| Investment Views (December 14th 1998) |
Despite falling below 9000, the Dow remains one of the healthiest markets
in the world. Next week we see more of the same. Friday,
the
selling abated at the close. Usually that is a positive sign.
But because
of the uncertainty surounding the impeachment vote next week
in Congress, we do not expect the Dow to recover substantially.
Although Americans blame the foreigners for the selling and for not
understanding what the impeachment proecess is all about, we
are not sure, that the whole thing is as harmless as some of the
political analysts made it out to be. At the very least, the
whole
process highlights how a conservative minority can hold the
majority hostage. The government has been sidetracked
by this whole process. Were these kind of attacks to become
routine, who would dare to be the next president? How will
he or she be able to govern? The financial market is dismayed
by all this and the dollar is the main instrument that the markets
showed its disapproval. But at the present, the Americans are
not worried by a weaker dollar. This trend will only be troublesome
for the Americans, after the dollar lost its role as the main reserve
currency of the world.
In Switzerland the SMI tested the 6550-6600 level again on Friday.
This support level held, but the rebound is much less convincing
than last
week's. So we see further weakness next week, even though
next week
will be expiration week. We see the SMI recovering on Monday, since
the
Dow closed a bit stronger than the market players expected. But we
still see
the SMI trading between the 6500 and the 6950 level, unless we manage
to
close above 7050. Expirations level are notoriously difficult
to predict. We
stick to our conviction that 6250 is still the most damage the market
will sustain
on the down side. Because of the weak dollar, we expect the National
Bank to inject liquidity into the system again and we shall probably
see lower interest rates again. That lower interest rate should
give the
stock market the necessary support.
|
People seem to forget that currencies are ontologically the same as
fictions. Actually it is better to see them as objects created
by
conventions. With the introduction of Euros we see how this process
is
really put into place by treaties and agreements. There are no
intrinsic values for dollars, yen, euro, or Swiss Francs. That
is why
the markets have a hell of a time trying to determine the "correct"
exchange rate. Because there is none. The Bretton Woods
convention
was the better solution, because it recognizes that exchange rates
are conventions. There is no perfect formula for calculating
the
value of a country's currency. We can aim for stability or we
can
aim for chaos. The "free" floating exchange rate system has show
that it is an invitation to chaos.
| *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! |
LINKS: