On 2010-05-05, John R. Carroll wrote:
Ignoramus32324 wrote:
On 2010-05-05, John R. Carroll wrote:
Ignoramus32324 wrote:


http://online.wsj.com/article/SB1000...434882588.html

Look at the picture, if it is behind the paywall, see here

http://igor.chudov.com/tmp/greece-communists.jpg

In the interests of disclosure, I must say that I bought a Greek
stock in the last few days. It is called "Hellenic Telecom" (OTE). I
reasoned that even communists or unemployed people want to use
phones and Internet.


How do you think the deflationary cycle that Greece, Spain, Poland
and a couple of others will impact your investment?

Given that they are in the euro zone, the prices are not local and
thus I do not expect to see local deflation.

As to a more general question, how will this phone/internet provider
do in a recession, I would hypothesize, that people might use the
phone a little bit less? Maybe use a little bit less instant messages?

Greece, for instance, can no longer just devalue their currency the
way they could before joining the EU so they are going to have to
reduce wages as a nation. Spain is even worse.

They have to increase taxes and reduce govt benefits. In any case, I
expect Greeks to still use phones and the Internet.

OK. What that means, since their currency can't float, is that the peeps
will have much less disposable income for things like satellite TV and cell
phones and as unemployment rises wages will be under tremendous pressure.
Then when their Romanian holdings crater and the Greek Government's
subsidies are reduced or eliminated, I'd expect to see the equity value
adversly affected. There are way too many unknowns in the world today so I'm
with the guys that wouldn't know which way to go on this one but I wouldn't
be surprised to see share prices on their ADR's in the three dollar range or
even lower within the next year. As George indicated - they might just be
nationalized.

DT might very well end up with the entire company, which would be great in
the long run, but you will have to stay the course and the deal might end up
as an equity swap with a little cash. That they just increased their
position indicates their belief that nationalization isn't likely.

I also do not expect nationalization. Hellenic Telecom is not a TV
company, as much as it is a phone and internet provider company, like
BellSouth. I would not expect people to give up either, except in very
dire circumstances (perhaps I am projecting).

Participation of DT is an encouraging factor for me. I have no idea
how low OTE will go, but I do think that chances are tilted in my
favor.

My son is now reading a "investing for kids" book. He asked me about
risk. This is a topic where I can go on a huge tirade if I am not
restrained. What such books usually do not explain, is that risk is
mostly about how much you pay for something. Risk is a possibility of
overpaying for a "dog" asset, not volatility.

I asked him, imagine that you buy an industrial machine, in unknown
condition. If the machine is bad, you can sell it for $200, if the
machine is good, you can sell it for $1,000. I asked, do you think
that it is a risky purchase? He said, yes. My next question was, what
if I paid only $100 for the machine, is that a risky purchase? Then a
light bulb lit in him and he said, not at all.

Buying viable businesses in a distressed country awash in bad news, is
like buying an unknown condition metalworking machine for less than
scrap value. At a price like that, all surprises with the machine will
be good surprises. I may lose money, still, but I estimate chances to
be in my favor.

i