Roger's 1998 Short Picks Message Board

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Strategies & Market Trends : Roger's 1998 Short Picks

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To: James F. Hopkins who wrote (269)	1/6/1998 10:37:00 PM
From: Dan Ross	Read Replies (3) of 18691

SOME ECONOMIC FORECASTS FROM DAN...LONG WINDED and POORLY ORGANIZED BUT WELL THOUGHT OUT.... I beg to differ...I think Jimmy Rogers is one smart guy.....He is very much from the old school but he judges the market pretty accurately... Perhaps not in the short-term but in the long-term he is correct IMHO....He knows his MACRO-economics which many people have long forgotten..... Labor pressures are there folks....they are HUGE....a friend of mine with a two year degree in CAD from DEVRY went from 23K to 32K in one year due to headhunters....he stayed with his company but for 40% + more....I know of numerous people that have made HUGE increases in salary over the past year......Damn Gen-Xers...(Check my profile)<ggg> However, we should see cheaper imports within the next 6-9 months...Some items are now cheaper...ie raw materials. from overseas SO what is my point....BOND PRICES ARE WAY TOO HIGH....yields should be 6.25% at least...we will see corporate alarms over the next few months....many of them will take it as a chance to use SE Asia as an excuse.....their shareholders will accept it even though the fundamentals of the company may be hurting under the surface....it will give some companies the chance to re-organize their operations.... Looking at market valuations, as the Rf (risk free rate) declines, the valuations given to companies should, on average, increase.....since we get less from the risk free rate we are willing to pay a bit more for the returns in the market....However, the market has thought that EPS will slow and isn't willing to pay right now....THIS IS A CORRECT ASSUMPTION IMHO......However, what will happen when the Rf increases and corporate EPS remain at the 8% levels that the market has priced them? STOCK PRICES WILL PLUMMET due to the valuations being to high....expectations will come down etc......REMEMBER MY EARLIER POST....If we return to the average over the past 15 years, we will shave of 2000-3000 points off the DOW IN NO TIME AT ALL. On another point.....Many firms are issuing debt at these levels... really cheaply....IBM issued 30 year notes at .75% above the Rf today.....Dayton Hudson is apparently going to issue and I'm sure many others are going to issue new debt to retire old debt....This will lower there WACC and help their valuations....Just a point... Take care Dan Ross

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