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.

i

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?
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.

--
John R. Carroll

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.

i

On Tue, 04 May 2010 22:08:42 -0500, 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.

i
=============
Might be a good play at the right price, however there is
considerable merit in the argument that what the Greek
worker and peasant pays for, the Greek worker and peasant
should own. According to the history books, one of the most
popular propaganda catch-phrases in the Russian revolution
was "steal that which was stolen."

The Greek governmental credit crisis has even attracted the
attention of my Representative in Congress. The huge danger
is that this is not isolated to Greece but Greece is simply
the first card to fall in the collapse of the house of cards
that is international finance.

If you are interested you can see Rep. Tiahrt's thoughts on
US taxpayer involvement in the Greek finance/fiscal debacle
at
http://tiahrt.house.gov/index.cfm?se...&itemi d=1517

As is my habit, I wrote him an email, with CCs to my
Senators, a copy of which is below.

----- start of email -----
To: Representative Tiahrt
CC: Senator Brownback
Senator Roberts
Representative Moran

Congratulations on being proactive rather than reactive to
the Greek/Euro financial/fiscal crisis as indicated in your
web posting of 04 May titled "Tiahrt: No Taxpayer-Funded
Bailouts for Greece". Keep up the good work!!!

A few items of caution and observation:

(1) Based on the prior precedent of the Mexican bail-out
shortly after the ratification of the NAFTA treaty using
funds from the "(emergency) Economic Stabilization Fund" now
known as the "Exchange Stabilization Fund" IT MAY ALREADY BE
TOO LATE in that the money has been appropriated and is now
under administrative/bureaucratic rather than Congressional
control.
http://en.wikipedia.org/wiki/Exchang...ilization_Fund
snip
The U.S. government used the fund to provide $20 billion in
currency swaps and loan guarantees to Mexico following the
1994 economic crisis in Mexico. This was somewhat
controversial at the time, because President Clinton had
tried and failed to pass the Mexican Stabilization Act
through Congress. Use of the ESF circumvented the need for
approval of the legislative branch. In response, Congress
passed and President Clinton signed the Mexican Debt
Disclosure Act of 1995, which implicitly accepted the use of
the ESF, but required reports to Congress every six months
on the status of the loans. At the end of the crisis, the
U.S. actually made a $500 million profit on the loans. On
September 19, 2008, U.S. Treasury Department announced that
up to $50 billion in the ESF would temporarily be made
available to guarantee deposits in certain money market
funds.
snip

(2) It is a typical but unfortunate misuse of language to
refer to the emergency loans as a rescue of Greece. Neither
the Greek people nor the Greek state will be helped in
anyway by the huge IMF/ECB loans. Indeed, under the
proposed /ECB austerity measures the average Greek looses a
great deal. The government of Greece, and the banks of
Greece will gain a small amount of time and breathing room,
but as this is directly a solvency problem, not a cash flow
problem, i.e. the government of Greece is bankrupt; any
benefits will be short term, at most a respite of few
months. The big winners/gainers will be the creditors of
Greece, the international banks that bought the Greek paper,
aiding and abetting the purchase of excessive armaments and
"show case" projects of marginal and frequently negative
value to the Greek people and state. Items with at least
potential payback such as infrastructure upgrade, for
example railroad and port improvement were neglected. It
should be noted that unless done with exceptional care and
finesse, "austerity" can, and frequently does, trigger
deflation/depression, making the fiscal/economic problems
worse, not better.

(3) While the major U.S. banks have loudly/proudly
proclaimed their lack of investment in Greek governmental
bonds, this may well be a hollow boast. While it may be
factual to state they hold no Greek governmental paper, no
information about other exposure such as derivative
counter-party risk (which can be many times the face or
notational value of the bonds), for example Credit Default
Swap or Interest Rate Swap contracts has been forthcoming,
and while there may indeed be no *DIRECT* bank exposure to
Greek governmental default/rescheduling, they may
nevertheless be heavily exposed, for example through the
bank's "carry trade" customers such as speculators, hedge
fund, bond funds, etc., particularly given the extraordinary
interest returns possible because of the fall in short-term
bond prices (note the inverted yield curve).

http://www.bondsquawk.com/tag/greek-bonds/
snip
The yield on 2-Year Greek bonds moved higher by 354 basis
points to 13.82 percent while the 5-year is yielding 11.58
percent, a rise of 121 basis points. The yield on Greek
10-Year is trading higher by 90 basis points to 9.40
percent.
snip
----- end of email -----
--

-- Unka George (George McDuffee)
...............................
The past is a foreign country;
they do things differently there.
L. P. Hartley (1895-1972), British author.
The Go-Between, Prologue (1953).

On 2010-05-05, F George McDuffee wrote:

Might be a good play at the right price, however there is

5 times annual earnings, 9-10% dividend yield, 31% return on equity,
dominant market position. The minus is 4:1 leverage, but many
utilities use leverage.

