Gekko

The forces of darkness in the international markets took another hit last month with the fall of the so-called Socialist (read Communist) government in Bulgaria. When it was announced that a new Parliament would be elected in April, there was cheering not only among Bulgaria's democrats, but also among my friends at the more speculative end of the international bond markets. We in the Street are all in favor of democracy, but our enthusiasm really picks up when there's a fast buck to be made at it.

By the end of last year, most players in the emerging-markets bond world figured the easy money had been made. People who had bet on turnarounds in the seedier end of the market (the bonds of places like Nigeria or Venezuela) had pocketed returns of maybe 50 or 60 per cent on their money -- more if they were leveraged -- before passing the paper on to the public. But what was left? If they had read this column back in December, they would have already dumped their Ecuadorian bonds after making a quick turn. The only basket case/turnaround story left was Bulgaria.

Unfortunately, Bulgaria does not have a great fundamental story. Russia has untold wealth in the readily convertible form of oil, metals, wood, gold, and some still-serviceable weapons. Bulgaria has attar of roses, which you use in perfumes I find somewhat overpowering, and canned fruit. For electric power, it depends on a couple of Chernobyl-style nukes that are held together with Scotch tape, bailing wire, and Eastern Rite prayers. The business community (if that's the term I'm looking for) is remarkable for criminality even by neighborhood standards. In Russia, some people seek to apply technology to productive use; in Bulgaria, unless you consider the refining of opium derivatives to be a form of manufacturing, there is little in the way of conventional commercial dynamism.

But the Bulgarians have, perhaps unwittingly, stumbled on what could be called the Costa Rican model of development. Back in the Sixties, the Costa Ricans realized that what the American government most wanted to hear was that free elections were going to be held on schedule. For that, they'd put up more aid money and cheap credits. Not being fools, the Costa Ricans organized more elections more frequently than anywhere in the world. They didn't bother with an army, since they knew the Americans believed the Marines to be enough of a security guarantee. So for years they prospered off peace and transfer payments. When the aid money got a little thin, they squeezed Robert Vesco for payoffs. When that wasn't enough, they recruited credulous bankers. When new loans ran out, they defaulted or rescheduled on easy terms. Why not? After all, they were a democracy. It's as if Dick Morris had replaced Lee Kwan Yew as an inspiration for a development model.

"Now all the Bulgarians have to do is assume an attitude of abject subservience to the IMF and the World Bank," says one of my people. "A few brochures would help -- you know, something like 'The Switzerland of the Balkans."' In a way, the legacy of the Bulgarian Socialist Party helps -- a stark contrast with the promise of the indefinite future. The caretaker government has even petitioned to join NATO. And before the Congress, or the CIA, or the World Bank, takes credit for this achievement, keep in mind that it's probably going to cost the Western taxpayers a good $2 billion this year alone.

But for the bond traders, it's champagne time. The Bulgarian IAB bonds went from 45 at the end of January to 55 in mid February. That's better than 22 per cent on your money in two weeks. And if you could leverage them, maybe three to one. . . . If you are a knowledgeable player, or a Mississippi riverboat gambler, buy on weakness over the next couple of months, and sell on strength.

You may recall that back in January Jesse Jackson announced that he would be setting up the Rainbow/PUSH Coalition Wall Street Project to "serve as a call to the corporate world for inclusion, and expansion, and opportunity." Donald Trump, always ready to come through with the jaw-dropping gesture, donated space in his not-quite-fully-occupied building at 40 Wall for Jackson's office. A Trump spokesman said they have the space, which is not that big, "for about a year." Apparently, Trump is charging rent of $1. The Project was scheduled for launch in mid February, but things are slipping a little. The phones may be in some time this month.

Not everyone on the Street is quite as enthusiastic as the Donald. "Thank God he hasn't called me," said a financier who's kept up with Jackson over the years. "He'll find the Street a little harder to shake down than the corporate world," said a partner in a securities firm. I'm not so sure. He's already gotten more out of Trump than I would have figured.

You would have done pretty well by taking on that long platinum/short gold position last month -- the spread on the per-ounce price between the two metals has widened by about $25 since the beginning of the year. And over time, the platinum group metals are going to do even better, as people begin to realize that the overhang of Russian stockpiles is smaller than the users had hoped. But there might be a tense moment or two as the Russians renegotiate their export contracts with the Japanese. So take your profits and wait until the next feeding frenzy is on the horizon. I'll be watching this market, which is nice and inefficient.

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