Rob, I agree in general, but
1) it is not given that the oil price will rise short-term.
Actually, devaluation in Russia scared commodity markets - they
are betting that commodity production in Russia will pick up
leading to more global glut. Forecasts differ. Yardeni, an economist
with a very good track record, predicts more deflationary wave
in the global markets leading to a deflationary crisis, so that
commodities will stay low, interest rates in the US and Europe will
match Japanese (thus suggesting long treasuries). Buffett, with
an obviously good track record, is reportedly long silver
and oil futures - and sold his zeroes, thus betting on higher
commodities and higher interest rates. Both scenarios have one thing
in common - SELL stocks, a global crisis is coming.
2) Russia will enter a period of increasing political instability.
(Not that it is stable now, but the instability will increase)
Yeltsin will be gone in 2000, parliament in 1999. The current mess
also created a lot of political nervousness.
3)More distress selling is likely to come. At this point almost
nobody made money on Russian stocks (except shorts). There is
no good news on Russia.
This is just momentum. It keeps going once it started, and
it's hard to predict a turning point (look at internet stocks).
I agree - 40x is a possibility in a very long term (Sure seems
distant now) Best plays are ADRs. Assuming no productivity growth,
if you extend Russian p/e to US p/e level, you get 40x, or 100x in
some cases. But this depends on what the government will do and how
things will develop. You may also get 0. |
