Ji'vrf? •**: '•. W* *«r*VW^ ■» 20 - MANCHESTER HERALD. Fri.. July 2, 1982 [li'if ■' , BUSINESS v\v>A*’ i;., . ; Make the outsiders get out. a ' of ^ . .'■ m. CLEARLY, Tins BEVy of unwanted bargains nationalizing the food industry. ^ - How’d you like to buy a Treasury bill yielding 47 sianaiB the prevaiUne view that the carnage is far from This could affect such companies as Del Monte,, percent? Or maybe snap up a hot growth stock selling at ovar: And that’s in the.face of a Mexican market that General Foods, Kellogg, CamaUon, Ralston Purina and just 2.8 times earnings and yielding a hefty 14.5 percent? has already tumbled a wicked 71 percent this year and Anderson Clayton; , ^ No, it’s not a fairy tale — hut an outgrowth of the dis­ Dan Dorfman 17 percent in May alone. ' Weiner pdints to Mexico as a country with one of the astrous investment scene in Mexico. One can easily understand the investor’s concern. most inequitable distributions of wealth — great riches on one hand and rapidly growing poverty on the other. And the message to us: Given a highly leveraged or Syndicated Mexican inflation is approaching SO percent; govern­ heavily debt-ridden economy (which we have) and high ment deficits are ballooning; the oil glut (leading to Yet, in the face of this inequity, the government is interest rates (which we also have) — coupled with Columnist lower oil prices) is preventing Mexico from generating Ulking of cutting back on spending (what with an 81 government policy errors (the jury is still out on the necessary revenues to service its surging debt. On deficit of $11.5 billion) — which would clearly impact Reagnomics) —• a country's stock market could top of this. Standard & Poor’s has reduced ite credit social programs, especially food subsidies. plummet to levels beyond the wildest imagination. rating on the state-owned bank, National Financiera. Mexico’s a great case in point. In January of ’81, it And the country’s external financing needs this year W ITH AN UNEM PLOYM ENT rate of 10 percent, boasted the eighth largest stock market in the world alone could run as high as $20 billion to $30 billion, or as part-time working force of 40 percent and more and; with a value of $23 billion. Since then, it has fallen an in­ much as the entire external debt of Poland. tom could be? . , „ ^ more young people (now half the population) coming credible 88 percent. In the same period, the U.S. stock As one bright Wall Street thinker. Barton Biggs, sees It’s no wonder that Biggs thinks the best bet is to look into the work force, Weiner sees the stage being set for ‘ market is down roughly 23 percent. it: “ Our stock market has discounted everything but a at the Mexican market again in about a year — after the depression. But if you. have real economic cracks, the growing “ dislocations” — namely riots and iUegaU COULD IT H.4PPKN here? And equally important, dust settles. strikes. One riot has already taken place over higher bus market could sell at a much bigger discount to book “ A potential full-blown financial crisis’’ is how the what are the ramifications of heightened economic fareS^and there’ve been illegal strikes in the airline in­ Lebanese urged value . .. and at a much lower price-earnings multiple .. Mexican situation is viewed by Benjamin Weiner, the chaos in Mexico, which is our third most important . than anyone could imagine." president of Probe International of Stamford, Conn., a dustry. trading partner and the world’s most indebted nation? Biggs, who runs a $5 billion investment management well-regarded consultant on political and economic ac­ And at the very least, Weiner sees growing numbers Mexico’s in hock for over $70 billion — with about $18 subsidiary for Morgan Stanley & Co., notes for example, tivities abroad. of illegal aliens — now about a million — entering the. billion (or over 25 percent) owed to U.S. banks. Chief that the Mexican stock market index is selling at an un­ Weiner regards Mexican debts as “ in great question’ United States. among them: Bank of America, Chase Manhattan, believable 78 percent discount to book value (vs. about a in light of the current oil glut and weak prices., “ It’s an Citibank, Manufacturers Hanover and Bankers Trust. The full impact df all o f this on the United States - r , 20 percent discount on the Dow). And that’s on a robust explosive situation — what vrith the country in the grips which is the single biggest investor in Mexico — is yet to Mexican focus is particularly topical at this juncture to join in assault yield'of 14.7 percent. Further, the Mexican market is of a severe economic crisis . and'we’re