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To: Tommaso who wrote (8096)	11/16/1997 12:18:00 PM
From: Barbara Barry	Read Replies (1) \| Respond to of 18056

To All, What do you think of the following article?(long post) My take is that the pros no feel for nearterm trends and did denote a little "worry"? Stocks Gear Up For Possible Year-End Rally Copyright 1997 by Reuters / Sun, 16 Nov 1997 5:20:28 PST NEW YORK (Reuters) - Is a year-end rally in the cards? Many experts say, ''Yes.'' But all bets will be called off if the Asian turmoil heats up, again. The stock market was on pins and needles last week, waiting for the next economic crisis to erupt in Asia, one of the world's main engines for economic growth markets. Investors also woke up to the fact that the Asian turmoil, which has ravaged the region's financial markets, is a bigger problem than previously thought. Now, it threatens to spread to Brazil, South Korea and possibly infect Japan as well. The Asian contagion is a new ingredient in the market and it will have an impact on Wall Street's year-end scenario. For U.S. multinational companies, the economic problems will mean less business in the once-booming Pacific Rim region. The turmoil will hurt big names such as Chase Manhattan Corp., BankAmerica, 3Com Corp. and Texas Instruments Inc. Investors have been weeding out the stocks of companies whose straight line profit rise over the last four years has become vulnerable to a slowdown abroad. Despite the gloom and doom from the global market dislocation, the experts say the odds are better than even that Wall Street will still see a year-end rally. ''I'm pretty sure there will be a year-end rally but the question is: Will it start now or in a few weeks with stocks at lower levels,'' said James Dines, publisher of the Dines Letter. But it all depends on how Asia plays out. ''If the Japanese banking system caves in, then we should all run for the hill because nothing is going to hold this market up,'' Dines said. He said the Japanese banks, which are already weak from the country's stagnant economy and a slumping stock market, could be the source of the next synchronized global bust. The Dow Jones industrial average this week tried to repair the damage done to the market's psychology from the Oct. 27 mini-crash of 554 points when the Asian turmoil reached the Hong Kong and Wall Street finally took notice. On Friday, the measure of 30 blue-chip stocks ended up 84.72 points at 7,572.48. For the week, it was down 8.84 points. The stock market has traditionally perked up in the final weeks of the year. It happens because trading activity tapers off after the market-making mutual fund and hedge fund traders close their books for the year near the end of the third quarter or early in the fourth. The lack of two-way liquidity creates a vacuum, usually on the upside. With stocks having gained more than 25 percent prior to the late October plunge, fund managers may have gotten an extra reason to exit the market early. For fund managers, the key is to stay out of trouble and avoid the risky business of getting back into stocks during November and December when an unpredictable event could erase three quarters worth of gains. The fund traders get bonuses based on their results for the year, which is another incentive to play it safe. The economic crisis overseas may also have given them a reason to take profits off the table and stay put until 1998 when they will have a clearer idea of the fallout from the Asian turmoil on the global economy. The year-end rally also coincides with a period of house cleaning for investors. ''Stocks that are trading fairly close to their lows of the year get knocked down in tax selling and that money is poured into stocks that are acting better,'' said Barry Hyman, an analyst for Ehrenkrantz, King, Nussbaum Inc. ''In the adjustment process, the weak (stocks) get weaker and the strong get stronger and the net effect is that the better stocks are usually the ones with higher capitalizations, which is what rules the Standard & Poor's and the Dow Jones index,'' he said. If the market does post a fourth-quarter rally, what should investors make of it? ''We will be confronted with the challenge of whether to regard this rally as a mere dead-cat bounce, or the resumption of the bull market,'' Dines said.