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To: Bill who wrote (617)	8/10/1999 8:46:00 PM
From: RDR	Read Replies (1) \| Respond to of 3350

Check what the key market movers are saying.... IT?S THE LATEST missive from PaineWebber?s top strategist, who is also known for the ?Kerschner curse.? When the market-watcher is out of town, historically, the broader indexes decline. Well, Kerschner took a much-deserved vacation recently and sure enough the S&P 500 index (SPX) fell 5.5 percent over the last two weeks. Now that Kerschner is back at his desk he is saying the declines aren?t over yet. He says he is in no mood to fight the Federal Reserve, and he?s telling clients the risk of higher interest rates (when the Fed convenes in two weeks) means the market decline has further to go. ?It?s probably not over yet. [The market] is not cheap yet. We got to 10-15 percent overvalued. Now [after the market?s summer selloff] we are 2-4 percent overvalued. Cheap to me is a market that is 10-15 percent undervalued,? he said. He predicts the S&P 500 could fall 10-15 percent over the next several months, a level that would make the market ?truly cheap.? The cause: rising interest rates are overwhelming rising earnings. As a result, Kerschner predicts ?fair value? for the S&P 500 by the end of next year will be 1,400. He says that by the end of 2000 he expects the Dow (DJS.X) to be at only 11,500. In other words, in roughly 16 months he expects that both indexes will rise only about 7 percent above today?s levels. ?At year end ?99 I don?t think anyone knows what the next four to five months will bring. We don?t know how much the Fed will tighten. Latin America brings a lot of uncertainty. Overall, you have lots of volatility,? he said. Previously, Kerschner was a bull on the market. In fact, the PaineWebber model has the best five-year track record on Wall Street. Even so, Kerschner didn?t imagine stocks would climb so quickly. At the beginning of the year he issued a year-end target for the Dow for 1999 of 9,750. If Kerschner?s bearish forecast comes to pass, however, and the Dow falls 10 percent, the index would be just below that level. The market-watcher says investors with a time horizon of more than 18 months should go ahead and look at a few carefully chosen sectors. Kerschner likes drug stocks such as Pfizer (PFE) and Warner-Lambert (WLA). He also likes tech stocks including Microsoft (MSFT) and Sun Microsystems (SUNW). (Microsoft is a partner in MSNBC.) Among the retailers he likes Gap Stores (GPS) and Wal-Mart (WMT). Regards,