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    • Investment Views    (March 26th 2001)

      Markets in General                                     



                
                 More than a year ago I wrote:
                
                 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 brand name 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
                
                 I feel like a prophet today.     I have not cited the above to gloat, but to emphasize the
              fact that the new economy is one of deflation rather than inflation.  The Central Banks
              of the world are slow to recognize this new trend and have been keeping the interest
              rates far too high.  This is the message the world stock markets' are conveying.
              All the markets in the world are in bear market territory with the exception of the Dow.
              We have reached such an oversold level that a bounce is entirely possible if not inevitable.
              The Dow could rebound to the 9700 level, the Nasdaq the 2000.  The Dax and CAC will
              probably recover, if the ECB should decide to reduce the interest rates next week.
             


    Stocks              

    Our favorite stocks remains SAP, Nokia, Ericcson, Cable and Wireless.
     
     

    High of the Year Low of the Year Price and year of recommend.  Performance since recommend. Stock Last* Week's
    Close    		 Daily high Daily low This Week's Close
    8080
    		 6968

    		SMI 7569.8
    		 7583.70
    		 7511.90
    		 7535.40
    E 48.30 12.40
    		 26.75 (2000) +8.78% AT&S 30.80
    		 30.40 
    		29.10
    		 29.10
    SFr. 4000 2389 1351(1998) +78.38% Bachem 2400
    		 2444
    		 2400
    		 2400
    Gbp 15.77 8.28 4.9(1998) +43.06% C&W 7.53
    		 7.54
    		 6.96
    		 7.01
    E 368.90 210.10 140(1998) +29.78% Cap Gemini 188.60
    		 187.90
    		 177.60
    		 181.70
    SFr.44.25 12
    		 10(1998) +40.50% Ericsson 14.80
    		 14.80
    		 13.70
    		 14.05
    E.102.50 E.16 14 (1999) +60.71%   Evotec 22
    		 22.69
    		 20.28
    		 22.50
    E.104.60
    		 70.10
    		 98.50
    		 -11.25%
                 		Fresenius Medical

    		 87.21   
                 		88.09
                		86.59
                		87.42
           
    E 97 70.25
    		 37.8(1998) +63.62% LVMH 64.10
    		 64.55
    		 61.85
    		 61.85
    Sfr.275 133 60(1999) +28.25% New Ventur 75
    		 77.95
    		 74
    		 76.95
    E.64.90 37.50 7.50(1997) +244.80% Nokia 26.51
    		 26.48
    		 25.86
    		 25.86
    SFr.456.33           218
    		 46.66(1997) +407.92% SAP 250
    		 244.75
    		 234
    		 237
    SFr.850 660 460(1998) +106.08% Syn-Stratec 965
    		 970
    		 947
    		 948
    E 26.60 4
    		 3(1999) +370% Zeltia 13.90
    		 14.10
    		 14.10
    		 14.10
     
    *We decided to calculate the performance since recommendation, because we have recommended the different stocks
    to buy at different times.  Since we're convinced that one should be long term investors, we think the performance
    since recommendation is a better reflection of  our goals.  *Because of my long absence, I decided to put in the
    prices of the stocks a day earlier instead of the prices of a week ago.


    We advocated systematically selling stocks that have lost 20%, because we believe it is
    better to get rid of the losers than holding on to them. Thus we have taken Roche GS
    as well as Sonera from our recommended list.

    Last week was full of news from different companies on our recommended list.  Fresenius
    reported earnings within analysts' expectation.  The stock barely moved, because the
    weak sales was anticipated by the market.  On the other hand Synthes-Stratec reported
    an increase in profits before goodwill of +38% and the market didn't like it at all.  The stock
    fell more than 20% in one day.  But since then it has recovered about half of that loss.  LVMH
    has also reported lower than expected sales growth.  The stock prices fell, even though the stock
    is near its yearly low already. 

    Go to Index


    Currencies and Bonds
    The dollar has recovered a great deal since we last wrote.  With the world stock markets in turmoil, the
    dollar has become the save haven of most of the world's investors.  We have to see if the dollar will
    rise to the SFr.1.80 level again.  The Euro has been also weak.  We could re-test its lows around
    .84.

    Go to Index


    The World Financial System and World Trade

    Lately we have seen a truely thoughtful review of the world financial system in the Business Week .
    We certainly feel vindicated in our views stated during the last world financial crisis.  We remember
    the outcry in the Western press, when Malaysia imposed financial controls essentially forbidding
    foreign investors to exit Malaysia.  The Western press also made a big deal, when Hong Kong's
    government intervened to support the market and driving out the short sellers.  Ironically these
    two countries are the most successful in recovery after the 1998 financial crisis, while Thailand being 
    the country that really tried to follow all the prescriptions of the IMF and other free market advocators, has
    yet to see its economy recover from that vicious attack of international short sellers. We're happy
    to see that people are slowly coming to see that unrestrained free markets can cause hevoc in
    developing economies.  That the world need a new financial order.  Let's hope that the US
    will not stand in the way of reforms of the world financial system.
     


     
     
    *The stock prices are provided for informational purposes only and  not intended  for trading purposes.  The opinions expressed in these pages are what they are: opinions!