Perhaps the saddest-but-true Wall Street maxim is to buy "when there’s blood in the streets." Under this rule, the drop in the U.S. crime rate, especially in New York, could be seen as an ominous sign. Not enough blood. More to the point, the scary goings-on in Indonesia suggest it could be time for large, sophisticated investors to begin thinking about how to place a small bet in that country.

"Stay away!" was the knee-jerk response from a very smart f/x trader I know. (F/x is short for foreign exchange, which means that on a moment’s notice, he may sell a billion ringgits or arbitrage the yen against the baht. Ah, finally words I know that my spell checker does not.) "You don’t want to be anywhere near that region — not Indonesia, not Malaysia, not the Philippines, not Singapore, not Hong Kong. …"

Which could mean he’s right, or which could prove the point: When everyone’s terrified and the end has surely arrived — when there’s blood in the streets — it’s time to consider taking a gamble.

Had you observed the blood in the streets of St. Petersburg in October 1917, you would have done very poorly following this folk wisdom.

Had you taken it a little less literally and invested in U.S. stocks after the crash of 1987, or when OPEC in 1973 had thrown the economy into a tailspin, you would have done Okay.

A friend who runs a company based in New Jersey and Malaysia thinks the bottom has more or less been reached. His company’s most important customers are disk-drive makers. Of these, Seagate has been the biggest. Well, at the beginning of the year, given the turmoil in Asia, the bad news came: Seagate wouldn’t be ordering anything from my friend’s little company for a year. They planned to resume ordering in 1999. Now that’s a pretty hefty setback for a little company — what do you do? Lay off all the Malaysians for a year? No, he found other things for them to do and just carried the plant for a while and, guess what? A few weeks ago, Seagate called to place a $3 million order. And IBM has been going gangbusters with its manufacturing in this region. So my friend won’t have to lay off any Malaysians, and at least his little corner of the Asian economy may have seen the worst.

Of course, this is hardly a macroeconomic view. One anecdote from one guy with one plant in one country in Asia. (His favorite country in the region from an investment perspective: the Philippines.) But even with a macroeconomic view, no one knows for sure what will happen.

But I’m looking into how to place a small bet on the Philippines.

Tomorrow: a few related words on closed-end country funds.


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