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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: KM who wrote (35439)	12/19/1999 3:42:00 PM
From: Lee Lichterman III	Read Replies (2) \| Respond to of 99985

I guess his job is safe then ( regarding bears extinct ) Market forecast from B.(the Bull) Schaeffer The Market Thursday, December 16, 1999 Closing DJIA 11,244.9 After being introduced as "Bernie the Bull" by Mark Haines ahead of my CNBC Squawk Box appearance this morning, it's only proper that I present you with another bullish forecast for the coming year. In my forecast for 1998, I predicted a bit prematurely that we'd reach Dow 10,000, as this did not occur until March 1999. My 1999 forecast called for a Dow high of 11,500, and so far the intraday Dow high has been 11,428. (A note to all who might conclude I'm a "perma-bull": I did correctly call the market top in August 1987 and was bearish through the October 1987 crash per Timer Digest [www.timerdigest.com ]). My forecast for 2000 calls for yet another "boring" year of gains of 20 percent or more, which would extend the string of such bull-market years to six. I see the Dow reaching a high of 14,000 next year, with most of the gains once again concentrated in the first half. I strongly believe that leadership will continue to emanate from the technology sector, and I expect the Nasdaq Composite Index (COMP - 3715.0) to soar above the 5000 mark. Why so bullish in general and so extra bullish on tech? First and foremost, I expect a massive flow of funds into the stock market in 2000 from two sources. Source #1 will be the baby boomers. "But," you may ask, "aren't the boomers up to their eyeballs in the stock market? The bears have been telling me this since 1994!" Glad you asked! As it turns out, the bears seem to have done an excellent job of keeping the baby boomers nervous about the market. U.S. Trust recently completed a study of boomers aged 35-54 with adjusted gross income over $230,000 or net worth above $3 million. The study found that these well-heeled boomers had just 38 percent of their portfolios invested in domestic equities, and nearly half of their holdings were in cash and in fixed income investments! But it gets worse. Not only have these "high-impact boomers" been grossly underinvested in the greatest bull market of the century, they've also been in the wrong stocks! Since 1993, their anemic stock portfolios have gained just 46 percent, compared to 218 percent for the S&P. With Y2K out of the way, these boomers are going to be taking a longing look at the outsized investment returns from technology stocks in 1999 and piling into aggressive growth mutual funds. This will help fuel further market gains, with the biggest gains chalked up by the technology sector, as aggressive growth mutual fund inflows are put to work. Flow of funds source #2 will be the shorts, which includes those who have been shorting and buying puts on the stock indices and on individual stocks. The dollars that are committed to these negative bets on the market are still astoundingly high, and I see a massive short squeeze that will power the market higher as these bears finally begin to capitulate in large numbers. Other factors that contribute to the bullish case for 2000 include continued strong earnings growth and the old reliable "Wall of Worry" – all those major concerns about which the bears keep reminding us that, once they lose their luster, are immediately replaced with new concerns. Y2K is now fast being replaced with concerns about rising interest rates and inflation. The Wall of Worry keeps investors' expectations from getting too frothy and thus sustains the life of the bull market. What are the wild cards that could defeat this bullish scenario? The Fed, the Fed, and the Fed. But here are some points to ponder before getting too concerned about a crazed Fed raising rates with reckless abandon in 2000. First, this is an election year, and historically the Fed has not been inclined to be too aggressive in such years for fear of being viewed as anti-incumbent party. Second, Mr. Greenspan is up for reappointment in 2000 and once again this is a factor in favor of restraint. And finally, there is no inflation out there and there is a limit to how far the Fed will go under these circumstances. As for my extra bullishness on the techs - that's where the earnings growth will be, that's where Mr. Baby Boomer is way underinvested, and that's where sentiment has been incredibly negative, which is so bullish to us contrarians (see Schaeffer's Daily Sentiment at www.optionsource.com/sentiment/sdscopy.asp). Happy New Year and happy investing! -Bernie Schaeffer