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Investment Views (October 26th 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 we have foreseen it, the stock markets have recovered strongly last week.
In fact we cannot be but a little proud that we have been very accurate
recently. When the Hong Kong government started intervening in the
stock markets, we have predicted that the worst for Asian markets is
over and have recommended investors buy Asian blue chips. In fact
if the investors have followed our advice, they would have made
very handsome profits within one months. Blue chips like Thai
Farmers Bank advanced almost 100%. Our recommendation to buy
more of Nokia and Ericsson would have been also rewarded. Nokia
gained almost 40% from its lows and Ericsson 30%. Our prediction
on the dollar weakness had also been right on target.

Going forward the markets are a bit more difficult to read. We see
a gentle correction next week or two. Lot of analysts call for a retest
of old lows. But we are not quite as pessimistic. We have the feeling
that the European markets will be relatively weaker than the American
one. As always, it's the weak dollar that will limit the gains in Europe.

The Swiss market has exihibited quite some strength last week. The market
advanced even when the Dow and the Dax looked relatively weak. But
we're still worried by the very light volume. Therefore we see a pull back
to the 6000 level next week. The level to watch is 5850. If we close below
that level then a retest of the low 5100 is under way. On the other hand,
if we manage to close above 6300 level, preferrably with high volume,
then we might see the market recover to the 6800 level.

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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	1900	1785	1900
Gbp 8.13	4.67	C&W	6.39	6.60	6.34	6.50
SFr. 51	25	Ericsson	29.75	30.25	27.50	27.50
FIM 509	182	Nokia	389.90	431	408	421
Gbp 8	2.40	Orange	5.54	5.49	5.25	5.43
FIM 1080	640	Raisio Group	82.60	83	79	82.50
SFr. 1029	419	SAP	568	568	530	530
SFr. 2350	1820	Stratec	1510	1650	1560	1650

Nokia reported blow-out profits. The stock jumped on Friday. We're still optimistic on
the stock despite of its 40% recovery from its recent October lows.

SAP has been going nowhere, because of the poor results reported by People's Soft and
Baan. People's Soft and Baan are more specialized in small and middle sized firms.
SAP works for the big international companies. And we still haven't seen the big
companies cutting back on their software investment yet. So we remain optimistic
on SAP, even though the company sounded cautious for the fourth quarter. But
fourth quarter has traditionally been the weak quarter for SAP. Since the company
still see their profits rising more than 30% for the year, we recommend holding onto
the stock.

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Currencies

Laura D'Adrea Tyson wrote in Business Week this week, "Two kinds of reform should receive
top priority in remaking the international financial system. First, emerging-market economies must
develop transparent, supervised financial institutions, monitored by either the IMF or the Bank
for International Settlements... Second, as the U.S. has proposed, the international system must
fashion some kind of contingency-loan facility that can be quickly mobilized by countries pursuing
sound policies to resist speculative runs... Had such a contingency-loan facility been available during
the summer of l997, the crisis that began in Thailand could have been contained instead of spreading
and threatening the entire world economy. It is equally sobering to note that Japan's proposal for
a new 100 billion fund to combat currecy contagion in Asia last year, which Washington defeated,
could have had the same effect..."

We find Ms. Tysons comments very sobering indeed. Had the US pursued a policy of weakening
the Asian economies on purpose? Are they only intervening after the whole system is crumbling?
Or did the Treasury and the Fed had too many friends on Wall Street who were making out
like bandits from the Asian crisis? But the game eventually got out of hand with the default of
Russia? Why is it morally hazardous to bail out Asian banks, but not hedge funds like
LTCM? The Asian economies is on the recovery path. At the moment politicians will
hold their tongues. But when the Asian economies grow stronger, we should see political
fallout from this whole crisis. I'm sure the Asian governements will no longer want a
dollar and an US dominated world economy. Thus we shall see a definite movement
away from dollar reserves. The euros will become the second reserve currency of
choice. The dollar and the treasuries will surely suffer in the longer term. Shorter
term though we see a bit of recovery for the dollar. Against the yen it will be the strongest.
Against DM and SFR we do not yet see a sustainable recovery.

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*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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