bucky
When it's an awful day to sell stock, maybe it's time to buy again. The stock exchange action tells me many people think the economy has come to an end. This time Russia was named the cause for the sell off. Is that believable?
Russia matters 1% export in U.S. and 2% in Germany. Yesterdays turnover in the moscow stock exchange was 800.000 $, yes plain $, not mio $! That's not much. Trading there more or less stopped. Who cares?
Japan is the place to consider, as Japan is a big G7 member. To enlargen G7 with Russia to G8 was a political thing. Russian still carries many nuclear war heads. That matters! but not economywise.
Germany has 75 billion DM loans in Russia, most ensured by the Bundesrepublik Deutschland. The German state has about 2.000 billion DM debt. That is something to worry about. Still German federal debt is below 60% GDP, the debt service below 3%GDP. In line with other G7 members.
How large is the debt in the U.S.? How large the debt service? In 1999 the US shall balance the budget, which will dry up supply of U.S. treasury bonds. This fading supply and given demand will increase treasury prices, lowering the yield. The yield curve is already inverted, so Alan Greenspan and friends may follow the market and lower rates in january.
On the other side the economy in U.S. and Europe grows robustly, putting pressure on the workforce in the U.S. So rates may stay where they are for a longer time. Who knows. At least the rates shall not rise.
Russia repays no more debt, services no interest. Bad! Unexcusable! If Japan did that, we all would be in bad shape, but Russia? Again, who cares? The Russian political system is a mess since 200 years. The russion industrial production imploded from 100 to 20% (just one fifth) and people starved from hunger before political unrest started serious, to later wash away the Zar. Are we there yet? Not yet! Do You expect any immediate political change in in Russia in days? Come on! Unbelievabel! The powerpeople in Russia play their games and the folk pays the price. It has always been like that there, and it will remain for some time to come. Can the unrest start trouble in the street? Yes it can. Jelzin used tanks, just seven years ago, to defeat the reserrection of the Sowjet Union. Will he again, if people attack him? Look in his face, when You see an interwiew. You shall bet, he will. Does that make any difference to the world? No (except emotionally).
Investors don't like unpredictable circumstances like in Russia. Even less they like debt default, like in Russia. But it really matters not much for the G7 economies, whis is, what stocks are about..
The pressure from rising russian commodity sales may spread to Canada, Australia, Latin America, who are all commodity sensitive, is more to think about. A latin american debt default would be much worse than Russia's. We had latin american debt defaults before, survived that too. The mecican tequila crisis left Mexico stronger than before. Sometime the market forces unload in a thunderstorm. The quality of the captain proves in the thunderstorm, not in calm sailing under sunshine.
Is it time to buy now?
Well we still have earnings warnings to come late in september an early october. If i buy now, I shall try to buy those beaten up stock, that probably have their bad news out, as the situation cannot become worse. Like Quantum, a turnaoraund play.
I hold
adpt, asnd, qntm, efii, tdfx, itwo, psft, sebl
and wonder wich to load up most, as all are fine profitable growth stocks.
Usually my portfolio moves twice as much as the Nasaq. Yesteday it declined only as much as the NAZ. So did the bad performance of small caps stop, and now the big caps get the ponding on the head. I just wonder.
Lutz Moeller
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