John,
A possible scenario that might satisfy both bull and bear in an interview with Robert Murrow below . I am beginning to belief that we might get a fake V recovery that will stall out early 2002. This might be what turns out to be the fundamental basis of morrows technical evaluation. I am interested in your take on this interview in lite of a recent comment you made that the bulls are living to get back to high valuations so they can sell. Of course if we got there we would have every excuse to hold on but I for one will sell everthing if naz hits 3900 this year(which i certainly dont expect). But who would have expected naz 5100 and then naz 1600 either? Mike
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05/04/01: "Market Monitor"-Robert Morrow, Editor of the Institutional Advisory Service
PAUL KANGAS: My guest market monitor this week is Robert Morrow, Editor of the Institutional
Advisory Service, and he's also the publisher of the monthly "High Tech Growth Forecaster
Market Letter. And welcome back, Bob.
ROBERT MORROW, EDITOR, "INSTITUTIONAL ADVISORY SERVICE": Good to be back, Paul.
KANGAS: Does the stock market's upturn today in light of the weak April unemployment report
convince you the bull is still alive and kicking on Wall Street?
MORROW: Absolutely. I'm looking for a very strong year this year.
KANGAS: Well, you've said on the last several visits with us, the last one being November 3rd
this past year, that you expected the Dow to top out around 14,770.
MORROW: That's right. And the S&P 1,876.
KANGAS: Well, that's a long way from where we are now. What makes you sop bullish?
MORROW: Well, these are the long-term cycles that have been in place for, you know, for some
time in my work, at least a year and a half. I have to say last year my peak was off by perhaps
seven percent, so I might pull those back by a small amount.
KANGAS: And, of course, the NASDAQ's fall last year in this, that was a little bit bigger than
you expected?
MORROW: Absolutely.
KANGAS: It's it tough one because of its volatility to figure.
MORROW: Exactly, the Internet bubble and many other things.
KANGAS: So basically your predictions are based on cycles. You do a lot of mathematical work
in-with cycles?
MORROW: Right. It's based on my career in vibration analysis. I just carry that math over to the
market.
KANGAS: And you hold some 37 patents in engineering products, is that true?
MORROW: That's correct.
KANGAS: Very good. Well, let's get back to the market now. The last time you were with us you
liked stocks like PepsiCo (PEP) and Safeway (SWY), which have done all right. But, you know,
this was back in November 3rd and you liked a lot of the high tech stocks like Adobe Systems
(ADBE), Automatic Data Systems, first, let's see, let's go down, Scientific-Atlanta (SFA), Tellabs
(TLAB). Seagate was taken out at a nice profit to you.
MORROW: Right.
KANGAS: Intel (INTC) and Viacom (VIA), all of those are down significantly but your rule is
always have a 15 percent stop order under the market.
MORROW: Absolutely, a mental stop order of 15 percent, perhaps a little different depending on
the volatility.
KANGAS: It takes a lot of willpower to actually execute the sell order when you're down to 15
percent.
MORROW: It certainly does.
KANGAS: But you do it consistently?
MORROW: I believe that's the way to go.
KANGAS: So you saved yourself from some huge losses because the NASDAQ Composite
dropped as much as 68 percent.
MORROW: Exactly.
KANGAS: You also gave us some stocks then in November that are up nicely, including IBM
(IBM), Biomet (BMET) and we have First Data (FDC) nicely higher, and Seagate, which was
taken out, as I mentioned. Are you still with some of those?
MORROW: Yeah. The ones that I like the best, I think, now are largely the semiconductor
stocks. The ones that you mentioned that I like are Intel and that group.
KANGAS: So now you like Intel even though you got stopped out of it before?
MORROW: Absolutely. There are actually 18 out of the 30 stocks that are strong in my list are
semiconductor or semiconductor related stocks.
KANGAS: So let's get specific here.
MORROW: OK. The ones that are probably the strongest, Analog Devices (ADI), Applied
Materials (AMAT), Advanced Micro Devices (AMD) and the Lam Research (LRCX) would be a
strong one, LSI Logic (LSI). I have others that are somewhat away from the semiconductor area,
too.
KANGAS: All right, now you think the market is going to top out this coming November. That's
when you see the peak in most of the major averages?
MORROW: That's right. That will be the absolute peak of this market that started back in
October '98.
KANGAS: OK. And how deep a sell-off could we experience?
MORROW: I expect 25 percent in the Dow, 25 percent in the S&P 500 and somewhere in the
range of 38 to 50 percent on the Nasdaq. I have a number on the Nasdaq I'm looking at and that's
about 3,943 as a peak in November.
KANGAS: So that's still a, it's a rally worst participating in.
MORROW: It certainly is.
KANGAS: OK. What about gold? Do you see any glitter there?
MORROW: Well, there might be some interest toward the end of the year. I have been advising
people just to hold their positions, certainly not add to them. At the end of the year we see some
weakness in the dollar. We see some inflationary expectation. Gold could become interesting
again. But I've got to see a technical proof of that.
KANGAS: OK, quickly, bonds, yes or no?
MORROW: No, not now.
KANGAS: But you perhaps will like them later?
MORROW: Later I think I will.
KANGAS: Even with the Fed expected to cut rates, which you expect them to do, right?
MORROW: Right.
KANGAS: You still don't like bonds?
MORROW: Just on a short-term basis it could move slightly but I think the real play in bonds will
be after November.
KANGAS: All right, so the November peak. We'll watch for it closely if we're up that high, 14,770.
MORROW: Right.
KANGAS: That's a long way from here.
MORROW: It certainly is.
KANGAS: OK, Bob, we'll be watching. Thanks very much for being back with us.
MORROW: Thank you, Paul.
KANGAS: My guest, Robert Morrow, Editor of the Investor Advisory Service. |
