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

To: Rob Shilling who wrote (505)	8/23/1998 9:43:00 PM
From: Rob Shilling	Read Replies (1) \| Respond to of 1301

My two cents on the "crisis" in Russia 1) The devaluation is a kind of way to get the unpaid taxes out of Russia's people. Most individuals have not paid taxes. So now they look around and their money does not buy as much (just like they paid some taxes and have less money). But, the oil and gas companies have more profit because there are now more rubles per dollar. So these companies can now pay more taxes to the government and help with the deficit 2) The "default" on the debt will reduce costs to the government by a huge $20-30 billion. Sure the debt holders are mad, but it is about time the debt holders lost money since the stock holders of Russian companies have been taking most of the pain. The financial media now says the world will not trust Russia to loan to for years. Nobody ever thought that maybe Russia wants to get its budget balanced quickly and get rid of the IMF. Why ?? because the IMF does not know what its doing. The IMF is imposing austerity when Russia needed liquidity. There is something wrong when a country has to spend billions defending its currency as its government employees go unpaid for months. 3) The cause of the crisis: Speculators ganged up on the ruble after oil prices dropped and exposed the weakness in the Russian economy. This raised interest rates and prevented the government from borrowing more money until oil prices come back up. Russia, which is new to capitalism did not understand that in this era many people want to be like George Soros and break central banks of countries to make money. Look at Hong Kong with huge reserves, yet speculators are doing their best to bring it down. Surprisingly Hong is fighting back by buying stocks in the open market that speculators have shorted along with shorting the currency (something Russia should try). We are witnessing for the first time in the world "financial warfare". 4) If Russia had 0.7% GNP growth in 1997, then with the reduced costs of borrowing from the default, with having back wages paid (thanks to the default), and with the progress of the reforms over the last few months, Russia will improve once oil prices get off their dramatic lows if not before. 5) The average Russian has not seen much added pain compared to earlier in the 1990's (2000% inflation). There are not runs on banks like their would be in most countries. 6) The more "banks" that go down the better. Unlike in the U.S. and other countries, many banks are just hedge funds that have been adding selling pressure to the stock market as they sell their stocks to keep from failing.