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Investment Views (September 21st 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

As I have foreseen last week, the European markets have decoupled from the US. The
US markets are still holding up relatively well, but the European markets have absolutely
no relative strength whatever. It's the currencies, stupid. The dollar became weak and
the European markets tanked, even though the American stock markets have recovered
quite a bit.

How will it play out next week? With the fiscal half year ending at the end of September
in Japan, we should see more Japanese firms repatriating their profits on their long dollar
positions. Thus we should not see any dollar strength yet. Therefore we do not
expect the European markets to recover quite yet. How low can the markets go? We
expect the German Dax will have some support around the 8500 area. The Swiss Market
index might have to test the 6000 level before rebounding a bit. So fasten your seat
belt for further turbulence. Sell into any rallies.

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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
SFr. 1495	1351	Bachem	1700	1750	1730	1750
Gbp 8.13	4.67	C&W	5.30	5.74	5.13	5.34
SFr. 51	25	Ericsson	30.50	28	25.50	25.75
FIM 509	182	Nokia	410	399	379	381
Gbp 8	2.40	Orange	5.30	6.03	5.51	5.71
FIM 1080	640	Raisio Group	54.90	67.40	65	66
SFr. 1029	419	SAP	736	647	600	600
SFr. 2350	1820	Stratec	1590	1590	1580	1580

Ever since Alcatel of France issued a profit warning for the next quarter on Tuesday, all the
Euopean telecom and high tech stocks got hit. Ericsson, Nokia, C& W sank in sympathy. Rumors
were rife that SAP would not meet analysts' expectations either. Although the company had issued
a denial, the market still didn't seem to be reassured. On Friday Royal Dutch issued another
profit warning and all the European markets sold off again. The European markets certainly
have a recession already priced in. We would do a little bit of bargain hunting, if we
had tons of cash on hand like the social securities fund and pension funds in Switzerland.

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Currencies

According to SBC Warburg's analysts, the global financial markets Armageddon is near. We're
not sure. Admittedly Greenspan's, Rubin's and Sommer's testimonies on Tuesday didn't sound
very encouraging. There appeared to be no new insights. No global vision. No solutions offered
to correct the current unstable international currency system. While flexible currency rates
seem to work for the mature economies of the world, the developing nations haven't found any
recipes to engender a stable currency environoment. The IMF's medicine doesn't seem to work.
The people of the developing countries have to pay an excessive price for any imbalance. Yet
Greenspan and Rubin still preach free market principles in face of hunger, unemployment and riots
in some of the excessively punished countries. We find this attitude deplorable. The world need
a new framework for currencies, but most influential officials do not seem to get it. In our opionion
Clinton's speach calling for a G-22 conference points to the correct way. Unfortunately he has
lost his influence because of his current legal problems. Although we still wouldn't rule out energetic
action by Greenspan to lower interest rates, should the Brasilien situation worsen, but we're not certain,
if it will be too little and too late. The world as a whole then slides into severe recession, if not deflation.

The weak dollar would help the world economies only if the European economies do not slide into a
recession. The German and French economies still seem to be robust. But growth is slowing.
Bundesbank need to lower interest rates and yet cannot, because of the introduction of the euro. We're
therefore not optimistic that the world can avoid a recession.

The dollar is oversold. We expect it to recover a bit, as soon as the Japanese repatriation for semi-annual
balance sheet window-dressing is over.

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Current Events

As we have foreseen, the Clinton scandal is dragging on. The partisan mudslinging is getting uglier
everyday. We do not see any possibility of avoiding an impeachment process. The dollar and
Dow will therefore be affected.

*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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