For those of you who listened to the show today you know Bob is still unwavering in his bullish view of the rest of this year and in 1999. As a point of reference of how we got here, below is an interview Bob gave almost one year ago on October 17, 1997. Dark days then as there is now but Bob did not join others who went in to the bear camp at that time. Yes.... for you Bobbears there is something in this interview for you to gnaw on too.....its called UTEK. Enjoy, Jeff
<<Market Monitor: Bob Brinker
PAUL KANGAS: My guest market monitor this week is Bob Brinker, the editor of Bob Brinker's Marketimer Letter, based in Coco Beach, Florida. And of course Bob is also the popular host of ABC Radio's weekend program Money Talk and welcome back to NIGHTLY BUSINESS REPORT. Bob.
BOB BRINKER, EDITOR, "BOB BRINKER'S MARKETIMER": Thanks Paul. Nice to be here. KANGAS: Nasty couple of days here that we wound the week up and down 119 yesterday. Almost 92 today. Is this the start of something big on the downside.
BRINKER: I don't think so, Paul. We're down about 2 1/2 percent for the week which is a very small pull back. I expect anything in here would be less than 10 percent. I think we're still in a bull market.
KANGAS: You know, it's very interesting. I just read your October 8th market letter and here's what you said. Although we remain bullish, we recognize that the Dow Industrial Averages gained 239 percent during the last 7 years without ever declining 10 percent or more and out of respect of these historic gains, we are reviewing the 5 major bear market root causes this month in an effort to further evaluate the staying power of this fantastic bull market. You must have had a premonition there was going to be some problem this week.
BRINKER: What's really happening here is a valuation issue. At recent highs we were 21 times estimated 1997 S&P 500 earnings. The market has rarely sold higher than that level and I think that's the ceiling we bumped up against here at the recent new highs.
KANGAS: But you say the 5 major bear market root causes are the other four-you mentioned tight money, not a problem.
BRINKER: Not here.
KANGAS: Rising interest rates.
BRINKER: Just the opposite.
KANGAS: Well today they went up a little.
BRINKER: Just a little.
KANGAS: OK. High inflation. Not a problem.
BRINKER: Two percent.
KANGAS: And the other was economic growth. Now we have seen some earnings disappointments, meaning maybe earnings growth is part of that problem.
BRINKER: Well, I think the earnings disappointments we've seen are company specific. I think overall, gross domestic product growth into next year should be 2 1/2 to 3 percent and that would be just about perfect for the Fed Chairman.
KANGAS: OK, so your major concern out of the five root causes of a bear market is over evaluation.
BRINKER: That's a big deal, Paul. When this bull market started in 1982, with the Dow in the 700s, we were 7 times earnings on the S&P.
KANGAS: Yes.
BRINKER: Now, we're almost 21 times earnings at the recent highs, and we're still 20 times earnings tonight. There's a ceiling in the low 20s on multiples. I don't think we'll get through that ceiling.
KANGAS: And how does that translate into the Dow Industrial Average level?
BRINKER: Well, the Dow-I think the Dow has the potential to go into the 8300 - 8500 area, which would be about 21, 21 1/2 times this year's earnings...
KANGAS: That's the high.
BRINKER: For this year.
KANGAS: And the low possibility?
BRINKER: I wouldn't expect us to go below the mid-7000s. I don't think any correction in the Dow or S&P will exceed 10 percent.
KANGAS: OK. Are you taking some money off the table, now?
BRINKER: Well, one of the stocks I recommended ...
KANGAS: Uniphase (NASDAQ:UNPH)...
BRINKER: Uniphase ...
KANGAS: ... a great winner, at 45, on your last visit with us - which was on January 24th. The Dow was at 6696. Uniphase was at 45. It's now over 80.
BRINKER: Yes.
KANGAS: You're...
BRINKER: ... trading around 80. Yes. I would book that profit. I would sell that stock; it's about 33 times next year's earnings. It has been a huge home run winner for us. I would take the profit.
KANGAS: Ultratech Stepper (NASDAQ:UTEK) recommended at 28. It's now about 30.
BRINKER: Yes. Ultratech Stepper is, I think, a special situation in capital equipment. They have a new process, Paul, "P-Gild" which is an advanced laser thermal processing tool for semiconductor manufacture in the smaller geometries. This is a big potential market. Could be a $2 billion market within a few years. They have other new products. They have a new mask-making division, Ultrabeam. They'll be coming in in '98. And they have a new pole-trimming tool, which is used for disk drive manufacturers. Saves a lot of money for the manufacturers in that area. I think Ultratech Stepper would be my single best purchase at this point. I would recommend buying that stock right in here tonight, in the 29-and-a-fraction area.
KANGAS: OK. That's U-T-E-K.
BRINKER: Yes. UTEK.
KANGAS: NASDAQ.
BRINKER: NASDAQ.
KANGAS: And Stanford Telecom (NASDAQ:STII) had a good move. You recommended...
BRINKER: Yes.
KANGAS: ... it at 15; and had a 2-for-1 split. Now, on that basis, it's 23. Take it away?
BRINKER: Well, we're up close to 50 percent since January in that one. I would hold the stock here, but if it gets back below 20, I'd be willing to add to it.
KANGAS: You go with mutual funds as your major vehicle for your subscribers.
BRINKER: Yes.
KANGAS: Stay with them?
BRINKER: Absolutely.
KANGAS: Don't panic out at this stage?
BRINKER: No way.
KANGAS: OK. And maybe buy on weakness, if you've got a little ammunition?
BRINKER: Sure.
KANGAS: OK. No 10,000 Dow this year, though?
BRINKER: I don't know where these numbers come from. I don't believe we'll see 10,000 Dow this year. I don't believe we'll see 9,000 Dow this year, because of the valuation issue.
KANGAS: But not a bear market?
BRINKER: I don't see a bear market in sight.
KANGAS: And you don't like gold; you never have.
BRINKER: I think the gold bugs are in for a long, painful winter.
KANGAS: All right. Bob, thanks very much for being with us.
BRINKER: Thanks, Paul.
KANGAS: My guest Market Monitor, Bob Brinker, "Bob Brinker's Marketimer Letter".
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