Investview

Index

Investment Views (August 10th 1998)

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

What a week! On Monday it looked as if the European markets were finally stablizing.
Then came the 300 points decline on the Dow Tuesday after Ralph Acampora, a well known
market guru at Prudential, turned bearish. Although the market recovered a bit in New York
on Wednesday, when other well known market gurus such as Abby Cohen, Mary Farrell,
Ron Hill all reiterated their buy on the dip recommendations. The Europeans remain jittery and the
European markets played catch up in falling. Thursday didn't see any recovery . On Friday
the European markets finally closed on the upside, but the nervousness is still palpable. The French
market showed the greatest relative strength. Although the German and Swiss markets both
recovered over 1%, the volume was thin. The markets still do not have conviction.

In this situation it is important to recall that the markets are driven by liquidity. There is still no
lack of that in the US and Europe. The German and the French markets have both reached
important support levels. Therefore next week should see these markets recover a bit, as
long as New York holds up. The Swiss market is more difficult to read. The more important
support level 7400-7600 hasn't been reached yet. Therefore we expect further volatility.

The question is therefore: have the investors in the US changed their strategy of buying on
the dip to selling into the rising markets? Mass psychology is notoriously difficult to predict.
We have to see how the next week develops. The New York market has reached an
important support level: the 8400-8500 area. Although we tend to think that we shall
see recovery next week, but only time will tell.
Go to Index

Stocks

Our favorite stocks remains SAP, Nokia, Raisio Group, Ericcson, Cable and Wireless
Baan and Bachem.* Raisio Group's stocks spit 1:10.

High of the Year	Low of the Year	Stock	Last Week's Close	Daily high	Daily low	This Week's Close
HFl. 108.70	62.60	Baan	75.60	81.30	79.10	81.30
SFr. 1495	1351	Bachem	1835	1850	1741	1800
Gbp 8.13	4.67	C&W	7.97	7.37	7.21	7.29
SFr. 44	25	Ericsson	42.60	40.75	39.50	40.50
FIM 378	182	Nokia	471	458	442	454
Gbp 8	2.40	Orange	7.17	7.54	7.15	7.51
FIM 1080	640	Raisio Group	86	83.90	80	83
SFr. 785	419	SAP	975	895	878	890
SFr. 440	385	Straumann	367	359	350	359

We recommend buying Orange shares whenever these shares correct. Orange is the English cellular telephone
arm of the Hong Kong tycoon Li Ka-Shing. They have shown that they can compete in the very competitive
cellular market in England. Now they're expanding into Switzerland. We especially like the stock's performance
last week. While other stocks sank like stones. Orange barely budged.

Straumann will report earnings next week. We're optimistic that it will come through with good earnings.
But the market is still doubtful, ever since the German health insurances took dental implants off from
their dental insurance coverage.

SAP's listing on New York big board has brought the stock a lot of media attention, but no additional
price rise. Indeed we will probably see much greater volatility.
Go to Index

Currencies

Soros and other hedge funds including Morgan Stanley, Goldman Sachs, Merrill Lynch and Salomon
are at it again: mounting a huge assault on the Hong Kong dollar and its stock market. The situation is
grotesque. The Hong Kong government had been a paragon of budgetary discipline. And Hong Kong
does not really have a trade deficit. Yet when the speculators attack its currency, its people and economy
have to suffer the consequence: high interest rates even though the economy is slowing down rapidly.
We're convinced that there is a systemic weakness in the so called open world economic order. An open
system will only work, if all players are more or less equal. But what we have now is a situation where
sometimes one hedge fund has more funds available to attack any small currency of their choice
than the smaller countries have funds to defend it, especially considering the fact that the hedge funds can
leverage their funds in all sorts of ways, whereas central banks normally do not have that possibility.
The speculators have finally realized that one does not need any reason to attack a currency.
All economies are based on credit and confidence. Once the confidence in a country's
currency is shaken, the credit system will automatically crumble.

The European countries have recognized this problem and have started the common currency euro
in the hope that there will be more safety in size. But will it really? We have to wait a few more
years, before we know. But we're not convinced that the euro will be immune from speculative
attacks in the future. The speculants have grown bolder as they grow wealthier.

What the world need to ask is: is the cost of this lopsided "open" system worth it? The
instability of the currency market is for the moment still contained within one region of
the world economy: Asia. But what if the Asian contagion starts to spread to
all the regions of the world? Will the IMF have enough funds to save the world?
Why not set up some rules about shorting currencies and raise the margin requirements
to 100% ? That at least will put the central banks on a more equal footing with
the speculators.
Go to Index

*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!