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To: Ian Davidson who wrote (25705)	12/19/1997 9:28:00 AM
From: Jim Patterson	Read Replies (1) \| Respond to of 176387

RE: "the reason Mohan likes these two analysts is because they have been CORRECT in their forecasts over the past years" Oh, and Ralph has not been just as bullish and right as Abby ? Ralph has done very well. the question, is is he right this time ? Jim

To: Ian Davidson who wrote (25705)	12/19/1997 10:12:00 AM
From: Mohan Marette	Read Replies (1) \| Respond to of 176387

The PUNDITS SPEAK- Believe them at your own risk. Ian & thread: Here is something which mau or may not interest you. PUNDIT WATCH WHAT'S NEXT? THE PUNDITS TELL ALL ÿ PUNDIT WATCH Abby Cohen Edward Yardeni Byron Wien Elaine Garzarelli David Jones Edward Hyman Charles Clough Barton Biggs Elliott Platt Michael Metz AFTER A STRING of disappointing company preannouncements and with no end in sight to this Asian contagion, the U.S. stock market is looking mighty shaky right now. We thought we better ask our favorite authorities what exactly is going on -- and what to expect in 1998. Here are their responses: Goldman Sachs's Abby Joseph Cohen, SmartMoney Interactive's No. 1-ranked oracle, is still telling investors to stay the course. The level-headed portfolio strategist is still bullish and says that the Dow can hit 8700 next year -- good for a 9% rise from current levels. "In general, 1998 will be a year of good profits and reasonably benign interest rates," she told a phalanx of Goldman clients this week. She also believes the U.S. can, for the fourth year in a row, have strong corporate earnings. In 1998, she sees S&P 500 operating earnings rising 8% and U.S. gross domestic product growth rising by 2.5% to 3%. The latter figure is notable because many economists are predicting very low growth for the U.S. economy. Cohen says she still likes banking and financial services stocks and believes the Asian contagion will not significantly affect her earnings outlook. Morgan Stanley's Byron Wien is still upbeat about the U.S. markets, saying the November employment report affirmed that growth in the U.S. is still powerful. "We still believe the next important near-term move in the market is up, as noninflationary growth continues," he says. In terms of sectors, Wien's favorites are: Energy, Airlines, Banks and Financial Services. On his closely-followed Fresh Money Buys list, Wien's top picks include energy's Baker Hughes (BHI) and the bank stock Citicorp (CCI). Elaine Garzarelli, as she does every year for SmartMoney, recently selected her favorite sectors for 1998. She says investors should overweight semiconductors, tobacco, newspapers, publishing and home-building stocks, among others, in their portfolios. For the markets in general, she believes we are in the midst of an extended trading range between 7000 and 8500 on the Dow. Garzarelli also says she is cutting her U.S. GDP growth rates from 2.25% -- an already bearish figure -- to 1.25% next year. "Because of this, corporate profits will be lower than anticipated." Unlike Cohen and Wien, she sees U.S. company earnings flat or even sequentially down next year "after observing the perpetuation of the Asian flu." A number of our analysts believe that a deflationary U.S. economic environment -- when prices not only don't increase, but fall below the previous year's numbers -- is right around the corner. In a comprehensive report entitled, "Yield, The Final Deflation," Merrill Lynch's Charles Clough argues that minuscule producer price index (PPI) and consumer price index (CPI) numbers, combined with a long bond yield under 6%, push us close to the precipice. And the rest of the deflationary-leaning world is closing in: Clough says that Asia -- and most importantly, Japan, with its 1.5% 10-year bond yield -- is already facing sharply lower growth prospects, as is Germany and much of Western Europe. The exception: Great Britain, where growth is still strong. One of Clough's more salient points is that the U.S. has had such a good market run because of the great disinflationary cycle it has been in over the last few years. By that he means a decline in the rate of change in inflation. Falling inflation has led to lower interest rates. The danger, Clough believes, is that this environment could lead to the kind of credit excesses that have recently been responsible for the economic turmoil in Asia. This same cycle is what decimated Mexico's economy in 1995. Deutsche Morgan Grenfell's Edward Yardeni takes this argument one step further and believes that there is now a 25% chance of a recession -- when the economy becomes stagnant -- in 1998. "The U.S. is importing deflation," he writes. "Competitive devaluation in Asia is bound to deflate U.S. import prices dramatically in 1998. This is one of the main reasons I expect to see deflation in the PPI next year and a CPI inflation rate of only 1.5%." Our pundits are not the only ones who agree with this scenario: Respected big-cap guru Nicholas Heyman of NatWest Securities sees that even companies that have no direct exposure to Asia will be affected by troubles in the region. "As these countries try to export their goods to the U.S., Asian turmoil can't be so easily dismissed with the end-market argument," says Heyman, The Wall Street Journal's top-rated electrical equipment analyst. "If you produce widgets that can just as easily be made in Asia, you will definitely see pricing pressures." -- By Eric Moskowitz (source:smartmoney)