Mark and others: here is the latest, different excuses...is this a buy signal considering her earlier calls??
Garzarelli sees Dow index falling 15 to 25 percent
By John Gilardi
FRANKFURT, Oct 28 (Reuter) - Market guru Elaine Garzarelli, best known for predicting the
October 1987 market crash, said in a magazine interview that she still believes Wall Street could
drop about 15 to 25 percent by the end of the year.
Garzarelli, in an interview published on Monday in Germany's Der Spiegel magazine, said in
particular that she expected the market drop to occur after the November 5 presidential election.
"Since 1990 my computer programme was always giving buy signals. Since the end of July, I began
receiving other signals. I would expect that the index will crash 15 to 25 percent this year,"
Garzarelli said in the interview.
Garzarelli, who announced in July that she had turned bearish in the market, also said earlier this
month in a U.S. television interview that the U.S. stock market could be due for a 15 to 25 percent
correction.
Garzarelli said she expected little movement in the Dow index before next week's election between
Democratic President Bill Clinton and Republican challenger Bob Dole.
But after that, she said "the risky period will occur," saying that expectations for the Federal Reserve
to raise interest rates and for a decline in expectations for corporate profits to weigh on the market.
"Investors think that American businesses next year can post earnings growth of an average 13
percent. But actually the average will drop about five to 10 percent," Garzarelli said.
"Economic growth will also slow because consumers are simply too much in debt," she said.
Garzarelli said the U.S. market would be pleased with a Clinton victory. But she noted that it was
the case that in the first year of a presidental term the market fell 90 percent of the time.
"If Clinton is re-elected, the good news is already built into the market. That's why the alarm clocks
are ringing."
She also said that the U.S. central bank was "unsettled" by the high level of the U.S. stock market.
"They worry about a speculation bubble because consumer debt is so high. They would therefore
rather raise rates than lower them," she said.
Despite some high-profile companies reporting earnings above market expectations, Garzarelli said
about half of U.S. firms were reporting results that were below expectations.
"In the 1996 fourth quarter and in 1997, profits will begin to slide because wages will be rising.
Normal people also want to profit from the good economic conditions," she said."
Garzarelli, who controls some $800 million in investment funds, said she has put her money into
two-year government debt and into short-term money market accounts. In addition, she said she
favoured energy and food industry stocks.
"These are products that people will need, even in a recession," Garzarelli said.
In addition, she said the impact of a U.S. market crash on the German market would not be as
severe.
"The German market will not fall as much because interest rates are clearly lower as in the U.S. In
addition, Europe lacks an attractive alternative to shares," she said. |
