Sergio and other Amigos y Amigas--Here is an interesting article about the market and interest rates from Forbes. Myron
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Portfolio strategy
Bullish for '99
By Kenneth L. Fisher
HERE I GO AGAIN, still
optimistic. I expect a strong
20% gain for the S&P 500 in 1999.
No, this bull market won't live forever. I'm no
"permabull," as one of my e-mailing critics
labeled me. Scan my 15 years of FORBES
columns and you will find two extended periods
of bearish calls. I'm very proud of them. But I
don't think I'll need to make another one until
2001. I'm predicting two more good years.
Starting in September we have had three interest
rate cuts. Previously when we had three cuts the
S&P 500 rose 19.4% on average over the next
12 months.
I expect more cuts in 1999. What makes me
think so?
My reading of history tells me that in general
three rate cuts is it—there is rarely a fourth or
fifth. With an exception: Usually, when the rate
cuts start in the second year of a presidential
term—1998 is one—there have been additional
cuts beyond the third. Sometimes five or six
more. Rate cuts when inflation is low almost
always promptly lead to higher stock markets.
Grumpy Greenspan will forge an unholy alliance
with Bill Clinton. Clinton badly wants Gore
elected in 2000 and needs easy money to get
him elected. Greenspan badly wants another
term as Fed head, and Clinton makes that
decision in the spring of 2000. Sacking
Greenspan would cause a stir, but Clinton can be
ruthless when political advantage is at stake. And
history is littered with presidents sacking
seemingly indispensable Fed chairmen.
Greenspan knows this and will play ball with the
man in the White House.
Stocks almost never fall in the third year of a
president's term. That's 1999. The third-year
median return is 23.4%. Check out my May 4
column. Greenspan will cooperate to keep the
string intact.
Grumpy Greenspan will forge
an unholy alliance with Bill
Clinton.
Market risk has been concentrated in the first
half of presidents' terms. When we've had
material corrections in the second year of a
president's term, as per this summer, the third
year has been particularly robust.
What about the Y2K problem? Forget it. It's just
so much noise. I devoted a full column to it on
July 6. You can get that column in my archives.
Just click on the "Archives" button.
While at the FORBES Web site, get my Aug. 10
column showing the U.S.' 35 largest stocks. My
allocation for 1999 remains 100% equity, with
67% of that in the 35 largest stocks and the
other 33% spread over huge continental
European stocks, with a few Japanese global
exporters.
In 1999 the euro will work well, which is great
for Europe. Doubly so for Italy, since its head
central banker, Antonio Fazio, will finally be
subordinated to the European Central Bank. So,
buy Istituto Nazionale delle Assicurazioni (26,
INZ). It is Italy's best financial firm. Yet because
it has a lackluster past, it isn't richly priced. It
spans insurance and brokerage. Its Banco di
Napoli operation is the largest bank in south
Italy. It shouldn't be hard for INZ to see 40 in the
next two years, which is 25% per year, with a
1.5% dividend.
I also like $40 billion ENI (59, E), which
produces oil and natural gas and petrochemicals.
It is among Italy's largest and best-run firms and
is among Europe's leaders in all its operating
lines. Having lagged the group in 1998, ENI
should start catching up soon and could easily
exceed 90 by 2000. It has a 2.6% dividend
yield. Its great Web site will be particularly useful
for most investors.
Sweden's Astra (18, A) suffered in late 1998.
This leading pharmaceutical firm sells half its
broad product line in the U.S. and half in
Europe. It is relatively cheap and should see 30
by 2001.
Other huge foreign stocks I'd load up on right
now include: Akzo Nobel (42, AKZOY ), ABN
Amro (20, AAN), ING Group (56, ING) and
Alcatel (27, ALA).
Merry Christmas.
Kenneth L. Fisher is a Woodside, Calif.-based money
manager. His third book is 100 Minds that Made the
Market. E-mail:kenfisher@fi.com
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Read more:
By Kenneth L. Fisher
Investment Columnists
Portfolio strategy
From December 28, 1998 Issue
December 28, 1998
Table of Contents:
On the Cover:
-Who needs college!
Industry
-The case for oil
-Recession 1999?
-Click and buy
-Web whacked
-Digital denim
Management,
Strategies, Trends:
Deals
-Diller time?
The Law
-"An (un)civil action"
Companies
-HP and PCs
Technology
-Code name: Godot
Marketing
-When scarce is good
-Access arbitrage
-The cable guy
-Booty call
-No more Newt
-Cleaning up
-Good idea, bad dream
Law & Issues:
Creative Giving
-The Jaguar kids
Technology:
Computers/Communications
-Cisco calling
Digital Tools
-O Solo Rio
Departments:
-Follow-Through
On My Mind
-2039
-Fact and Comment
-Other Comments
Commentary
-Singapore And
Malaysia Today
Digital Rules
- Coming Soon—Cyber
Co-Ops
-Transparent Eyeball
Columnists:
Management strategies
-The starfish school of
management
Software Horizon
-E-mail addiction
Paameters
-Secret sauce
Money & Investments:
The Funds
-Playing the middle
-Spain yes, France no
The Forbes/Barra Wall
Street Review
-The Forbes/Barra Wall
Street Review
Dividend Review
-Dividend Review
-Streetwalker
Investment Columnists:
Portfolio strategy
-Bullish for '99
Stock trends
-Five digits on the Dow
Market trends
-The phantom recession
The Forbes Life:
Re-Viewing
-One-stop shopping
Collectors
-The Wyatt Earp buy
The Arts
-Photo/Econ 101
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