| Investment Views (February 22nd 1999) |
Our computer failed because of a hardware problem. Now it's partially
fixed.
The world stock markets have been in correction since mid-January.
We have the
feeling that most markets are ready to go up again, if it weren't for
the US. The US
market has exhibited great strength and essentially refused to correct
more than
5%, even though most analysts consider it to be way overvalued.
But the problem with
the terms "overvalued" and "undervalued" is nobody really knows what
values are.
There are rules of thumb for valuation that most analysts subscribe
to, but these are
no more than what they are:rules of thumb. It doesn't help us
to find the "real" values.
Values are always relative to the market liquidity, psychology, demand
and a general
sense of economic well being. Nobody can deny that at the moment,
the Americans
feel at the top of the world, despite of the world economic crisis
and political leadership
crisis. The American economy had undergone painful adjustment
for more than
a decade. Now it's reaping the benefits of those adjustments.
Most importantly,
the US is the only country in the world with a budget surplus.
Thus we do not
see substantial weakness in the dollar nor the US stock market until
the congress
and the government start to squander the budget surplus in a big way.
The European markets have all corrected more than 10% already.
Since the
dollar is gaining strength again, the European stock markets really
have room to
go up again. In the short term we have the problem that Anglo-Saxon
investors
are taking profits and repatriating their funds, because they're afraid
of further
weakness in the Euro. Also the Japanese are probably also repatriating
funds to dress up their balance sheets for the end of the fiscal year
in March.
We have the feeling that these crosscurrents against the European markets
are slowly subsiding. We should see some market strength soon.
To be on the
safe side we would say that the European markets will probably resume
its
upward trend, if the US market recovers and closes substantially above
9390 on the Dow, or if the ECB cuts the interest rates in Europe.
Failing these
factors we should stay in our trading ranges, albeit with a slightly
downward bias.
The Swiss Market index has been stuck in a range between 6840-7200 for
the
last few weeks. We usually see market strength in the morning
fading very
quickly during the day. Volume is very thin. We do not
see a breakout of the
trading range, unless the external factors mentioned above come into
play. During
these kind of times, it's better to remain on the sidelines and hit
the ski slopes.
But this year there's too much snow. So there is danger being
trapped in
the mountain resorts, if one drives up there. The safest thing
therefore is
stay home and do some shopping. The deflation is still here.
Everything
is getting more reasonally priced.
|
We have great doubts whether we want to keep SAP and Raisio Group on
our favorite
list. Both stocks have fallen more than 60% from their highs.
Raisio has been hit especially
hard. We suggest really long term investors to part with their
other weakies and buy
into Raisio. Raisio is feeling the weakness in forestry products.
But we're buying
into Raisio not because of its forestry products but on the ground
of its margarine.
We're still hopeful that their joint venture with Johnson &Johnson
will take off.
SAP is a hold. We do not suggest adding to the position.
We're still hopeful that
it will work out some of its problems in collecting fees in Japan.
But with the
Japanese economy still weak, we have become more cautious in our hopes.
| *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: