Investor says sell now while market is high
Fund manager Barry Kitt sums up the connection between Wall Street and the Y2K problem this way: "For the first time in the history of the stock market, we have a date-certain event that could become a worldwide cataclysmic event."
Kitt controls The Pinnacle Fund, a $31 million hedge fund based in Dallas. The fund invests in undervalued growth stocks. Through May 31, Pinnacle gained 30.22% in value, compared to 15.01% for the Dow and 3.96% for the Russell 2000.
Like all investors, Kitt is assessing what will happen on Jan. 1, when the world's computers make that dreaded shift from the year 1999 to the year 2000.
His conclusion: There will come a financial cataclysm that will affect any portfolio that invests in securities.
But Kitt (who describes himself as "typically a bull investor") knows Wall Street makes decisions more on emotion than on logic, more on perception than on reality. And there are enough investors out there who fear the Y2K Bug to cause the Dow Jones averages, the S&P averages and the Russell averages to shift downward.
"Let's assume that only 30% of all investors pull out of the market during the last half of this year," Kitt said. "That's more than enough to cause a major, major correction. I wouldn't predict how low the Dow will go. No one's smart enough to guess that correctly. But it would not surprise me at all if the Dow falls by several thousand points before Jan. 1."
"The market will implode," Kitt says frankly.
As for the individual investor, Kitt's advice is simple: Get out now. Sell that stock; dump that mutual fund.
"If I pull my money out now, I lose nothing," Kitt says.
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