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

To: EPS who wrote (7078)	8/24/1998 3:23:00 PM
From: CuttotheCore	Respond to of 22640

If you want to knock a thin market down all you have to do is sell SPX calls and buy SPX puts aggressively. Wrong! Dispatches from the Front: Short-Termers and the SPX By James J. Cramer 8/24/98 12:36 PM ET Confused? There's plenty of reasons to be. But remember, it is the day after expiration, which always causes a lot of broken-field running, and people who are no longer selling stocks don't have enough reasons to buy stocks. That's why the market couldn't hold its boisterous opening. But let me tell you what I am seeing that is making the confusing seem downright negative: the buying of SPX puts and the selling of SPX calls. That's what is causing this incredible choppiness. Let me explain what this arcane strategy is and how it is affecting your stocks. If you want to knock a thin market down all you have to do is sell SPX calls and buy SPX puts aggressively. Ten million dollars worth of this strategy can produce enough downticks and vacuums to cause people to panic out of anything they may have bought for a trade. This strategy causes rapid-fire derivative selling, as the guy on the other side of the trade must dump stocks in order to be hedged. So it looks like a giant tsunami of selling but is actually quite a tame affair. That's why once the hedge is put on, and the translation from the options to the stocks is complete, the market lifts immediately. This ebb and flow has been going on all morning and each time it makes you feel as this will be the wave that knocks the boat over. Then the wave passes and the buyers come back. Long-term players can sit back and relax, as this is strictly a short-term game. But the people who use these strategies tend to have unlimited firepower and can keep coming back over and over, so we will not be out of the woods as long as the SPX put buyers and call sellers think they can make money. We last saw this pattern played this aggressively in 1990, when it played out for months before the people who put on these strategies got buried by real buyers. Could take some time here, too. Many of you will now email me and ask me what software I have that tells me this stuff or which statistics you need to watch to spot this. Forget it. Some things need humans to tell you about. I make calls, I check floor markets, I ask desks to find out this stuff. It is called work and there is no software/technology solution for finding it out. James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com at letters@thestreet.com. See Also WRONG! REAR ECHELON REVELATIONS Watch Out Amazon, BKS.com's on Its Way 8/23/98 0 AM WRONG! REAR ECHELON REVELATIONS Why Friday Boded Well 8/22/98 7 AM WRONG! DISPATCHES FROM THE FRONT Spinning Our Wheels 8/21/98 8 AM WRONG! DISPATCHES FROM THE FRONT ARCHIVE Cramer's FAQ c 1998 TheStreet.com, All Rights Reserved. TOP \| ABOUT US \| CONTENTS \| SUBSCRIBE \| ADVERTISE \| TRADE ONLINE \| FEEDBACK \| SEARCH \| HELP

To: EPS who wrote (7078)	8/24/1998 3:26:00 PM
From: MGV	Read Replies (2) \| Respond to of 22640

Only Victor if you let it by overextending with margin. But you are right about one thing, the market can refuse to value TBR on its fundamentals for a very long time.

To: EPS who wrote (7078)	8/25/1998 5:55:00 AM
From: EPS	Respond to of 22640

Market Status at 06h10 pm ET The announcement of measures by the Central Bank aimed at preserving the country's reserves were ineffective toward boosting trader sentiment in both of the countries major stock exchanges: Sao Paulo's Bovespa and Rio's BVRJ, which registered lackluster sessions and thin volume. The apathy was due to the lack of non-professional investors: domestic or foreign. Not even the improvement in the international scene helped push up share prices. Market analysts believe, however, that the Brazilian equity market will remain volatile during this week. The Sao Paulo Stock Exchange Index (Ibovespa) finished lower by 1.4% (Ibovespa/US$ finished down 1.36% at 2,369 points). Trading volume was at US$364.015m with some 20.195bn shares having changed hands. The Rio de Janeiro Stock Exchange Index (IBV-RJ) closed down 1.21% at 27,020 points (IBV/US$ closed down 1.18% at 8,362 points). Among the blue chips, Telebr s PN/US$ ended down 0.17%. Eletrobr s ended lower by 3.89%. Petrobras PN/US$ ended down 5.30%. Usiminas finished higher by 3.48%. CSN ended up 0.02%. The measure adopted today by the Central Bank aimed at protecting the country's reserves -- which, up to last Friday, had registered an outflow of US$5.7bn -- brought some relief to the forex market today. The BC reduced the minimum term for raising funds abroad from two years to one; reduced the minimum term for the renovation of these loans from one year to six months; authorized the investment of 100% of funds raised via 63 Caipira operations in exchange securities (the BC previously allowed the investment of only 50% of these funds); as well as permitted the anticipated entry of resources destined to privatization to be invested in the fixed-income funds. The market reacted almost immediately to the BC's decisions. The exchange coupon retracted to 13.60% from 14.10% p.a. "Nobody believes the measures will protect the country indefinitely, but the measure served to reassure the market that the BC is attentive to the large outflow of resources," a trader said. At the Futures and Commodities Exchange (BM&F), September dollar futures contracts fell 0.03% to R$1.17220. October contracts finished also declined 0.08%, quoted at R$1.18340. The floating dollar closed out the day at R$1.1776, down 0.03%, offering a premium of 0.22%. The black market dollar finished up 0.25% at R$1.223, offering a premium of 4.09%. The US commercial dollar Ptax ended at R$1.1750/R$1.1742, from R$1.1753/R$1.1745 last Friday.

