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: djane who wrote (7603)	9/6/1998 6:39:00 PM
From: djane	Read Replies (2) \| Respond to of 22640

9/21/98 Forbes. After Yeltsin falls, Russia should be a good place to invest. Here's why [PT, wasn't this guy correctly extremely bearish on Russia about 1 month ago? I guess 87% down can convert a few bears...] global.forbes.com Fixing Russia By Vladimir Kvint In his speech announcing his nomination of Viktor Chernomyrdin as prime minister, President Boris Yeltsin stated that no one could have expected the Russian financial crisis. Soldiers and workers aren't getting paid, export earnings end up in Swiss bank accounts and no one could have foreseen a crisis? The man is clueless. The crisis cannot be ended by IMF loans or half-hearted reforms. It can end only when the idiotic privatizations of the early 1990s are reversed, some controls reestablished and the tycoons who pocketed the proceeds from Russia's exports forced to disgorge their foreign bank accounts. This Yeltsin cannot accomplish: He is the creature of the tycoons. When Yeltsin falls-whether via resignation or by a coup d'‚tat-his successor will have to do things that may be seen abroad as a backsliding to communism, but that will be a misconception. I do believe that money honestly invested in shares and physical assets from abroad and by ordinary investors at home will not be confiscated. To attract foreign investors back into the economy and to persuade ordinary Russians to invest their savings, both groups will have to be made whole-although foreigners who bought those now-frozen government bonds (GKOs), are going to be stuck holding the paper for a long time. Voiding the privatizations and doing it again honestly and openly could bring in more foreign exchange than all the money the IMF could ever lay its hands on. Some of that foreign exchange would come right out from under Russian mattresses. We had all better hope that the change comes quickly. I think, therefore, that sound investments made now in Russia will pay off: in telecoms-but not in mass media-in oil exploration, public utilities in some regions, transportation, high-tech and software companies, the construction industry and a few reliable banks. But: Know what you are buying. There is a big difference between companies run by Western-style management and publicly traded in the U.S. and those that are run by the old-style bureaucrats and their oligarchic masters. Which means that companies controlled by Russia's new magnates should be avoided (see "The last days of Boris Yeltsin," ). These companies are likely to be renationalized and ultimately resold, perhaps in part to foreign interests, in open tenders organized by foreign and domestic accounting, law and investment banking firms. On the other hand, several of the mutual funds managed by foreign firms, such as the Templeton Russia fund, could be promising investments once Yeltsin is out of the way and Russia starts afresh. With their prices down 87% and more, there are certain to be bargains among Russian stocks. We had all better hope that the change comes quickly. For years, when Westerners asked me about the control of nuclear weapons in Russia I laughed, because they were always in strong hands: Brezhnev's, Gorbachev's, Yeltsin's. These guys would never use nuclear weapons. They loved life and the privileges their rank brought them. They had no death wish. It is different, though, with military men who have not been paid, whose families have no money for decent food. Discipline in the Russian army hasn't been at such a low level since the last days of the czar. Soldiers have been selling guns and tanks and aircraft. What's to stop them from selling nuclear and biological weapons? Terrorists do not need to buy a nuclear bomb as a whole; they can buy them in pieces from different places. Chechen guerrillas have threatened Russian leaders with word that they possess weapons of mass destruction. Americans worry about the possible coming to power in Russia of a nationalistic dictatorship that might turn aggressive to make the Russian people forget their troubles. Not to worry. Even a military dictatorship would have an enemy close at hand: the pseudocapitalists who hijacked the Russian economy and stole the bread from Russian mouths. As recently as 1992 these pseudocapitalists were as poor as most other Russians. They had no capital and no access to it but bribed and muscled their way to wealth by methods described in previous issues of FORBES and FORBES GLOBAL (Dec. 30, 1996, and Sept. 7, respectively). They then proceeded to send abroad the money earned from Russian exports, leaving Russian companies unable to pay their workers. These people-not foreign investors-will feel the wrath of Yeltsin's successors. Indeed, selling foreigners a stake in the economy will be seen as the only real hope of putting Russia on a more prosperous path. Dr. Vladimir Kvint is a professor at the Fordham University Graduate School of Business in New York City and a consultant. Writing in FORBES in 1990, he was one of the first people to predict the imminent breakup of the Soviet Union. c 1998 Forbes Inc. Terms, Conditions and Notices