As for your representative wanting to deny bailouts because "taxpayers
are tired of bailouts", it needs to be pointed out that some taxpayers
are tired of them and some were saved by them. It would seem that
Greece is mostly a European concern at this point. However, if a
crisis of confidence is allowed to propagate too far, it may affect
the United States as well. If irrational fears result in tripling of
our debt service costs, suddenly that amount will be a reality of its
own. It is something to keep in mind.

This is a complicated matter in which I have no opinion on whetehr to
help Greece or not. My judgment regarding OTE is that it will probably
do well.
i

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.

--
John R. Carroll

Ignoramus32324 wrote:
On 2010-05-05, F George McDuffee
wrote:

Might be a good play at the right price, however there is

5 times annual earnings, 9-10% dividend yield, 31% return on equity,
dominant market position. The minus is 4:1 leverage, but many
utilities use leverage.

The minus is their P/E ratio Ig. For one thing, it's way too low even for a
utility. Their last dividend was EU .5 per share.
Something is goofy about these numbers. The question, of course, is what
exactly that is. Infrastructure?
I'm just seeing the boogie man everywhere these days.

My feeling isn't so much driven by debt as it is that by "saving" the
financial sector we have prevented the collapse of 1929 but what we end up
with might not be so good either. Greater income disparity appears to be the
future and that isn't good for anyone in the long run.

--
John R. Carroll

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

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

Might be a good play at the right price, however there is

5 times annual earnings, 9-10% dividend yield, 31% return on equity,
dominant market position. The minus is 4:1 leverage, but many
utilities use leverage.

The minus is their P/E ratio Ig. For one thing, it's way too low even for a
utility. Their last dividend was EU .5 per share.
Something is goofy about these numbers. The question, of course, is what
exactly that is. Infrastructure?

I think that it is like BellSouth, kind of.

I'm just seeing the boogie man everywhere these days.

Not a bad way as a start to all analysis.

My feeling isn't so much driven by debt as it is that by "saving" the
financial sector we have prevented the collapse of 1929 but what we end up
with might not be so good either. Greater income disparity appears to be the
future and that isn't good for anyone in the long run.

You are right. It is not even good on the correct side of the income
divide. (where one would hope to be) I would prefer to be well off,
surrounded by other well off people, than to be well off in a sea of
poverty, confusion and despair.

The income disparity, however, is driven by economic factors from
which there is no escape. These factors are computers and automation.
The phenomenon is called variously, for example "loss of middle class
jobs". (or midmarket)

This article is frightening:

http://www.ncbi.nlm.nih.gov/bookshel...013e48ddd00012

It identifies the "competencies" related to complex problem solving,
which will continue to be rewarded, with the implication that there
will be less and less space for people not possessing them.

i

Ignoramus22564 wrote:
On 2010-05-05, John R. Carroll wrote:
Ignoramus32324 wrote:
On 2010-05-05, F George McDuffee
wrote:

You are right. It is not even good on the correct side of the income
divide. (where one would hope to be) I would prefer to be well off,
surrounded by other well off people, than to be well off in a sea of
poverty, confusion and despair.

My immediate concern is that the worlds biggest central banks have
fundamentally changed the character of their balance sheets.
The US Fed, for example, has expanded their balance sheet from $800 billion
when the latest turmoil started all the way to $3.5 trillion dollars and the
mix has gone from 95/5 US T-Bills to an unhealthy blend of securities that
aren't investment grade at all in some cases.
Furthermore, they have actually put out (created) $15 trillion dollars all
together. The only way you can have a $3.5 trillion dollar balance sheet in
a $15 trillion dollar environment is with off balance sheet assets. The US
central bank, in other words, is running the same model AIG, Lehman, BofA,
and WAMU were and we know where that lead. Should this become widely
percieved as the truth, underlying value won't matter at all and the risk
premium for anything will be 100 percent.


The income disparity, however, is driven by economic factors from
which there is no escape. These factors are computers and automation.
The phenomenon is called variously, for example "loss of middle class
jobs". (or midmarket)

This article is frightening:


http://www.ncbi.nlm.nih.gov/bookshel...013e48ddd00012

It identifies the "competencies" related to complex problem solving,
which will continue to be rewarded, with the implication that there
will be less and less space for people not possessing them.


The "middle" will continue to be squeezed and we will end up, as the article
points out, with a barbell shaped structure.
One thing that wasn't explicitly stated is that the barbell won't be equally
weighted. One side weighs 90K employment units and the other 10K.
This isn't good or even necessary.
In a consumer based economy, you'd want an elliptical distribution.
The US isn't adopting the public policy posture required to insure this -
just the opposite.

--
John R. Carroll

Ignoramus22564 wrote:
On 2010-05-05, John R. Carroll wrote:
Ignoramus32324 wrote:
On 2010-05-05, John R. Carroll wrote:
Ignoramus32324 wrote:

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.

