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Strategies & Market Trends : Investment in Russia and Eastern Europe
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To: Real Man who wrote (780)11/3/1998 12:44:00 PM
From: Paul Berliner  Read Replies (1) of 1301
 
Vi, no reason to be short? How does a classic bear market rally and impending retrenchment sound as a reason? Earlier on this thread there's a chart showing ROS, TFT and VIP which are all way up since the middle of september. BUT, they are still down 80% or more from their highs. The rally is a direct result of short covering on the part of the specs that made a killing throughout August. When every institution and fund on the planet has liquidated there long ROS and VIP positions, there are no further sellers and the shorts slowly and steadily cover. There total of institutions going long VIP or ROS at these levels is still few or none. The political uncertainty, the rebirth of a cold war due to the seizure of control by the communists hardliners and the general negative outlook for emerging markets leave everyone no choice but to look elsewhere. Primakov has put further privatization plans on hold, so who knows what these clever communists have up their sleaves? They may very well re-establish several companies as state-owned enterprises. This is no time to pick a bottom in russian stocks - because the bottom may be zero, meaning capitalism is shown the door and foreign investment is restricted.

Blame it all on the Japanese for starting the Asian contagion which led to decreased demand for natural resources. If oil was the same price today as a 18 months ago Russia wouldn't be in this problem - but how are they supposed to run the country, pay state employees and service their debt with half the money coming in from principal industries as 18 months ago? The IMF can throw all the money away it wants too - another russian debt moratorium is a given unless oil goes over $22 by the end of the year - impossible (even trouble in the mid-east would not send it up more than 20%).

I have often wondered why the hardliners did not take the chaotic opportunities of late August to coup yeltsin and seize power. The answer is that yeltsin's health must be so frail that they are comfortable waiting for him to die. When he does, the fiery oratory
of the commies will rally the population (which leans more towards favoring the old regimes each day) against capitalism and towards a 'rebirth' of the soviet socialist republic. These next few months are going to be more fascinating than the last few. Position yourselves accordingly.
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