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

To: md1derful who wrote (8580)	9/28/1998 1:59:00 PM
From: Steve Fancy	Read Replies (4) \| Respond to of 22640

Yep, 5th grade. Worse yet, he told the joke out of the blue at a small family gathering for my Father's birthday as he heard a discussion of the Clinton fiasco. TBR, rate drop, tomorrow, who the h*ll knows. One school of thought I've heard says the market will sell off on a 1/4 point cause 1/2 point is built in. Another says 1/2 point causes a sell off due to concern that maybe things are worse than we all know. I'm going to put some kind of straddle on some stock or sector before the big announcement. As far as the elections, I think a Cardoso first round win is good for a small rally, but I see the key as being how aggressively he attacks the reform issues. Hope to see some strong comments regarding reforms on Sunday or Monday. None of the Japan approach of we'll get back to ya in a couple months, maybe. It has been stated Brazil is not Russia or Japan, next Monday will be time to put up or shut up IMO. Of course a further significant factor may be the availability of an emergency fund. Maybe we'll get our socks knocked off next Monday with an aggressive reform plan and announcement of an emergency fund. That oughta do it. US earnings start in force next week also. I think they may come in better then expected. This coupled with a rate increase may be good for a strong October rally. sf

To: md1derful who wrote (8580)	9/28/1998 4:32:00 PM
From: Steve Fancy	Respond to of 22640

Latin Stks Price In 25-Basis Pt Rate Cut; Sell-Off Likely September 28, 1998 Dow Jones Newswires By MARGARITA PALATNIK Dow Jones Newswires NEW YORK -- Latin American stocks, which need all the help they can get after their sad performance this year, have already priced in the potential good news of a U.S. interest-rate cut, and could see a sell-off Tuesday. Market participants surveyed said that they discount a 25 basis-point cut in U.S. federal funds rate by the Federal Open Market Committee Tuesday, thus leaving Latin American shares ready for profit-taking if consensus estimates come true. "25 (basis points) is priced in, 50 would be really good, and no cut would be really, really bad," said a New York-based trader of Latin American stocks. "The market will fall on a 25 (basis point) cut," said a dealer at Mexican brokerage Inverlat. "In that case, I would take profits on strength." Since U.S. monetary authorities recently acknowledged the importance of foreign economies' well-being for the U.S., the FOMC meeting - which lately had elicited big yawns from market watchers - is once again drawing the world's attention. However, in this familiar game of wants and expectations, what the market craves to feed a rally - a 50 bps rate cut - doesn't seem to be in sync with what it believes will happen. Financial professionals point out that it's "not the Fed's style" to move rates by half a point. "Also, for the Fed to cut 50 (bps) in one shot is a risky signal, because it implies the crisis is very serious," said the Inverlat dealer. The federal funds rate now stands at 5.50%. A move by the Fed to lower the funds rate to 5.25% would be welcomed by investors in Latin American equities, which have been pummeled in 1998. Through Friday, Brazilian stocks were down 34% on a year-to-date basis. Meanwhile, Mexico's IPC index has fallen 29% in 1998 and Argentina's Merval index is off 43%. For Deutsche Bank Securities emerging market strategist Geoffrey Dennis, a 25 basis point reduction in the U.S. federal funds rate shouldn't be all that tragic. In fact, Dennis said the cut could be the first in a series. "The Fed has a lot of work to do before it can protect the (U.S.) economy from slowing growth, so the market will be anticipating further cuts," Dennis said. This expectation could sustain improved sentiment towards emerging markets for several weeks, he said, barring any more negative news from other markets. But a rosy U.S. rate scenario isn't a bullet-proof shield for Latin American stocks. For example, Dennis warned, disappointing figures from the Japanese Tankan survey of business sentiment could dampen the good mood as soon as this Thursday. "Japan is a constant (problem) to pay attention to. The problem started in Japan and will end in Japan," according to Francisco Rivero, head of research for Mexican brokerage Valores Finamex. An improvement in Japan's economy would not only benefit neighboring Asian countries, but, more importantly for Latin America, it would strengthen commodity prices. However, as crises go, the flavor-of-the-month is Brazil, the largest economy in the region, Rivero added. "We'll be watching the elections (Oct. 4), waiting to see if (president Fernando Henrique) Cardoso announces a fiscal program, then to see if the market buys his program, and whether or not Brazil gets a rescue loan backed by the U.S." and the International Monetary Fund, Rivero said. "All these events will be critical for the (Latin American) markets to recover from the ridiculous levels hit in August." -By Margarita Palatnik; 201-938-2226; margarita.palatnik@cor.dowjones.com