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Non-Tech : Shorting the Big Banks (e.g. JPM, BT, CMB, CCI)
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To: BDR who wrote (31)9/7/1998 11:40:00 AM
From: Mohan Marette   of 268
 
The unknown factor

Hi Dale thanks for starting the thread.

I too am looking for picking up at least some scraps from the money center banks not necessarily by shorting them but hopefully finding some value somewhere among the crowd either via for a short term play or otherwise,I don't know which yet.

Asia- Since the Asian thing is over a year old now I belive the damage incurred by the U.S MCBs (Money Center Banks) must have been already factored into the equation,at least this is what Abby Cohen of Goldman Sachs thinks and I am assuming they should know a thing or two about these things. Also if I am not mistaken the U.S banks have also picked up some banking properties or a share or it in various S.E.Asian countries because of the fact that a lot them were on fire sale.

Japan-Well Japan has been in IT for over 5 years now and I don't believe there would be any additional damage to the U.S banks now as I am sure they have taken defensive strategies by now.

Russia-According to a recent report the total damage suffered by the U.S MCBs amounts to approx. 1.2 billion dollars and many by now have revealed the extend of damage that they have suffered via various news releases.Analysts have already factored this into their new revised estimates on most of the MCBs.

Now because of all of the above the U.S MCBs have been whacked pretty bad and most of them are trading below their 52 week lows. Now the question is can they go any lower???? Well I believe it might because of the trepidation that investors have about LatAm countries.

Latin America the unknown factor-
Now LatAm is the only remaining unknown factor as I don't think any of the banks have come out and said anything about their exposure in these countries and their possible loses in case of a meltdown in this part of the world. But 'they'-the pundits- tells us that LatAm countries are in much better shape than Russia and even some S.E.Asian countries,how much better I don't know. Also 'they' tell us since the last meltdown in South America (when was it in the 80s?) many of these the countries particularly the major ones like Brazil,Aregentina and Chile have reformed their economic structure to a great extent and are on their way to becoming 'ture capitalist' countries.Also the U.S MCBs have been more cautious in lending in these parts since then. This is all well and good but we don't know anything more than this at the moment. I guess it all depends on how countries like Brazil,Argentina and Chile weather the perceived impending doom.

Brazil seems to have a fairly sizeable foreign currency reserves [65 billion dollars] to withstand any immediate threat to their economy,and I suspect Argentina and Chile may be able to withstand any temporary setbacks but any of these countries could withstand a prolonged economic slump in the world markets will be anybody's guess at this point.Also I heard in Aug. alone there was an outflow of foreign capital to the tune of 12 billion dollars and during the first week of Sept.the outflow stood at 2 billion,perhaps this was an over-reaction by the foreign financial institutions or is it a harbinger of things to come I don't know.

Anyway this is my story and I am sticking to it.<g>

PS:Also bear in mind the U.S is more likely to help LatAm countries indirectly via the IMF and more importantly directly since North America represents some 40% or so of the U.S exports this of course includes Canada, and Mexico.At least this what Rubin said recently in California. As an example may I point out the Mexican crisis of recent times and Brady bond to help out the Latin Americans.
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