The recent capitalist movement in Eastern Europe, despite its positive signs for cooperation with the West in the 1990s, is perplexing to capitalists who`d like to profit from it.
The very first money-making venture to follow the opening of the Berlin Wall involved the chunks of its concrete that sold for $10 apiece in U.S. department stores during the Christmas season.
Yet longer-range financial opportunities are hardly so clearcut and ingenius.
Beleaguered and embattled Eastern Europe, you see, needs everything. Who provides it-and which countries, companies and shareholders ultimately benefit-is up in the air.
In the early 1980s, I visited East Germany as one of a group of journalists. We`d also spent time interviewing political heads of West Germany, such as then-Chancellor Helmut Schmidt.
Compared to the flashy, high-powered activity of West Berlin, East Berlin was a bleak picture of despair. Economic reality hit you immediately. Upon entering, we were ordered to trade valuable West German marks for worthless East German marks.
Shopping malls were more like shopping museums, since it looked as though no one ever bought any of the merchandise in them. The existing goods were substandard, any really necessary items in short supply. Citizens wore clothing that appeared to be from the 1950s, such as geometric-patterned shirts, not for nostalgic reasons but simply because that was their clothing. While historic buildings were beautiful, living conditions were terrible.
All those West German politicians who told me Germany would one day be reunited may be proved correct, but no one could have predicted the upheaval- some of it violent-in so many countries.
Despite recent changes, Eastern Europe has a long way to go economically. Profits from its restructuring won`t be reaped quickly.
``Eastern European economies are short of capital, have no consumer credit patterns, no good transportation and face a painful transition with problems such as unemployment,`` observed Charles Clough Jr., chief investment strategist with Merrill Lynch & Co.
There`s more to it than McDonald`s Corp. opening a few fast-food restaurants. ``There are no laws in those countries which establish private property rights and these are newly established governments which must get their goals together,`` added Ken Knutel, investment strategist with Kemper Financial Services.
Still, opportunities do exist. As Western Europe bonds together economically in 1992, Eastern Europe is likely to provide a second tier to take its place alongside that group.
``The European market will expand dramatically and, as countries break the shackles of socialism, economic impact over time can be staggering,`` said Michael Sherman, chairman of the investment policy committee of Shearson Lehman Hutton Inc. ``The discipline and work ethic are there, but need the push of development money and advice from the West.``
It`s a game of guessing the future. U.S. investors can try to play Eastern European revitalization through international mutual funds or foreign stocks traded either on our exchanges or overseas exchanges. There are also some U.S. stocks.
Among West German companies, Knutel believes manufacturer Siemens, carmaker Volkswagen and Dresdner Bank will benefit. Clough expects West Germany`s Deutsche Bank will expand into East Germany. Sherman thinks Italy`s Fiat and West Germany`s Mannesmann, a maker of specialty steel tubes, will excel.
``You may be looking at three or four years before there`s an effect, but improvement of basic facilities will occur first,`` predicted Ton Tjia, London-based manager for Vanguard World International Fund.
Tjia sees opportunities for Asea Brown Boveri, the Swedish-Swiss maker of power stations; Compagnie Generale d`Electricite in France; and Otra of the Netherlands, a wholesaler of electrical equipment.
Among U.S. firms, Knutel likes providers of oil exploration services, such as Schlumberger and Baker Hughes, or computers, such as IBM, Compaq and Apple. Caterpillar and big money-center banks should benefit, while Procter & Gamble, PepsiCo and Scott Paper may provide consumer goods.
Finally, Clough sees opportunities for domestic firms such as Fluor in plant construction; Morris Knudsen in specialty steel; and Deere & Co.
Andrew Leckey`s column appears Sunday, Monday and Thursday.