telling our — what with the recent revelation that syndication of a be determined. selling at only 1.9 times reported earnings (compared clients to be wary,” he says. But in view of the mounting financial and economic, $2.5 billion loan to Mexico was delayed by the news that with about eight times earnings on the Dow). turmoil there, a legitimate question to be raised is the the country’s reserves fell over $1 billion to $3.9 billion AC TU ALLY, WEINER’ S gone beyond just the “ be Arab League Secretary-General Oiedli Examples: Aurrera, a rapidly growing food chain and viability of those $18 billion of U.S. bank loans to By David Zenlan , “ If the Lebanese people want to live ln in the first five months of ’82. a blue-chip stock with no dollar or peso debt, sells at 2.8 wary” recommendation. He’s telling clients with dignity and peace, they have to start a Klibi told a news conference in the Saudi Mexico. United Press International Mexican interests to get cracking and reduce their risks battle against the (Palestinian) killers..., city of Al-Taef that Phalangist military FIRST TO TH F INVKSTMKNT question. Obviously times earnings and yields 14.5 percent. Celanese Mexico One Bank of America official tells me. Its un% — such as by getting a partner to take part of the equity. ’The Lebanese people have to fight to get chief Beshir Gemayel objected to the it would be unthinkable to believe that the U.S. stock sells at an 83 percent discount to book value and fetches thinkable that Mexico wouldn’t meet its ’ financial Israeli Defense Minister Ariel Sharon He sees particularly difficult days ahead for U.S. Arab League’s undisclosed proposals. market could also get whipsawed by an 88 percent drop. only a 1.5 multiple. Tubacero, the steel company, is arrived in east Beirut Friday and told their freedom and independence,” he companies with food and pharmaceutical interests in obligations.” But In the same breath he also says: “ How Yet, if we’re in for a more damaging economic down 95 percent from its high ancj sells at a 90 percent Lebanese Christians they must help said. Returning to Beirut from the meeting, Mexico. And he notes there’s growing talk o f can anybody predict tomorrow in that crazy country.” experience than we expect, who's to say what the bot- discount to book and at less than one times earnings. Israel attack and destroy the PLO. Sharon dodged questions about Gemayel blamed the PLO for the im­ V/ Israeli planes buzzed the capital for the whether Israel would launch a direct, all- ' passe in negotiations. third day in another mock attack. out assault on west Beirut, where more “ They are lying to the Lebanese, to the Region's In Tel Aviv, Israeli Chief of Stafd than 500,000 civilians still reside. Arabs and to everyone,” Gemayel, an P&G suits claim 3 Rafael Ettan forcefully echoed Sharon, “ We believe that there will be a way to Israeli alljy^id. sayhng Israel would “ destroy” the PLO convince the terrorists to leave west A senior'^lestinian leader pointed the unless it left Lebanon on Israel’s terms. Beirut,” he said. “ Israel will not accept blame the other way, saying the PLO Israeli Foreign Minister Yitzhak the situation which will allow for a was ready to negotiate its presence in ■.. business guerrilla presence because we decided Shamir also rejected an attempt by Lebanon but not with a gun at its back. spreading rumors once and for all not to accept any more France to mediate in the War, telling an “ We are ready to negotiate with the envoy dispatched from Paris Thursday killing of our women and children.” Lebanese government matters relating that a French peace initiative was not In Tel Aviv, Eitan told the newspaper to the Palestinian military and political bullish Ma’arlv it should be possible for Israel to presence, but we cannot talk before a wanted, the Israeli army radio said. it supports devil A week-old cease-fire held in Beirut “ reach a military solution in Beirut limited Israeli pullback from the Beirut BOSTON (U P I) — New England but it appeared from Israeli statements without entering the crowded quarters of area," Salah Khalaf, Arafat’s top depu­ ATLANTA (U P I) - The Procter said the three individuals named in small business executives backed and faltering diplomatic efforts that, the city.” ty, said. He did not elaborate, but he warned & Gamble Co. filed two federal law­ the lawsuits were investigated and Ronald Reagan’s bid for the barring a PLO surrender, it would not that, “ if the guerrillas do not leave suits against three people it claims witnesses will testify they spread in­ presidency, and many still support last much longer.