Archive for August 2nd, 2004

If markets are always right: Watch out Hugo!

August 2, 2004

I am not a believer that markets are always right and they predict the future, although I must say they sometime have an uncanny way of reacting ahead of the news. But I would like to find some meaning to the fact that the ADRs of Venezuelas premier telephone company CANTV, actually went up today, as shown by its quote:






















































Last


 20.29


 


 


Open


 20.07


 


Change


 +0.32


 


Previous Close


 19.97


 


% Change


 +1.60%


 


Bid


 NA


 


Volume


 240,300


 


Ask


 NA


 


Avg Daily Volume


 206,200


 


Instit. Ownership


 28.3%


 


Day’s High


 20.29


 


52 Week High


 21.45


 


Day’s Low


 20.00


 


52 Week Low


 12.40


 


Notice that the stock closed at $19.97, went up 32 cents and was never below the closing price of last Friday.


 


Whats weird about this? That President Hugo Chavez spent the weekend threatening to intervene the company if it tampers with the election results, going as far as saying that the decree to intervene the company was essentially ready.


 


News like this make investors very nervous and in the case of CANTV, its public stock is in the hand of mostly foreign investors led by Verizon, its largest stockholder, Telefonica de Espaa and more than 18,000 stockholders. It is definitely scary to even consider the possibility of the Government running CANTV again. In 1990, it would take on the average three tries to get a dial tone, one year to get a phone and many times your phone was in conference with somebody elses phone permanently. The company was privatized and it is run fairly efficiently today.


 


It is puzzling why Chavez picks on CANTV, after all, the company already provided its network for the two elections in which Chavez won in 1998 and 2000 and it is only a partner of the company providing the voting machines, which is a newcomer to the game. But perhaps the reason is that that voting machine company was chosen by the pro-Chavez Electoral Board and Chavez does not want to undermine the credibility of a Board that has favored him at every step. CANTV on the other hand is foreign owned and many who are part of Government today, were against its privatization in 1990 and have failed to see the benefits of having it privatized.


 


But the remarkable thing was that the markets simply shrugged off the news completely, did not get nervous by the threats and the price of the stock actually went up! Is it because they know Chavez would not deliver on the threat? Or because they know Chavez will be out by the 16th? If markets are right and truly can predict the future: Watch out Hugo, you should be very nervous!

If markets are always right: Watch out Hugo!

August 2, 2004

I am not a believer that markets are always right and they predict the future, although I must say they sometime have an uncanny way of reacting ahead of the news. But I would like to find some meaning to the fact that the ADRs of Venezuelas premier telephone company CANTV, actually went up today, as shown by its quote:






















































Last


 20.29


 


 


Open


 20.07


 


Change


 +0.32


 


Previous Close


 19.97


 


% Change


 +1.60%


 


Bid


 NA


 


Volume


 240,300


 


Ask


 NA


 


Avg Daily Volume


 206,200


 


Instit. Ownership


 28.3%


 


Day’s High


 20.29


 


52 Week High


 21.45


 


Day’s Low


 20.00


 


52 Week Low


 12.40


 


Notice that the stock closed at $19.97, went up 32 cents and was never below the closing price of last Friday.


 


Whats weird about this? That President Hugo Chavez spent the weekend threatening to intervene the company if it tampers with the election results, going as far as saying that the decree to intervene the company was essentially ready.


 


News like this make investors very nervous and in the case of CANTV, its public stock is in the hand of mostly foreign investors led by Verizon, its largest stockholder, Telefonica de Espaa and more than 18,000 stockholders. It is definitely scary to even consider the possibility of the Government running CANTV again. In 1990, it would take on the average three tries to get a dial tone, one year to get a phone and many times your phone was in conference with somebody elses phone permanently. The company was privatized and it is run fairly efficiently today.


 


It is puzzling why Chavez picks on CANTV, after all, the company already provided its network for the two elections in which Chavez won in 1998 and 2000 and it is only a partner of the company providing the voting machines, which is a newcomer to the game. But perhaps the reason is that that voting machine company was chosen by the pro-Chavez Electoral Board and Chavez does not want to undermine the credibility of a Board that has favored him at every step. CANTV on the other hand is foreign owned and many who are part of Government today, were against its privatization in 1990 and have failed to see the benefits of having it privatized.


 


But the remarkable thing was that the markets simply shrugged off the news completely, did not get nervous by the threats and the price of the stock actually went up! Is it because they know Chavez would not deliver on the threat? Or because they know Chavez will be out by the 16th? If markets are right and truly can predict the future: Watch out Hugo, you should be very nervous!

Another big lie by the not so pretty revolution

August 2, 2004

While PDVSAs financials are not available for the simple reason that the auditors have not been able to complete their job properly, under Venezuelan Government regulations, the company has to have its budget approved and if there are significant variations, it has to request that the Cabinet approve it again.  In late June, PDVSA submitted a new budget to the Cabinet which I post below. With the caveats that not all of the information coming out of PDVSA, it is interesting to make some comments about it:


 



 


The first comment is that PDVSAs revenues are not up to the levels of 2001, despite the extremely high oil prices; this proves that the company is not producing the number of barrels of oil that it claims to produce.


 


But the most perverse part of the budget is how Chavez and his government lie about what they are doing and how they have improved PDVSA. Government authorities repeatedly talk about the inefficient and overpaid management that they got rid of at PDVSA. They speak of their unjust high salaries and perks and how they made millions while most Venezuelans went hungry. Well, nothing has changed at all after this hollow revolution took over PDVSA. In fact, it is worse now. Right before the strike, the bolivar stood at Bs. 1,000 per US$ and the company had 43,000 workers. According to the budget above the average salary in 2002 per worker was $32,700 per year.


The interesting thing is that reportedly PDVSA now has only 31,000 workers, after firing 18,000 workers and rehiring some 6,000 new ones. That comes out to be US$ 39, 200 per worker, an increase of 19.8% in US$ terms. This at a time when there has been a devaluation of the official rate of 75% of the currency. Thus, PDVSA workers have received salary increases of 90% in bolivars during the last two ytears!!!! at a time that Government workers have received no more than 30%.


 


Mind you, I am a strong believer that PDVSA workers should be well paid compared to the private sector. To me, it is the only way to have a strong and competitive world class company. What amazes me about these numbers is how the official line is to claim they got rid of the expensive management and the company is so profitable today while the reality is completely different. Another lie of the not so pretty revolution! Can you fool most of the people all the time?

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