To All, my predictions
To: All
Its nearing noon time on New Year's Eve at which time I am turning out the lights in my office. I plan to spend the afternoon cooking for a dinner party we will have tonight for family and very close friends. Have spent the last few days musing, I am sure, like most of you. Here is what I honestly believe. This is sort of letting it all hang out but I decided to do this to solicit other views.
Asia's recovery will come only after worse revelations then we have seen so far. In Malaysia I think we will see some bank closings. The only way out will be to write down the bad debt and that is too great for many of the banks here. Malaysia will move to protect depositors but there will be very little protection for equity and land owners. There could be political fall out before mid year. At the least there will be some reorganization of high level UMNO (the controlling party) positions. In Indonesia Suharto will retire. The transition will be orderly however. In Singapore the property market will suffer substantially and rents will fall. But banking and exchange in Singapore looks reasonably solid. Korea will struggle and will need more then is currently being discussed in the way og help. Japan is all in re: Korea so the additional help will have to come from elsewhere. European powers will likely step in in a much larger way. The bitter fued between North and South will cool off a bit. Both sides are to busy domestically to press on.
The newly revealed severity (from all the Asian countries) will make it clear that the recovery will not begin to appear at mid year as some have prognosticated. But the recovery will become visible by end of 1998 as most nations will by then have moved decisively to revamp debt and take the hit. Growth (GDPs) in Asia will average around 2% but it will still be growth.
The DOW will lose from 600 - 900 points before the end of 1998. This will primarily be the result of negative news spawning a general malaise. Corporate earnings will be the biggest contributor to the slide. But it would be worse without the influx of foreign invstment. I suspect it will be a slow linear fall. Urged along by continued earnings disappointments and some increased Asian woes.
However, High Technology stocks will, in general, show some resilience. They have already been hit by most of the negative stuff and only have one more quarter of really bad stuff before the full discounting occurs. By the end of 1998 we will look back and see latter Q2 as a turning point for the sector. By then it will be clear that the world will continue to look for productivity tools in Hi tech products. In addition it will be more apparent that PCs and the Internet will reach mass market status, aided only in small part by appliance gadgets. Additional spurring will come from telephony which will rise in favor as they put ISDN behind them and get on with it. ISP's will get a boost.
I have some other thoughts about whats coming but the above is the main theme. My strategy is as follows;
I am going to stay 40% in cash (I am currently about 70% cash) and about 30% in previously selected mutuals which I believe will have a chance to outperform the market. This mix is partly due to my age and some personal business risks. It isn't necessarily reflective of any general strategy.
I am going to look to start buying tech stocks in the February/March time frame. Top of the list are Seagate, Quantum, Netscape, IBM, and Intel. Some smaller issues I like are MTIC, and Zygo. These will account for roughly 20%. I am also trying to identify potential bargains in the local KLSE. I expect to make some selections totaling roughly 5% of my portfolio but no decisions yet. The last 5% I call goofy money. I don't know what may grab my attention there.
Some notes: I do not select stocks from outside the tech sector usually. I am only 10 years from goal retirement age. In general I look to buy and hold longer term but tech stocks frequently prevent me from doing this.
I am eager to hear comments by any and all.
There it is. Ahhh I feel better.
Best Wishes to All for a Happy and Healthy New Year!
Stitch |
