Telebras (TBH) & Brazil Message Board

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Strategies & Market Trends : Telebras (TBH) & Brazil

TBH 0.550

+2.8%

Jan 9 9:30 AM EST

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To: djane who wrote (8041)	9/15/1998 12:53:00 PM
From: MGV	Read Replies (1) of 22640

Imagine a small bucket of cold water. That is all this post is meant to be. TBR is still a trade here rather than a back up the truck opportunity. We all agree it was extremely oversold and extremely undervalued. Today it is less oversold and still undervalued but, until we see structural reform in Brazil the worries/sentiment that caused the oversell, it can come back with a vengeance. I think it will raise its ugly head again between now and 10/4. The lesson I've learned here is that there is huge perception risk underlying all of the risks we associate with an "emerging market" stock such as TBR: currency risk, interest rate risk, and political risk comprising the three majors. I would add financial reporting risk to the equation.) I underestimated - over the short term - the viciousness of perception. I disagreed with the perception and learned that over the short term the only thing that matters is the perception, not whether you are right. This is tue in all investments over the short term but the effect is multiplied to geometric proportions in non-US equities, even blue chips such as TBR (I learned.) Now, look at the reasons for the perception: (1) Japan vacuum in leadership leading to policy paralysis; (2) Huge fiscal deficit that just invites speculative attacks on the real in Brazil; and (2) socio-politico-economic chaos in Russia. Nothing has been altered to remove the risk of viciously negative perception yet. Now, I think the causes will be altered but, not before at least one more dive down on the sentiment. What could hold it up without at least one more dive between now and mid-Oct. (when Cardoso, fresh off a 1 round election win gets cracking on SS reform)? I don't think a US rate cut will because I think it already ahd been discounted into this rally. I think the same with respect to IMF and other external intervention - it is already discounted into this rally. So what then? Well the most likely might be movement in Japan. But I think it is more likely that we will see the opposite. One positive is the appearance of the two geniuses who are spewing predictions for TBR armageddon. Once the negative sentiment gets that low in the food chain, it is likely we have reached close to bottom.

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