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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: Still Rolling who wrote (236)	6/17/1998 6:23:00 PM
From: Real Man	Respond to of 1301

Goldman Sachs' are going public in 3 months. They would not like the market to drop now, would they? Perfect timing. The FED model yardeni.com shows overvaluation of 15% (more after today). Historically the market was NEVER as overvalued as it is today. In 1929 the market cap was 70% of GDP, now over 100%. Japan were valued mostly by sales, 130% of GDP in 1989. Dividends are below 2% - never before. Yields are at record lows. Book values are forgotten, the market values public companies at high multiples of their book value. The valuation models are tied to the low bond yield. Should the bond yields rise, good-bye the bull market. Commodities now are tied to yen. Asian currency rise would trigger commodities rise, bond fall (rising yield). Then the overvaluation according to various models will become very pronounced. On the other hand, if Yen continues to fall, there will be lots of Asian goods in our market, and our companies will have to compete with Asians who now have devalued currency. Not a lot of room for growth. As for TRF - I would not buy 70c of Russian stocks for a buck. I would rather go with LETRX or ADRs (I'm in RNE myself) Russia is in a bear market now; bear markets have no supports and have sucker rallies. So any plunge into Russia right now could easily end in additional losses short-term. I would wait until the Fall to see how the debt crisis plays itself out. The Economic situation in Russia is not pretty - the GDP has halved since the reforms began, the ruble added 3 zeroes. Most people are living much, much worse than during the communist regime, so the social unrest is likely to continue, especially if the ruble is devalued. I believe ruble devaluation will oust current government and president Yeltsin, but I may be wrong. -Vi