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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Harold Carrizo who wrote (6349)	8/5/1998 11:58:00 PM
From: jayray	Read Replies (2) \| Respond to of 22640

Given today's less than spectacular performance by TBR your post raised some important questions 1. Do you feel that TBR is in fact undervalued, or does it just appear so in comparison to U.S. large caps? I'm very long on TBR and the belief that it is greatly undervalued. Having experienced the miserable reality of the existing phone service, and having listened to Brasilian friends who want and need more and better phone service, I can only conclude that there is very strong current demand, a large potential market for profitable growth, and the excesses of any bureaucracy which can be trimmed, within socio-politically acceptable limits, to yield greater operating efficiency. I simply don't see these favorable conditions applying to any great degree to American large caps. We seem to have been playing a game of greater fool; "investors" buy Lucent for for 105, believing there's someone out there who'll give them 108 tomorrow. How else can you explain investors' acceptance of dividend yields that are half that of passbook savings account rates? 2. If answer to #1 is yes, is this in part due to the magnetic effect which the U.S. large caps have recently had upon international capital looking for a safe home? Yes Fleeing money looks for safety first, not extra profitability perceived as risky. For many, Brazil is seen to be as risky as the least stable of the Asian economies or of Russia. 3. If you're still with me, will a correction in these U.S. large caps lead to increased liquidity flows into "undervalued" foreign securities such as TBR (or its sucessors) in the intermediate term (3-9 mos.)? In other words, what will it take for investors to abandon the view as the U.S. large cap market as a diamond in the garbage heap? If the U.S. large caps loose their lustre, will everything just look like garbage, or will other "diamonds in the ruff" begin to shine? IMO the uncertainty and even fear created by a humbled American stock market will not free up funds for investment in what are perceived as emerging nations, In fact, it will most likely dry up funds for equity investments in all markets. For that reason it is imperative that the United States take the leadership role in maintaining world economic stability in much the same way that America has served as the pivotal link in maintaining world peace, more or less, for the last forty years. I am worried that the lack of attention paid by Congress to things such as IMF funding and the Russian bailout package undermine our ability to help maintain a rough degree of world economic stability. In the short term - six to nine months - I see TBR being properly valued by the market only if the American market stabilizes and if TBR's privatization effort seems to be progressing as scheduled, no bickering bidders, no shadow franchise fights etc. A tall order. And don't forget to ask the Japanese to start properly managing their economy, TBR will need the breathing room. So much for the soapbox, Harold. Any other thoughts out there.