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    Investment Views  (August 23rd1999)

     

    Instead of writing my clients individually I thought I might as well
    do a weekly summary of my views on the markets, the currencies,
    the economy, the world, and life in general.
     


    Markets in General

    The Dow is solidly back above 11000. Therefore we expect the market
    to make new highs, unless the Fed raises the interest rates more
    than the expected quarter percent.  But we have to remember that
    Friday was options expiration day.  So the trend might not be
    quite as firm as it appeared.  We will have to wait until the
    Fed Open Committee meeting is behind us.

    The Dax should be also stronger.  The IFO survey turned out to be
    stronger than expected.  However tentative, the recovery in Europe
    is gaining steam.  We expect the Dax to get stronger.

    The SMI has exhibited quite a bit of strength.  Instead of a pullback
    towards 6800 level as expected, the market closed above 7050.
    That is quite positive.  We expect the Swiss market to remain
    strong.  We should see 7250 at least.

    Go to Index


    Stocks

    Our favorite stocks remains SAP, Nokia, Raisio Group, Ericcson, Cable and Wireless, Orange
    and Bachem.
     
     
    High of the Year Low of the Year Stock Last Week's 
    Close    		 Daily high Daily low This Week's Close
    8489 5108.30 SMI 6934 7055.70 6996.40 7051.50
    SFr. 2300 1351 Bachem 2200 2117 2099 2100
    Gbp  9.85 4.67 C&W 7.27 7.24 7.11 7.18
    E 174.80 126.60 Cap Gemini 150.90 155.40 151.80 154
    SFr.  51 25 Ericsson 47.20 49 48.06 48.80
    E 253.90 169.70 LVMH 279.50 285.50 280.10 285.40
    Sfr.67 37 New Ventur 62 62 61 61.50
    E.79.50 52 Nokia 80.54 79.88 78.31 79
    Gbp10.75 2.40 Orange 9.44 9.95 9.80 9.84
    E.  11.80 5.30 Raisio Group 10.85 10.59 10.05 10.10
    SFr.  607 420 SAP 511 514 506 506
    E 19.22 12.40 Sonera 22.30 23.90 23.40 23.50
    SFr.  513 436 Syn-Stratec 541 547 538 547
    SFr.649 496 Swisscom 531 526 520 526
     
    Bachem has report very meager earnings growth.  We're reviewing the company's
    prospects.  It is worrisome that it has practically only one product.  On the other
    hand, biotech companies are doing very well.  So we expect Bachem to continue
    to do well.  But we worry about its growth prospects.
    Go to Index


    Currencies and Bonds

    The dollar dropped below SFr. 1.50 level again.  Again we will have
    to see, if the 1.48 level holds.  The US trade deficit turned out
    to be wider than expected.  But we still think the growing
    budget surplus is more important for the strength of the dollar
    than trade figures.  So we expect the dollar to remain strong.
    i.e. stay above the SFr. 1.40 level.

    As we had expected, the bond market recovered quite a bit
    after hitting 6.3% yield on the 30 years treasuries.  We still
    can't make out serious inflation problems in the world.  So
    the 6% yield is still way too high.

    Go to Index
     

    Future Trends

    The internet will transform our world in a massive way.  I think it is time to
    begin and do some thinking on what kind of change it will bring and see if
    we can draw some conclusions that are relevant to our investment decisions.

    First, as we have opined in this column we do not believe many of the today
    sky high internet stocks will eventually make a lot of money.  The internet
    is such a competitive forum.  The pricing pressure is so great so that only
    providers with Brandname recognition and meaningful contents will be able
    to have some pricing power.  We must remember what the internet eventually
    will bring is absolute international competition.  Price competition will be fierce.
    Middle men will be eliminated.  Therefore we see many service sector jobs
    will be eliminated.  For example, we see this trend in the financial sector already.
    More and more people are trading stocks on line.  With internet brokerage
    charging less than $10 per trade, we should see brokers and financial advisors
    being eliminated at major brokerages in a big way soon.  The same should
    happen in other tradable items.  For example, there will be less need for
    retail stores for items that one can buy easily on the internet.  Of course
    there will be branches of the economy that will profit.  For example:
    the telecoms, the Federal Expresses, and the computer software industries.
    But the question is: Will the general economy really profit or will the general
    deflationary trend continue and become worse and worse?  Without pricing
    power and with lots of jobs being eliminated and salaries on hold, we see
    the world economies trending toward deflation, even if it continues to grow.
    That means real estates and gold will become even less appealing.  If we
    believe our argumentation, we would not invest in the "internet" stocks
    themselves but in the companies that do have contents and pricing power
    as well as companies that will offer services to the internet providers
    and users: ie.  companies such as Sony, Time Warner, Dow Jones, and
    Federal Express. We would also recommend the stocks of Corsair (CAIR),
    Qualcomm, Ericsson, Nokia, the equipment and software provider for the CDMA,
    the next wireless telephony standard as well as stocks of telephone companies
    like Sonera, ATT, Worldcom-MCI, Colt Communications, and Swisscom.  We also
    see internet companies needing ever more sophisticated software.  Therefore
    we're quite optimistic about the long term future of the likes of IBM, Oracle,
    SAP and Cap Gemini.
     
     
    *The stock prices are provided for informational puruposes only and  not intended  for trading purposes.  The opinions expressed in these pages are what they are: opinions!

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