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

To: Tony van Werkhooven who wrote (270)	7/6/1998 10:15:00 PM
From: Rob Shilling	Read Replies (1) \| Respond to of 1301

I know on Wall Street that there is a lot of what goes up keeps going up and what goes down keeps going down. But somehow I don't think Russia is going to be perpetually down and out. Supposably Russia does not have a current account deficit so the ruble in theory at least is not overvalued. Basically Russia has a short term cash crunch that it is trying to fix. The "smoking gun" has been the "cycle on nonpayment". But the new prime minister has been really good at working on the tax payments to break the cycle. If Gazprom follows through with what they promised, their taxes for July could be 2-3 billion rubles more than June. That comes a long way towards closing the budget problems. The government is also going after the oil companies and UES (electric utility). Since the Duma has passed the tax legislature that the IMF was looking for, there is a good chance Russia is going to get an emergency loan in July. That should be enough to tide Russia over until the budget is fully balanced (the prime minister is shooting for November 1). As for the markets, there has already been carnage. LUKOY and ROS are both below book value (ROS is 1/2 book value), yet they are both profitable and both have low debt. With the Russian Blue chips so low, it just looks to me that this may be a rare opportunity to pick them up on the cheap.

To: Tony van Werkhooven who wrote (270)	7/6/1998 10:34:00 PM
From: Real Man	Respond to of 1301

These comments look like a weather forecast: linear extrapolation. So if the current trend continues, they will hold. The main reason to buy into Russia is value - I believe, nowadays Russia is the cheapest market in the world. There is a chance that things will get worse, but at these prices a lot of bad news is already priced. You will make 90% in roubles in GKO. If the rouble stays stable, that's a lot. Even if it devalues 40%, still you'll make a lot. Of course, there is a possibility of default or uncontrolled devaluation. But the central bank will defend the ruble at all costs, or so it seems right now. If anything, current situation in the Russian market is an opportunity to buy. Yes, there are risks - mentioned in these comments, however, these are risks - by definition something which won't necessarily happen. In my opinion, it will take a lot of effort to turn Russia back to communism or dictatorship. Maybe, though, I should quit and go out buy YHOO, which soon will be worth more than all Russian stocks combined. P.S. It is still better to wait until the trend changes