Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Steve Fancy who wrote (6695)	8/15/1998 5:33:00 PM
From: MGV	Respond to of 22640

I would agree that there will be an explosive upside to TBR. I think we may disagree about what must be accomplished to stoke it for the upside move. Of your list of factors, the overwhelming primary ones are interrelated. They are currency runs, Japan, and Russia. To be poised for the pop we agree will take place, Japan must have a credible structural reform program approved. It will not pop merely by getting above a certain price on its own. I think it needs Japan and a move safely but modestly above 100. If we get both, then a very healthy upside move likely will follow. My reason for holding this view is simply my original underestimation of the weight Japan (via currency) is being allocated by money managers in the TBR calculus. Nevertheless, it is more than uncertainty (i.e. risk) engendered by Japan and Russia that is affecting TBR. It is also "emerging market" categorization and liquidity factors, as raised by the Cramer article. TBR continues to be categorized as an emerging market stock. I think it is at least a hybrid now, with one foot in (political risk, currency risk) and one foot out (professional global telecomm. managers, deep capital budgets, a fast improving, albeit as yet underappreciated, market structural environment in Latin America) of the environment that characterizes emerging markets. At worst, I am wrong about this shift in characterization but, at best I am early in viewing it this way. It is patently clear that the market has not begun to distinguish significantly TBR from other emerging market companies. The result has been severe and swift downward pressure on TBR and not solely for fundamental (i.e. currency risk) reasons. As pointed out by Cramer, if the traders need to reduce their overall allocation to emerging markets on avalanche days and TBR is the the most liquid, least outrageously priced "emerging market" security on the bid, then they are going to sell TBR first and answer questions later. The good news is that this is causing a more severe depression short term (apologies to short term option traders) than would otherwise occur. This creates value buying opportunities. I am wholly unconvinced that Japan is ready to move on its reform requirements. Similarly, the image of a defiant Yeltsin with arms crossed in Moscow is admirable but uninspiring. Consequently, I think we are in for at least one more wave down. I had no idea in April that I would be able to afford the quantity of TBR that I hold now. I'm poised to buy more on my thesis.