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    Investment Views  (August 17th 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 


    We had another week of volatility in Europe.  The markets fell hard and rapidly across the board.
    The worst day was on Tuesday, when a French new agency reported that Indonesia had defaulted
    on some of its sovereign debts.  Most markets fell about 3%, although the Indonesian government
    had issued a dementi.  The international investors just don't like being reminded how fragile the
    world financial system is.   Of all the main markets in Europe, the Swiss market managed to
    perform the worst, falling more than 3.5% with trading volume finally picking up.  Wednesday
    saw all the markets recovering a bit until Thursdays news about the near collapse of the
    Russian ruble caused the markets to fall again.  But Thursday most markets did not break the
    intraday lower low made on Tuesday.  Friday saw all the markets recovering strongly.  The action
    last week showed that the markets have finally reached some support level:  for the Dax : around 5200,
    the CAC around 3750 and for the Swiss Market Index between 7300-7400.  The recovery on Friday still
    seemed very tentative.  The trading volume is still extremely thin.  But next week is again options and futures
    expiration week.  Therefore we should see further recovery despite of the volatility.  But as I have
    emphasized before, the European markets usually follow the American lead.  Therefore everything
    depends on how the market holds up on Wall Street next week.

    Despite of the volatility, Wall Street held up pretty well in comparison to Europe.  The Dow traded
    in a very narrow range between 8300-8600.  The question is:  is the Dow building a bottom here
    or is it just too weak to go anywhere from here.  We're not sure.  The market is totally oversold.
    But nobody seems to be in a hurry to do any bargain hunting.  Since Clinton is testifying on
    Monday, it's not surprising that everyone is still staying on the sidelines.  Friday the market
    actions were again negative:  the market opened high and then could not hold on to the gains.
    A rumour about a Russian ruble devaluation was enough to send the Dow south.
    The only positive is: the very important 8425 level on the Dow held despite of very negative
    sentiments and technicals.  If 8400 does not hold, we could see the Dow going all the way
    down to 8100-8200 level.  If that happens, European markets' support levels will not
    hold either.
    Go to Index
     


    Stocks 

    Our favorite stocks remains SAP, Nokia, Raisio Group, Ericcson, Cable and Wireless, Orange
    Baan and Bachem.
     
     
    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 81.30 74.40 72 72.70
    SFr. 1495 1351 Bachem 1800 1835 1800 1830
    Gbp  8.13 4.67 C&W 7.29 7.45 7.25 7.35
    SFr.  44 25 Ericsson 40.5 39 35 37.85
    FIM  378 182 Nokia 454 429.50 412 424.50
    Gbp 8 2.40 Orange 7.51 7.55 7.15 7.20
    FIM  1080 640 Raisio Group 83 85.50 81 84
    SFr.  785 419 SAP 890 895 860 885
    SFr.  440 385 Straumann 359 344 340 344
     
     
    Straumann  reported earnings last week.  The numbers were disappointing.  The decision by German
    insurance to cut payments for dental implants has caused a decline in sales.  The Japanese consumers
    also seemed to have cut back on implants because of economic uncertainty.  But we're convinced
    that as the baby boomers grow older, they will opt for more implants rather than conventional
    bridges.  We recommend buying on further dips in price.

    Bachem, on the other hand, reported numbers in line with expectation.  The stock is fully priced at
    the present level though.  But we're still optimistic for the long haul.
    Go to Index
     


     Currencies 

    The world currency turmoil has again benefited the dollar.  Technically the dollar has found support at SFr.
    1.46-1.48 level.  We should see a dollar rally.  The dollar could retest the SFr. 1.54 level.  But fundamentally
    we do not see a dollar going much higher.  The trade deficit of the US is growing at an alarming pace: showing
    that the restructuring of the American economy has not been really achieved; that the American industries
    cannot really compete on a global basis without the beggar thy neighbor devalutaion policy practised in the last
    thirty years.

    We find the American attitude towards global currency instability cynical.  This cynical attitude is epitomized
    in a statement made by the Time magazine in the August 17th issue "If the cost of achieving that cherished goal
    (moderate and sustainable growth for the US) includes an Asian economic crisis and a lower stock market,
    then so be it."  But do these editors realize how much real pain is inflicted upon 100's of million people
    in Asia?  This cannot be the right attitude for a nation that is a world leader.  What US should aim for is
    world prosperity not just an insular perspective.
    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!
     

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