To: EPS who wrote (7078)	8/25/1998 5:56:00 AM
From: EPS	Read Replies (1) \| Respond to of 22640

U.S. Baby Boomers Could Look to Brazil In The Future by Elliot Uchitelle, President of Latin American Trade Specialists Brazil's recent privatization of its remaining shares of its telephone company, Telebras, was notable for its great success in obtaining a 64% premium over the minimum bid price. And this privatization, the largest ever in Latin America, certainly attests to the fact that major investors remain confident in the long-term prospects for Brazil's economy. But the most significant aspect of the privatization may very well have been the widespread coverage the sale received throughout the United States. The business sections of major newspapers throughout the United States highlighted not only the ultimate sale of Telebras but also the incredible economic prospects in Brazil's telecommunications sector as well as other sectors. And CNN, the twenty-four hour U.S. news station, highlighted the sale of the Telebras and the fact that its shares on Wall Street rose four percent the day after the successful privatization. It is this widespread coverage throughout the United States that could have significant ramifications for Brazil in the future. Over the past ten years, U.S. citizens have been pouring money into securities with the vast majority of this money buying U.S. stocks. And as the large segment of the population known as the baby boomers begins to think more and more about retirement, this trend is only expected to increase. People in the United States have begun to expect a minimum yearly return on their investments of at least ten percent which leaves stocks as the only viable alternative. Yet, many analysts are convinced that it will become increasingly difficult to find U.S. stocks that will continue to yield an annual ten percent return given that these U.S. companies are becoming increasingly overly valued. And that is where Brazil's stock market, and its recent widespread exposure as a result of the Telebras sale, could become significant. To date, it is still principally the large investors that have bought Brazilian stocks, but it is the small investors that control the bulk of the funds in the U.S. market. And if these small investors were to start buying large shares of Brazilian and other Latin American shares, the inflow of capital would increase dramatically. That was the real significance of the Telebras sale. The American people had an opportunity to see the great opportunities for investment in Brazil. If Brazil can continue its path toward economic stability and growth, it only seems logical that small U.S. investors will start to invest their retirement funds in Brazilian stocks. That would be excellent for the Brazilian economy and the small U.S. investor.

To: EPS who wrote (7078)	8/25/1998 5:58:00 AM
From: EPS	Respond to of 22640

Economists diverge on adoption of new economic package Sao Paulo, 24 - Both economists Andr‚a Calabi and Paulo Nogueira have different opinions about the possibility of the government setting up a new package of economic measures before presidential elections next October. The issue was discussed yesterday during Fogo Cruzado (Crossfire), a TV interview program beamed by one of the three major Brazilian channels. According to Calabi -- who defended the government is not going to adopt an economic package -- last October financial crisis favored the government as it begun to articulate different solutions for the eventuality of renewed turbulence. "The country is much more prepared," Calabi said. "The deepening of the privatization program -- mainly after the sale of the Telecommunications giant Telebr s -- coupled with the stabilization of the financial system and the improvement of the foreign exchange policy created a far different background from that of countries such as Russia and Venezuela," he said. According to Calabi, the measures set by the Finance minister, Pedro Malan, are long-term aimed and should not be changed. On the other hand, Calabi's counterpart, Paulo Nogueira, believes it will be difficult to make any forecasts such as whether the government will act on the matter at this point in time. "What we really know by now is that the international front is looking a great deal risky," Nogueira pointed out. "More so if we compare today's picture with last October's, when Brazil came under an international speculative attack." The economist said this is a distinct situation since a country as important as Russia has called for a moratorium. "It is the first time we have a country with an atomic arsenal cornered." He agrees with Calabi when his counterpart says the improvement of reserves (currently at approximately US$70bn, a figure some US$10bn higher than that registered before the outbreak of the Asian crisis) might have given Brazil time to breath. However, he pointed out that, "(reserves) were obtained in a perverse way, through the precipitously selling of main Brazilian assets, such as Telebr s". He went further on saying that "in order to guarantee president Fernando Henrique Cardoso's second-term of office, Brazil's long-term health was put at stake". Nogueira said it is clear Brazil fundamentals have improved a great deal since last October, but the country is still considered vulnerable to international crisis. "(Mainly) because Brazil does not objectively face its vulnerabilities." (By Melch¡ades Cunha J£nior)

To: EPS who wrote (7078)	8/25/1998 5:58:00 AM
From: EPS	Read Replies (1) \| Respond to of 22640

Holiday Inn to open 50 hotels in Brazil Sao Paulo, 24 - Bass Hotels & Resorts group, Holiday Inn chain's owner, plans to open 50 hotels in Brazil in the next five years. The group intends to offer services in a scarcely exploited area: cheap-rated business tourism. That is, receive executives seeking a hotel for a brief stay of up to three days, charging daily rates of R$60 to R$70. No room or laundry services, convention center and other facilities commonly found in high standard hotels will be offered. (Folha de S.Paulo)

To: EPS who wrote (7078)	8/25/1998 5:06:00 PM
From: EPS	Respond to of 22640

Aug/25/98 at 08h13 am ET Last closing review Stocks fall despite government blitzkrieg; real reacts The announcement of measures by the Central Bank aimed at preserving the country's reserves were ineffective toward boosting trader sentiment in both of the countries major stock exchanges: Sao Paulo's Bovespa and Rio's BVRJ, which registered lackluster sessions and thin volume. The apathy was due to the lack of domestic or foreign non-professional investors. Not even the improvement in the international scene helped push up share prices. Market analysts believed, however, that the Brazilian equity market would remain volatile during this week. The Sao Paulo Stock Exchange Index (Ibovespa) finished lower by 1.4% (Ibovespa/US$ finished down 1.36% at 2,369 points). Trading volume was at US$364.015m with some 20.195bn shares having changed hands. The Rio de Janeiro Stock Exchange Index (IBV-RJ) closed down 1.21% at 27,020 points (IBV/US$ closed down 1.18% at 8,362 points). Among the blue chips, Telebr s PN/US$ ended down 0.17%. Eletrobr s ended lower by 3.89%. Petrobras PN/US$ ended down 5.30%. Usiminas finished higher by 3.48%. CSN ended up 0.02%. The measure adopted yesterday by the Central Bank aimed at protecting the country's reserves -- which, up to last Friday, had registered an outflow of US$5.7bn -- brought some relief to the forex market. The BC reduced the minimum term for raising funds abroad from two years to one; reduced the minimum term for the renovation of these loans from one year to six months; authorized the investment of 100% of funds raised via 63 Caipira operations in exchange securities (the BC previously allowed the investment of only 50% of these funds); as well as permitted the anticipated entry of resources destined to privatization to be invested in the fixed-income funds. The market reacted almost immediately to the BC's decisions. The exchange coupon retracted to 13.60% from 14.10% p.a. "Nobody believes the measures will protect the country indefinitely, but the measure served to reassure the market that the BC is attentive to the large outflow of resources," a trader said. At the Futures and Commodities Exchange (BM&F), September dollar futures contracts fell 0.03% to R$1.17220. October contracts finished also declined 0.08%, quoted at R$1.18340. The floating dollar closed out the day at R$1.1776, down 0.03%, offering a premium of 0.22%. The black market dollar finished up 0.25% at R$1.223, offering a premium of 4.09%. The US commercial dollar Ptax ended at R$1.1750/R$1.1742, from R$1.1753/R$1.1745 last Friday.

To: EPS who wrote (7078)	8/25/1998 5:07:00 PM
From: EPS	Read Replies (1) \| Respond to of 22640

Market Status at 12h49 pm ET Brazilian markets are expected to get a boost, mainly after the Central Bank's announcement yesterday of a package of measures aimed at preserving the country's reserves, see related story. An improved scenario in foreign markets overnight, as Dow Jones reported, is also expected to lift trader sentiment. However, non-professional investors -- which are necessary to keep money gyrating -- are still very cautious as they know any investment at the moment would be like sticking their hands in a hornet's nest. So far, so good, but Agˆncia Estado pointed out this morning that any oscillation detected abroad, be it either in Wall Street or in Asian or European stock markets, might instantly reverberate in the domestic front and lead investors into a selling binge. The Sao Paulo Stock Exchange Index (Ibovespa) is higher by 2.57% at 7,852 points. Trading volume is at R$ 177.889m with some 9.603 bn shares having changed hands. The Rio de Janeiro Stock Exchange Index (IBV-RJ) is also higher by 1.85% at 27,519 points. Among the blue chips, Telebr s PN up 2.95% at R$ 101.20. Eletrobr s also higher by 2.04% at R$ 25.00. Usiminas up 3.14% at R$ 5.25. CSN also up 2.27% at R$ 22.50. Likewise Brazilian equity markets, the measures adopted yesterday by the Central Bank is also expected to have a positive impact on the dollar market, leading commercial projections lower. Measures were adopted to protect the country's reserves as well as the forex market, which had accumulated a negative balance of as much as US$7.3bn up to yesterday. A figure some US$7bn higher than that registered during the Asian crisis outbreak last October. As for new dollar entries, the government believes it all will depend on the scenario abroad as well as on domestic improvements, mainly in the fiscal deficit. However, market watchers believe the measures could not have been taken in a better moment. The US commercial dollar Ptax is currently trading at R$1.1730/R$1.1725.