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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Mr. BSL who wrote (9441)	10/23/1999 4:49:00 PM
From: Jeffrey D	Read Replies (1) \| Respond to of 15132

Interesting that Bob thinks bonds are a screaming buy as per his comments on his show today. Elaine Garzarelli agrees with him. Jeff << Bond returns could rival stocks Sixty percent chance of Fed hike By Elaine Garzarelli, CBS MarketWatch Last Update: 4:44 PM ET Oct 22, 1999 Commentary Letters to the Editor NEW YORK (CBS.MW) -- Markets recovered a bit this week, with the S&P 500 and Dow down 8 percent from their all-time highs (Nasdaq is down only 3 percent). "With the 30-year bond yield at 6.36 percent, we believe bonds are a great investment and should create returns as good as the stock market." Elaine Garzarelli Fears of a Y2K-related tech spending slowdown ignited earnings fears in the markets this week, with IBM's shares falling about 20 percent. Along with IBM (IBM: news, msgs), Xerox, Unisys and Lexmark all said their earnings could be hurt by a slowdown in Y2K spending. In spite of this poor earnings news, we are focusing on the decent earnings gains anticipated for the S&P 500 next year. We would take advantage of buying high-quality technology stocks during any correction. We believe a slowdown in the U.S. economy is ahead, given there is about a six-month lag from the previous two Fed tightenings. Already contributing to the slowdown is the rise in mortgage rates (30-year mortgage rates rose to an average of 7.93 percent -- the highest level in two months). In fact, as we see foreign economies firming (France, Canada, Japan), we believe a tightening is likely abroad, with the Bank of England and European Central Bank already in tightening modes. This should contribute to the slowdown domestically. Our models indicate a level of 12,500 for the Dow and 1,600 for the S&P 500 over the next 12 months. Interest rate analysis With the 30-year bond yield at 6.36 percent, we believe bonds are a great investment and should create returns as good as the stock market. Rates rose recently on fears of continued Fed tightening and possible higher inflation. We believe bonds have, at this point, factored in another Fed tightening. In our opinion, there is a 60 percent chance of another tightening as the Fed analyzes more economic reports in the months to come. Even with another tightening, we would take advantage of these yields and make bonds a part of one's asset allocation. Our bond model continues to forecast that yields should be about 170 basis points lower than where they are now (currently, the 10-year bond yield is at 6.19 percent and our model predicts 4.5 percent sometime over the next 12 months). Elaine Garzarelli is a columnist for CBS MarketWatch. You can get more information at her Web site. >>