I do too but not for any reason beyond DT's increase in their position.


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 watched Blankfein on Charlie Rose recently. Did you see it?
Every time the discussion turned to market making, Blankfein spoke about his
customers buying and selling risk.
I don't think he mentioned anything physical even once.
I lost a lot of respect for Rose because of this interview.
He appeared to want to ask about the abuse a market maker can inflict but
never went beyond allowing the response to be another attempt to restate
what making a market means. Rose is either dumb or he had agreed not to ask
certain direct questions as a condition of getting the interview.



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.

Well, there is one risk and that is that the market for whatever the asset
is won't exist when you want to sell.
That's what happened to the derivatives market.
Then third party repo failed. I still can't believe how large the TED spread
got.


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.

The only drawback is a lack of specific knowledge not about the company or
industry but about what k00kie thing people might do in reaction to what's
happening in the general economy. You can't, for instance, factor in mass
suicide!
LOL

I've never bought equity in the absence of specific positive knowledge in
advance of the market. I also set my trigger prices in advance at both the
low and high side.

--
John R. Carroll

On Tue, 04 May 2010 23:29:58 -0500, F. George McDuffee
wrote:
snip
Congratulations on being proactive rather than reactive to
the Greek/Euro financial/fiscal crisis as indicated in your
web posting of 04 May titled "Tiahrt: No Taxpayer-Funded
Bailouts for Greece". Keep up the good work!!!

A few items of caution and observation:

(1) Based on the prior precedent of the Mexican bail-out
shortly after the ratification of the NAFTA treaty using
funds from the "(emergency) Economic Stabilization Fund" now
known as the "Exchange Stabilization Fund" IT MAY ALREADY BE
TOO LATE in that the money has been appropriated and is now
under administrative/bureaucratic rather than Congressional
control.
http://en.wikipedia.org/wiki/Exchang...ilization_Fund
snip
==========
Without editorial comment except to note that this was
released late on Sunday night [May 09]

http://news.yahoo.com/s/ap/20100510/...na/date/asc/11
snip
WASHINGTON – The Federal Reserve late Sunday opened a
program to ship U.S. dollars to Europe in a move to head off
a broader financial crisis on the continent.
snip
prevent the European crisis from spreading further.

The Fed said action is being taken "in response to the
reemergence of strains in U.S. dollar short-term funding
markets in Europe," and to prevent the spread of that strain
to other markets and financial centers.

A so-called "swap" line with the Bank of Canada provides up
to $30 billion. Figures weren't provided for the other
central banks. The arrangements are authorized through
January 2011.
snip
--

-- Unka George (George McDuffee)
...............................
The past is a foreign country;
they do things differently there.
L. P. Hartley (1895-1972), British author.
The Go-Between, Prologue (1953).

Wow, I was welding and drilling etc, playing with kids almost all day
yesterday and missed the "1.2 trillion stabilization".

Special for John Carroll and others that are interested in
the economy. Note metal content.

http://www.telegraph.co.uk/finance/p...and-bonds.html
The New York University professor, Nassim Taleb, who made
his name predicting the credit crunch, has told investors to
dump equities and government bonds and buy 'hard assets'.


By James Phillips, citywire.co.uk
Published: 10:55PM BST 18 May 2010
snip
The New York University professor, Nassim Taleb, who made
his name predicting the credit crunch, has told investors to
dump equities and government bonds and buy 'hard assets'.

He has poured scorn on the economic recovery, claiming that
the global economy is in worse shape than it was during the
subprime crisis and warns that the US could yet lurch into a
Greek-style meltdown.
snip
His main concern is that the transferal of debt from the
private to the public sector has seen the risks within the
financial system increase and 'take a much more vicious
form.'

Western governments have been issuing record levels of debt
to keep the recovery afloat, but Taleb says that it is
inevitable that at some point they will struggle to find
buyers of these assets.
snip
So how should investors position their portfolios for such a
doomsday scenario? Taleb, who made millions betting against
financials during the credit crunch, recommends investors
dump long-term government bonds and only hold short-dated
debt. He also warns against viewing the dollar as a hedge
against the ailing euro, pointing out that both currencies
face the same underlying problems.

He dismisses the stockmarket, which would be expected to
perform badly in a period of hyperinflation, completely,

"I recommend not thinking about the stockmarket," he said.
"It is a big hoax that has disappointed people over the last
decade making their retirement plans, thinking it would
appreciate."

"Use it as something to play with for entertainment and
nothing more."

He favours moving into hard assets and advises investors to
build exposure to a basket of metals rather than try and
second guess which individual hard commodity will
outperform. He also likes agricultural land, but said avoid
'speculative real estate'.
snip

-- Unka George (George McDuffee)
...............................
The past is a foreign country;
they do things differently there.
L. P. Hartley (1895-1972), British author.
The Go-Between, Prologue (1953).