Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : Tokyo Joe's Cafe / Societe Anonyme/No Pennies -- Ignore unavailable to you. Want to Upgrade?

To: TokyoMex who wrote (2613)	8/30/1998 9:32:00 AM
From: TokyoMex	Respond to of 119973

A Morgan Stanley Expert's Take on the Market Turmoil By ROBERT D. HERSHEY Jr. NEW YORK -- Back in mid-January, the stock market faltered, investors fretted, and Byron Wien, chief U.S. investment strategist at Morgan Stanley Dean Witter, stepped up to the plate. He told clients that the Dow Jones industrial average, helped by declining interest rates, could hit 9,000 during the first half of the year. It did. But in early August, with the market down sharply from its July 17 high, some people wondered whether to prepare for the next leg of the bull market or to sell. Wien advised the latter and those who did are glad they did. Friday, Wien shared his opinions about the market turmoil. Q. First, what has prompted all this? A. I don't think that Russia, in and of itself, is the factor that has got everybody concerned. It's that Russia is the latest development. What you have is a situation where Europe and the United States were doing well and one by one the rest of the world was getting into trouble. Q. Is there a problem of further contagion? A. The people who are going to be hurt are the people who have lent money to Russia or the people who have had investments there. That's primarily the major German banks and some hedge funds and they've already been hurt. I think the German banks can deal with this and I don't think the hedge funds are a critical economic factor. Q. How is this likely to play out in the United States markets? A. I think we began a topping process in June where the number of stocks performing well was becoming increasingly narrow. Now we're suffering the down side of this enormously favorable first half that we had and my view is that we'll erase all of the gains of this year. But I don't think we're in a serious bear market because the economic fundamentals of the United States are still quite favorable. The level of employment is still high. Interest rates are low. Housing starts, durable goods orders are still strong. So my belief is that we're going to suffer the worst correction that we've had since October of 1990, but I don't think we're in a bear market. Q. Corporate profits are starting to skid, though. A. One of the factors that could make me wrong is that profits are coming through worse than I and others expected. But they are still positive. In spite of all the things that have happened, the year-over-year profits are still above a year ago. And I think they will be better in the second half than they were in the first half. Q. Is the Dow catching up with the erosion that's been taking place elsewhere? A. Well, I think that the rest of the market, beyond the top 100 stocks in the S&P 500, has been hitting a bear market for a while now. More than 60 percent of the stocks on the New York Stock Exchange were down more than 20 percent as of the end of last week. Stocks like Coca-Cola are beginning to suffer along with the rest of the market. Part of my idea of how this would unwind is that some of these large-capitalization multinationals would suffer along with the rest of the market and that would provide the final flush-out that would end this phase of the decline. Q. Is there some flight to quality? A. There were some high-technology stocks like Microsoft, Dell Computer and Cisco Systems that were certainly doing well. Liquidity is playing a big factor in this market. One, if you're a little uncertain about the market, you want to buy something, you'll be able to sell if you change your mind. And, secondly, many mutual funds now have grown to the size where they need large-capitalization stocks to put certain amounts of money to work. Q. How confident are you that shareholders will hang in there if the market continues to sell off? A. I'm not confident at all about that. We've seen a few weeks of poor markets and net redemptions. It's possible if we have another bad week that August could turn out to be a net negative month as far as withdrawals. The last time that happened was in the fall of 1990. This won't be over until there are some mutual fund redemptions. Q. Should investors look for stocks that have held up, or been beaten up? A. If you look at the pattern of the market over the last decade or so you'll see that out of every major correction new leadership has emerged. For example, from 1988 to 1990, large-capitalization stocks did extremely well. Then the market corrected as a result of the Iraq invasion of Kuwait and, coming out of that, small- and medium-capitalization stocks did well. Those are the ones I would focus on when the final bottom is reached. Q. So, is your advice to sit tight or to lighten up? A. My advice has been to sell on the rallies because this is going to get worse. But we're probably two-thirds of the way toward the bottom. And next year is going to be a good year. So, if you have stocks that you have long-term confidence in, I wouldn't sell them at distressed prices here. On the other hand, if you have some marginal holdings, where the fundamentals have changed, and you don't have long-term conviction if the market does rally, I would sell those. Q. And the bond market? A. You do have a flight to quality in the bonds. So you could see long-term rates perhaps go to 5 percent but my view is that if the economy stays strong and these are stabilized, and the Russian situation doesn't infect the rest of Europe, long-term rates will head higher next year. Q. Are there any particular stocks you would recommend? A. The carnage in the bank stocks has been extreme. The airlines have suffered excessively. Those are the only two. Q. Where will the market end this year? A. My feeling is that the market will end the year plus or minus 5 percent of its starting point. Sunday, August 30, 1998 Copyright 1998 The New York Times