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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Bucky Katt who wrote (2511)	1/27/1999 12:34:00 PM
From: Rande Is	Read Replies (1) \| Respond to of 57584

Here's the SHORT planted propaganda of the week. Look how funny. TOTALLY bearish perspective. . .and so well timed. This will probably cue other articles as well. Man, Wall Street has got it all under their thumbs. Investors Wonder About '99 Prospects .c The Associated Press DENVER (AP) -- As we head toward a new millennium, U.S. investors find themselves finishing the century on an uneasy note. Following four straight excellent years, 1999 looks a little less clear. The economy remains strong, but markets around the rest of the world, from Asia to Russia to Latin America, are shaky, and investors worry about what impact the decline will have on the U.S. markets. Investors nearing retirement or already retired, who have less time to overcome declines, are especially concerned. ''Where the market is going to go in 1999 is anybody's guess,'' says Hal Lenhart, an academic associate at the College for Financial Planning. ''But one characteristic about the market that investors can be pretty sure about is that it is going to be very volatile.'' A major reason the market is likely to be volatile in 1999, according to Lenhart, is due to a word many of today's investors have never heard before -- deflation. The last time that word was commonly spoken in this country was during the Great Depression. Lenhart does not see a Great Depression in 1999, or in the next decade for that matter. But he does see declining prices, or certainly an extremely low inflation rate. ''Deflation reflects a lack of liquidity in the market,'' Lenhart says. ''People are holding on to their money. They're not doing much with it from a consumer standpoint.'' The Federal Reserve tried to flush liquidity into the economy by lowering interest rates last fall, and that has helped, Lenhart notes. Nonetheless, investment experts remain concerned that there is still not sufficient liquidity. Financial institutions tend to clamp down on lending in a deflationary market, so it's harder for businesses to borrow to grow. In addition, businesses have a more difficult time passing along costs in a deflationary environment, such as the higher labor costs they're incurring due to the tight labor market. Consequently, deflation affects corporate earnings. ''We're seeing extreme volatility because the market doesn't know where to go,'' Lenhart says. ''Any minor blip in earnings forecast sends market prices plummeting.'' All of this puts retirees and those nearing retirement in a tight spot. With minuscule inflation and interest rates, bond yields and stock dividends -- two sources of relatively steady income for retirees -- are at or near record lows. That will force retirees to look at selling some of their investments for cash, but that may not be as bad as it sounds, Lenhart says. ''The key is to back up and look at what your investments have done over the past several years,'' Lenhart says. ''Don't look back just to recent highs and feel disappointed about how poorly the market has done since then. Look at the value your investments have accumulated over the last ten years.'' Investors in their late 50s or early 60s may not need to be too concerned about selling stocks at this point since they've got 10 to 15 years before they may need to start seriously drawing on their retirement accounts. But retirees who will need funds in the next five to 10 years may need to liquidate some of their stock holdings and invest the money in Treasury securities, shorter-term bonds and other forms of low-risk cash-oriented investments. Psychologically, that can be tough, Lenhart admits. ''Investors don't like to sell their seed corn, their principal. Yet if their investment planning was good, they accumulated this principal with the idea that it would provide them income to live on.'' This doesn't mean even investors well into retirement should bail out of stocks entirely, Lenhart cautions. You need to weigh your future income needs and what other sources of retirement income you have. But any money you need within the next five years should not be tied up in the market. Lenhart fears that people who have accumulated substantial wealth in the market the last few years may be reluctant to cash in some of their winnings. For one thing, they will have to face capital gains taxes on the profits. ''But they shouldn't get greedy,'' he says. He doubts the market is going to repeat the 20 percent or better returns it has averaged over the past four years. In a deflationary environment, returns will likely be much lower. He also warns against trying to time the market. Much of the market activity today is due not to traditional institutional activity, which tended to keep the market on a more even keel, but to retail day traders who flit in and out of the market. AP-NY-01-27-99 1202EST Copyright 1998 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without prior written authority of The Associated Press.