Steve Zito, MS Fin/BS Econ Wharton School, HTML Writers Guild
uses economic and technical analysis to forecast the direction of the stock market. The views in this newsletter are opinions only, and should not be relied upon as advice on investment decisions.
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NASDAQ COMPOSITE
INDEX closed 1791.68

Employment Report Sep.7 to mark bottom
Fri., Aug. 31, 2001

******************Commentary*******************
August 30 Go To Page 2 Nasdaq closed 1791.68 -51.49 on Thursday.
Gus Sauter, a Vanguard Quantitative Equity Group manager running $150 billion of mutual fund assets at 2nd largest mutual fund group, appeared on CNBC this morning. What he said is reflective of how he lives so well while you are losing your shirt. When asked if he is now buying stocks, he replied his funds under management always remain fully invested. Then when asked if he was losing a lot of money in the recent market downturn he replied that he has computer models which move his funds money into sectors which are rising and out of losers. He then remarked that he always advises investors to hold money in his funds for the long term instead of timing the market. Then, CNBC politely showed a graphic that $10,000 invested in his funds in 1976 would be worth approximately $300,000 today. The last question put to him, if he bought stocks today, assuming Mr. Sauter was not fully invested, what would he buy? This cocky mutual fund manager then replied that he is always turning over portfolios and does not hold a stock for more than 6 months. In other words, a guy with a $1000 suit says for you to buy and hold while he keeps selling. Vanguard mutual fund managers are not worried. All the money being lost is not theirs. I have often mentioned that Clinton, A. Greenspan, and Robert Rubin engineered a stock market bubble in 1999-2000. They have done well. President Clinton did not worry in his scandal, he knew he could write books and reportedly will get $8 million for memoirs. Alan Greenspan is not losing any sleep. He does not own any stocks. Greenspan does own a home, and interest rate policies all year have caused a housing boom, increasing home values. Robert Rubin does not have an ulcer waiting in the unemployment line, he works the $25,000 lecture circuit telling the world how great a Treasury Sec. he was. What is the story? These powerful financial and political leaders are living the good life. Clinton and Rubin are no longer in power. Thus, U.S. dollar is losing upward momentum. Foreign investors in Nasdaq stocks are bailing out of holdings. This accounts for the heavy selling in both the first hour and last hour of Nasdaq trading, when foreigners transact their overseas portfolios. There are plenty of local investors to take up the slack from loss of overseas investor demand. The problem is that U.S. households are moving investible funds into the housing market and out of Nasdaq, there is more money to be made in tangible real estate. The Nasdaq froth is frozen, no matter how much TV's illiterate media announcers sensationalize stories to pump stocks up, the bubble is burst. The only way to survive the BEAR is to learn to be dynamic.
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