The Russian Stock Market
An average citizen of Cheboksary, interested in buying stocks of a particular local company, or regional conglomerate, cannot open an online account the likes of Etrade or Ameritrade. With a middle class earning only $1000 per month, there is hardly any liquidity to support an electronic trading industry. Instead the investment market is reminiscent of America's security market during the 1920s. The majority of stocks purchased by average Russians are traded as physical paper between brokers in what could be called a curb market. Brokers rent out one room offices with filing cabinets full of paper issues, the way railroad stocks were sold early in the American 20th century.
Much of their liquidity, that is inventory of shares to sell, comes from soliciting owners of stock, usually company employees, to part with their meager holdings. The cheap suited broker puts an ad out in one of the classified papers in town saying "We buy shares of VolgaTelecom". Lets say one share of VolgaTelecom costs 10 rubles. This is the price quoted on the MICEX, Russia's version of the New York Stock Exchange. The person who reads the broker's ad in the newspaper has no clue what the official market price is, he doesn't even know what a share of stock is, or that they grow in value if you hold long term.
The owner of VolgaTelecom shares, usually a housewife, retiree, cleaning lady or employee needing a hit, calls and after a short talk with the broker, who hypnotizes him with fancy words and his opinion that stock will soon tank: or in short, "sell now before its too late". He buys the paper shares for 7 rubles, then immediately sells them on the open market for 10. VolgaTelecom has tripled in price since 2003. The ridiculous part is that these freshly purchased shares are physically shipped to Moscow, trunk loads of shares at a time. Millions of shares are looted daily this way.
The Soviet Voucher
What happened to the Soviet Union after it collapsed in 1991? A toilet paper factory in Magnitogorsk began printing "vouchers", or shares when divided were equal to the total wealth of the country. Everyone was issued an equal amount, true to the communist dream of each citizen owning no more than the other. It wasn't long before greasy haired toughs began standing in bazaars across the nation holding placards that said "I buy vouchers". When converted to hard cash, a citizen's set of vouchers, their sole piece of the Soviet Union, could buy them a Chinese made sweater and a can of tushonka (spam).
Shakedown artists and short-con operators took their freshly purchased vouchers and sold them to investment clans now known collectively as the Oligarchs. In order to privatize an oil company or steel factory you needed so many vouchers to complete the deal. If you could accumulate .01% of the USSR's vouchers it meant you physically owned .01% of the country, and as such could loot that corresponding amount of property at auction.