is not enough, it is necessary to increase the efficiency of using wealth: consolidate it even more in the hands of the state, strengthen control, increase discipline, bargain or get it by force Better conditions exchanging one's wealth for things needed in the country from the outside world, perhaps, if possible, seizing more wealth from neighbors.

If a part of the people live too poorly, it is necessary to take away from others a part of the wealth hitherto distributed to them and redistribute it in favor of the poor. If the state does not have enough for (supposedly) necessary spending, then it is necessary to distribute less to citizens or return more back - and finance state spending; at the same time, government spending is a priority, since the state knows what to allocate funds for, but people do not. The state, which has taken on such work and such responsibility, naturally becomes exaggeratedly large and expensive, gets the privilege to make decisions outside and around the law, based on the rationality of the moment (and we are all human beings) for reasons of personal benefit of its representatives.

In Russia, with its resource dependence, with its Soviet past, when "everyone pretended to work," it is easy to believe that only the distributive model is effective (and indeed exists). It is obvious that such faith is well cultivated on the principle of self-fulfilling prophecy. The development of the distribution system hypertrophies the state, leads to the destruction legislative framework and effective horizontal economic relations, effective economic agents are leaving the game, and their place is taken by clumsy and corrupt state structures and thieving private sticks, earning semi-legally on the privileges they receive.

It is easy to accept such a picture and pass it off as proof of the theses "all businessmen are thieves", "the people cannot be trusted with anything", "nothing will work anyway, the experiment must be curtailed" and others. It is also obvious that in the presence of significant resources, it is beneficial for resource holders to support the distributive model of the economy - in it they have an unfair advantage over other agents. Under these conditions, a vicious circle is formed - the power belongs to the resource holders, they benefit from the distributive model, the generative model is easy to compromise in the eyes of society. The result is called the resource curse: countries that are endowed with resources, unless strong institutions have been formed in them before the appearance of the resource, preventing the consolidation of resources in the hands of the authorities, freeze in the distributive model of the economy.

This is exactly what happened to Russia. The creation of an effective community of independent economic agents does not fit into the sincere (based on both convictions and personal gain) view of the economy by top officials: moreover, it is perceived as a loss of control over financial flows that is dangerous for their authorities. In the logic of our government, the problem of lack of money can only be solved by withdrawing the right money those who have them, and if the latter will not have enough themselves, let them go and work more - not everyone can pull the state (it must be said that in the opinion of these officials, everything that is in Russia already belongs to the state, therefore even self-earned funds by a citizen are considered as received from the state, well, maybe not directly).

In this regard, it makes no sense to say that raising the retirement age is not a solution, but a dead end, that it will have to be raised again and again, that the only way to cope with the problem is to gradually switch over to a non-state funded pension system within 10-15 years. , over time, starting to pay pensioners "from the state" and at the expense of taxes, regardless of seniority and merit, the same small pension, only to have enough to live on. Such a system would effectively provide citizens with pensions, but it would huge sums out of the control of officials; in addition, it will be based on the idea of ​​economic self-organization, which is inaccessible to them.

Similarly, it makes no sense to say that an increase in the tax burden (and an increase in VAT by 11% is a significant increase) will lead to a reduction in non-state consumption and a decrease in the growth rate (if any) of the economy; that it is simply stupid to raise funds for a "presidential decree" - it is necessary to create conditions under which private business fulfill all these decrees simply in the process of developing their business; that even if you need to find money for something, you should first look for it in the bottomless credit pockets of state monopolies, for the sake of contractors from among the president's friends, reducing their cost with meaningless projects; then one could look for them in the borrowing market - in today's world low rates it is beneficial for states to increase the financial leverage, this allows you to catalyze the economy, and not to clamp it down with extortions.

For the authorities in Russia, private business is an enemy, unless it is busy serving the authorities and has not taken an oath of allegiance, sealed with a couple of large-scale criminal cases (in case of forgetfulness); but contractors of state monopolies are friends, and they can be trusted: they will earn a lot, but at least they will not plunder everything; ultimately at exorbitant prices, but they will build it and not run away from the country (especially now). There is no reason to take a loan to the state - interest must be paid for the debt, debts must be repaid, and raising taxes gives free money forever.

It is noteworthy that the rise affected specifically VAT - in fact, a tax on final consumption, the most sensitive for businesses with high added value (that is, non-resource, most efficient and most mobile) and businesses at an early stage of development. Neither these businesses nor consumers have a voice in Russia. The question of raising income tax is removed from the agenda - of course, because income tax officials and "effective managers" close to power pay from their significant salaries. Increasing the income tax would hit primarily resource businesses that receive high margins, and these businesses are "class related" and mostly controlled by the authorities. It is true that VAT is easier to collect than income tax, especially since tax authorities Russia has been improving for many years in its calculation and tracking of care patterns. But this again is the logic of a prince who collects tribute, and not a leader who thinks about the prosperity of the country.

Worse, discussing the question "how to raise or lower taxes" or "what is the correct retirement age" in Russia today is akin to discussing the question "what kind of sweets is it right to use a cannibal to attract little girls so that the latter would be more pleasant before death." The basic problem of the current Russian state is the extremely low level of institutional trust of all in all, which is a consequence of the already mentioned neglect of power in a distributive economy to such an inconvenient thing for centralized government as the letter of the law.

The Russian government treats the law as a universal means of realizing its interests - it writes indistinctly and interprets as it wants (often in the opposite way in two identical situations), rewrites constantly, within the framework of momentary interests and often even more indistinctly, ignores when it is convenient and requires execution, when profitable, creates a critical volume of exceptions to any rule for its own convenience and writes a procedure for refusal on informal grounds on top of any permission.

Economic agents in Russia copy power - our market is characterized by extremely low contractual discipline, the desire to fool the counterparty (including the state) or force him to accept dishonest conditions (and this is often practiced by state-owned companies), take advantage of non-market advantages and / or enter into illegal collusion. Investments in Russia have not been going on for a long time, and the outflow of capital has been significant all the years of the 21st century, with the exception of 2006 and 2007 (when foreign speculative capital outweighed the withdrawal of funds by Russian businessmen) - what's the difference, what VAT?

The direction of the movement of our state has been very clearly indicated (not today, but today there is a reason to say so): the generative model, which, it would seem, began to break through the historically formed distribution model in the first three to five years of the 21st century, has been finally abandoned. She is left with only two roles: she can live in the barren backwoods of the economy, limited to a rare small business, a small service industry, and a few "approved" high-tech business showcases; it should also serve as the basis for the cargo cult of the "economic breakthrough", in which ever longer rows of dull state offices will dress up in its clothes, "mastering" the budget under the guise of developing and implementing new technologies, innovative ideas, strategic projects and other buzz-words .

Strange, but true - as if apologizing, the guardians of the distributive economy in Russia are trying to give the maximum number of its manifestations names that are confusingly similar to the names of manifestations of the generative economy (this did not happen in the USSR - perhaps these are the consequences of the experience of begging for money from the IMF in exchange for reforms in the 90s).

At the same time, a state in itself with a sufficient amount of resources and a predominantly distributive economy can exist for a long time and steadily. Yes, in such a state the level of inequality is very high, social institutions, the vast majority of people live in poverty, and technologies flourish in areas that serve the interests or ambitions of power, while in the areas of ensuring the overall efficiency of processes and / or ensuring the well-being of the population, they are hopelessly behind. However, the existence of such a state depends on the amount of the resource - if it is less (it is cheaper), its states "quietly" eat up and fall apart, if more (it is more expensive) - they ossify in their system of clan bureaucracy and live for generations, supporting the impoverished existence of 95% of the population , unstable prosperity for 4% and luxury for 1%, an elegant showcase for the outside world, a bright picture on TV and a complete lack of opportunities inside, except for the only opportunity - to serve in the resource distribution system, enduring humiliation and deprivation in the hope of climbing higher in the service hierarchy.