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Rambus Inc. Message Board

  • crashof98 crashof98 Jan 23, 1998 5:14 PM Flag

    Chaos in Indonesia -- Part #2

    Valuable Dollars

    As the Indonesian rupiah has plunged, companies have hoarded increasingly valuable dollars. With a shortage of dollars in the system and their price rising daily, Indonesian banks are struggling to make good on day-to-day transactions with international parties such as honoring checks and trade-related credits, as well as foreign-exchange deals. In the past
    two weeks, most large Indonesian banks have had to plead for extra time in settling transactions with foreign banks, according to senior bankers in Singapore, where the bulk of daily trading in the rupiah takes place.

    Applying pressure could push the system into gridlock, in which the complex flow of banking-system payments freezes as each
    bank refuses to make a payment until it receives one from another party. As a result, Singapore bankers say that so far they have
    allowed Indonesian banks time to scrounge up the needed cash. But it makes them very nervous; they're growing reluctant to deal with
    Indonesian parties. And fewer players in a market makes it more volatile, the last thing the beleaguered rupiah needs.

    "The system is close to collapse unless there is some stability returned," says a prominent Indonesian businessman. "It can't endure the rupiah at this level."

    But bankers now expect that the government will be forced to block foreign-debt repayments, shut the gates on capital flows or otherwise restrict the rupiah's trading. The government said two weeks ago that there would be no moratorium on debt payments, a move that would be tough to get past the IMF.

    Financial-System Freeze

    But that was before the latest IMF package, a tougher version of a November agreement that Jakarta strayed from, was formulated -- and flopped. The IMF is expected to push Indonesia to keep its capital account open, and to refrain from bailing out the companies that have accumulated heavy debts. But if the falling currency and mounting debts trigger a financial-system freeze, the government may have no choice but to take some of these measures.

    "It's got to the point where some foreign bankers are saying, 'Why don't we just trigger it ourselves and get it over with,' " says one banker. "At least then we'd know where we stand."

    A moratorium might also prove ineffective or destructive, some economists say. "It seems like an easy thing to do," says Tim Condon, economist at Morgan Stanley Dean Witter. "But experience shows that it's unlikely to stabilize the currency unless it's accompanied by far-reaching economic reforms."

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    • Congrats on your short success (on this stock) I bailed at $47.
      What do you think about AOL taking a tumble? You seem to know a lot about companies to short. There doesn't seem a lot of a up return for investors but man could this thing crash hard.

      • 2 Replies to PBOL
      • Check out XION can't hurt it any more all good news also
        at it's price it could tripple soon with hp's new line


        P.S. I do own some for what it's worth.

      • I don't follow AOL and would be uneasy about shorting it.
        The internet stocks are more volatile than Rambus, if thats possible. AOL has a huge customer base and beaucoup advertising revenues. I don't know if they made their earnings this quarter, but I know that their P/E is not as stratasferic as Rambus' is.

        I think the best companies to short are the ones that have:
        A) missed earnings & better yet, had losses
        B) Have Asian exposure
        C) Project flat to negative earnings going forward.

        There are plenty (to name a few):

        1) Motorolla (MOT)
        2) JP Morgan (JPM), Chase Manhattan, Citicorp
        3) Union Pacific Rail (UNP)
        4) Steel Makers (USX, etc...)
        5) Ship Builders
        6) Autos (GM <-- will post huge writeoff = $5 Billion)
        7) Heavy Construction Equipment (Caterpillar, Komatsu)

        You will make plenty of money just working this short list.
        In 6 - 12 months, I project that I will double my investments
        just shorting these industries. I just sold my house and am planning to put all of my equity in the market to further short these stocks.

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