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  • Last Week's Views
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    Investment Views  (June 29th 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 

    How fast people forget.  As soon as the markets recovers, people start to forecast  new highs
    on the Dow.  At the same time the currencies traders forecast new lows on the yen.  Well, we
    can't have it both ways.  So who's right?  On the one hand, the Japanese are still taking their
    time.  They will announce a more detailed plan for reforming the ailing banking system on
    July 8th.  That is an eternity for short terms traders.  On the other hand, we have the Fed readying for another intervention.  So currencies traders are more circumspect about betting against the Fed.  In the mean time the bond traders get jittery, because the Fed meets next Tuesday to decide whether to raise the interest rates.   With these kind of cross currents we
    do not expect the US markets to breakout one way or the other in the short term.  For the next week the Dow 9000 level is critical, if we're to go higher.

    The Frankfurt market made new highs last Friday, even though the breath (the number of advancing stocks vs. declining stocks) and volume are not overwhelming.  The fundamentals
    for Euroland remain positive.  But the valuation is becoming quite high.  Therefore what
    happens on Wall Street is still very important for Europe.

    The Swiss market is near the old highs made in  March (SMI 7884 intraday).  Some analysts
    are already seeing 8300.  However, I personally doubt we'll get over the 8000 level.
    The Swiss Francs have been weak against DM and US$.  Normally the Swiss interest rates
    shoot up in such cases.  And the stock market tanks as a result of the higher interest
    rates.  So I wouldn't get too carried away about the Swiss stock markets' prospects. On the
    other hand the merger of SBC with UBS will be finalized next Monday.  All of sudden
    there will be a giant worthy of Novartis, Roche and Nestle in the index.  On Wednesday
    Rentenanstalt and SAirGroup will be added to the SMI.  The effects of these changes
    should be already discounted in the market.  But some analysts think that certain pension
    funds still have some portfolio adjustments to do.  So we might have some volatility
    as a result.

    Go to Index
     


    Stocks 

    Our favorite stocks remains SAP, Nokia, Raisio Group, Ericcson, Cable and Wireless
    Baan and Bachem.* 
     
     
    High of the Year Low of the Year Stock Last Week's
    Close    		 Daily high Daily low This Week's Close
    HFl.  108.70 62.60 Baan 80.70 79 77.10 79
    SFr. 1495 1351 Bachem 1420 2280 1935 2070
    Gbp  8.13 4.67 C&W 6.75 7.25 6.95 7.16
    SFr.  44 25 Ericsson 41.50 43.20 42.75 43.20
    FIM  378 182 Nokia 348.50 380 371 379
    FIM  1080 640 Raisio Group 935 1005 990 990
    SFr.  785 419 SAP 908 925 900 915
    SFr.  440 385 Straumann 394 391 385 390
     
     

    Bachem has been top performer last week on the Swiss Stock Exchange.   It went up more
    than 45% in one week and 82% from the issue price.  It is still red hot.  Mostly because
    the market is extremely thin.  Only 100000 shares were issued on the IPO.

    Cable & Wireless hasn't performed well recently due to the Asian market crisis.  But
    it is a relatively safe way to tip toe into the Asian markets.  And optimist like me don't
    believe in a total collapse of the Asian economies.  Since timing the bottom is just as
    difficult as timing the top, we would tip toe into safe stocks such as Cable & Wireless,
    Singapore Telecom.

    Go to Index
     


     Currencies 

    The market is testing the resolve of Rubin and Greenspan.  Will they intervene again to
    support the yen?  As I have outlined last week, I believe that they will and should.  Being
    a former currency trader, Rubin will probably not intervene until the shorts are deeper
    into the game, so that they can inflict real pain for shorting the yen.

    As I have pointed out above, the Swiss francs have been unusually weak against
    the euro and the US$.  But until it breaks 1.54 against the dollar, it's actually
    still in its trading range.
     
    Go to Index


     Sportsview 

    What a week for the Football World Cup!  The referees were handing out red and yellow
    cards like candies and rewarding penalties right and left.  I find this practice of sending
    players off the fields on minor provocations extremely annoying and probably helped to
    falsify some of the game results. Norwegens victory over Brasil could have only happened
    on such arbitrary dictates of the referee.

    On the other hand it's a week in which the human spirits soared above the technical
    skills of the teams.  We saw the Iranians defeating a technically better American
    team and we saw that ultimate game of blood, sweat and tears between South Korea
    and Belgium.  The South Korea scored a point literally because they were ready
    to die for it.

    The playoff started auspiciously for our favorite team Brazil.  Brazil defeated Chile
    4 to 1!  Happy days are here again.  Brazil will face either Denmark or Nigeria
    in the quarter finals.  We don't see much of a problem there either.

    Up until now France appears to be on a roll.  But if they win today, they will face
    Italy in the next play-off.   That will be a game to look forward to.  Will the French
    home advantage suffice?

    Go to Index
     
     
    *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!
    Please scroll downwards for last week's comments.

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