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

To: Peter Singleton who wrote (630)	9/5/1998 10:52:00 PM
From: Rob Shilling	Read Replies (2) \| Respond to of 1301

Ah, Peter, glad to see somebody is out there. The odds for my list to happen may be kind of high. But, as for just being able to make money in Russian stocks rolling a string of 7's may not be the best interpretation of the odds (IMHO). It is more accurate to say that to make money in Russian stocks you need to NOT roll snake eyes. Snake eyes would be nationalization of ROS and LUKOY. ROS and LUKOY are so low now, there is easy upside in them if anything gets better. That is especially true for LUKOY which has most of its revenues in dollars and costs in rubles. Remember, both companies were/are profitable and had good balance sheets, especially LUKOY. LUKOY is the best buy of all. It is trading at 1/6 sales. It is the largest oil company by reserves in the world. To get more desperately needed investment in Russia's oil fields, the government cannot nationalize the oil industries. Also, markets are supposed to price in news. We have already had default, devaluation, inflation, panic, and political uncertainty. Unless Russia falls back to communism you can win big with Russian stocks. If Victor C. gets voted in that should add some calm to the situation. Remember I am long term in a sea of short term investors. Capitalism has a way of working things out for you. Sure Russia already has problems, but capitalism has made inroads already and it is almost irreversible. At least one of the Oligarchs has lost a ton of money on the SBS-Agro bank failure. Since he was not efficient and rational with his money he loses. That is market forces at work. It seems the banks are the worst problem in Russia, not because they are failing, but because they need to fail. Most of them are just gambling hedge funds. Russia could come out a lot stronger after this crisis. But I am not talking next week, I am talking 1 year or more. The stocks will reflect this earlier though probably.

To: Peter Singleton who wrote (630)	9/5/1998 11:11:00 PM
From: Rob Shilling	Respond to of 1301

Peter, as for the world financial system being in trouble, I am with you a hundred percent on that. I think hedge funds like the ones Soros runs have destabilized the world with currency "shark attacks". Add the hapless IMF fund and the overcapacity in Asia and there is a big mess. The one market I would be most worried about is the U.S. market. It has just now taken a 18% hit from the top. But once people realize that earnings will probably be DOWN year over year for the S&P 500, it could go much lower. Maybe Dow 4500 (IMHO). Now I look at Russia as a hedge against deflation. If there is worldwide deflation food prices will drop (Russia imports most of its food). Second oil prices will not necessary stay at deflated levels because they are more determined by OPEC than free market action. OPEC has been very good at compliance with cutbacks recently and the "glut" is dissipating. If you add IRAQ and maybe Iran/Afganistan, oil prices could surge much higher, all the better for Russia (so Russia is a hedge against high oil prices and war). But, for the U.S.A, high oil prices will put the nail in the coffin and help bring on the recession. How about Y2K ??? Russia probably will not be too affected, because it is still so backwards there. The atomic power plants are already deemed o.k. because they use analog and not modern digital electronics. So Russia is a hedge against Y2K. also. Add to that that the Russian stock market is down 90% from its peak, there is no volume on the Moscow stock exchange, and everything that could go wrong has, up or sideways seems to be the directions. Even social unrest is unlikely because Russia is now printing money to pay wage arrears and the Russians are legendary for their patience and at this time want stability and not rebellion. Nationalization is the only potential negative. I have convinced myself that I have good odds at not "rolling snake eyes" on this one. So, I agree, we may have some sort of worldwide problem, or some type of "asia comes back and the U.S. falls" type of situation. So I definitely would not touch U.S. stocks. Especially since most people have been brainwashed that the Dow goes up at least 10% a year and there is no such thing as bear markets. So I have kind of a weird theory. Russian stocks are a good hedge against worldwide economic chaos !!!