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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: EnricoPalazzo who wrote (40031)	3/5/2001 11:49:55 PM
From: Rick	Read Replies (3) \| Respond to of 54805

Is this the bottom? THE CASE FOR DOW 12,500 Monday,March 5,2001 By BETH PISKORA "EVEN as most Wall Street strategists have turned bearish for the short-term future, a few remain unabashed bulls. These optimistic stalwarts base their confidence on two important factors: a strong corporate profit outlook and a Federal Reserve that is in the midst of cutting rates. "People are nuts to be selling stocks - they should be buying," said Larry Kudlow.... "I believe an improved outlook on earnings can emerge during the second quarter as visibility into the second half improves, inventories are reduced and spending picks up," agreed Joseph Battipaglia, chairman of investment policy at Gruntal & Co. "As earnings expectations rise, the risk/reward tradeoff for owning equities should improve since most of today's bad news is already priced into most company's stock prices," added Battipaglia. The steadfast bull remains convinced that by the end of the year, the Dow Jones industrial average will be at 12,500, the S&P 500 index will be at 1,650 and the Nasdaq composite index will be at 4,300. Kudlow believes the S&P will post 25 percent growth from its current levels, putting it near 1,550 by the end of the year. To make that forecast, Kudlow uses a model developed by famed economist Arthur Laffler 20 years ago to predict stock market growth. Laffler measured capitalized earnings, which he defined as projected corporate profits divided by T-bill rates. Right now, analysts are projecting higher profit growth in the second half of 2001 than there was in the second half of 2000. At the same time, the T-bill rates are falling in response to Fed rate cuts. By Kudlow's calculations, that means capitalized earnings could rise by 40 percent in the next year. "This is surely a buy signal," Kudlow said. "Never in the history of man has a T-bill drop of this magnitude - from 6 percent to 4 percent - not precipitated a big run-up in the S&P 500. My forecast is that the S&P could rise 25 percent from current levels." "From mid-1999 to the end of 2000....was a clear sell signal. But now's the time to buy." nypostonline.com We'll see. - Fred