Don't be too negative on the market from WSW pundits. Laslo B. has been the best WSW stock picker by far, and an article on him yesterday said he does it using money flow analysis - and he predicts tha market levels the same way. His prediction for the market this last year was very close. For 1998? Laslo (I can't spell either his first or last name) says that the Dow will hit 10,000 plus.
Also, keep in mind we have had a bear market for small caps the last three months or so, and the PE ratios of the New Horizon funds are in the 1.1 to 1.2 times the larger stocks level - on the lower side of the normal 1.0 to 2.0 range, so lots of upside left. Tax cut implications will boost the total after tax returns from small growth stocks making them more attractive, and the larger companies will he hit harder by slowing worldwide economies (many are planning massive layoffs according to Business Week in order to attempt to maintain profits in a non-inflationary environment).
Also Greenspan came out this weekend and said at a meeting of economists that deflation is a much bigger threat than inflation to an economy, not that we were going into deflation, but he said there were some indicators that could cause worry. Now with the Asian situation, South American jitters, Russian unstability, deflation concerns, I can't see an aggressive effort to jack up interest rates, so the interest rate environment should be very positive. Also, the bond market (that really is the place where rates are "set") has begun to recognize that inflation is becoming less and less of a concern.
I don't time the market because I know I can't, but I do know that some smaller cap stocks like BIOI are very very attractive from a valuation standpoint, and have limited downside risk IMO, with explosive upside potential. Put a portfolio of these types of stocks together and you may be surprised and get results better than you can imagine. Then again, I'm an optimist and the market and economy could crumble, taking our small caps with them.
Best - Joe |
