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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Lars who wrote (3758)	3/12/1999 6:51:00 PM
From: Simprofié	Read Replies (2) \| Respond to of 15132

Lars, Bought The Millionaire Next Door today. Thanks. Hate to admit it but I remember closing in on dow 1000! Joe

To: Lars who wrote (3758)	3/12/1999 10:26:00 PM
From: DD™	Read Replies (1) \| Respond to of 15132

** Another Montana Grizzly Bear Sighting ** "Market Monitor"-James Stack Of InvesTech PAUL KANGAS: My guest market monitor this week is James Stack, the president of Investech Research, based in White Fish, Montana. And Jim, it's good to have you right here in our studios. Welcome back. JAMES STACK, PRESIDENT, INVESTECH RESEARCH: It's great to be here again Paul. KANGAS: It must have been a little frustrating for market bulls today to see the Dow flirt with 10000 but not get over it. And for you it must be equally as frustrating to see it up this high at the 10000 level since you've been bearish for the last three years. If it made it through 10000, what would that mean to you? Would it change anything? STACK: Well, no, Paul, it really wouldn't. And I think the key point to keep in mind is that the reason for our extreme caution is not just the valuation levels which are at the most extreme in history, but also what's happening internally in the market. KANGAS: You know, Jim, we get occasional e-mail and some regular mail, a few calls here and there. They ask, some of the viewers ask why do we keep having Jim Stack on and some other bears that we've had on when the market just keeps going the other way? Why bother to have them on? And of course from the standpoint of broadcast journalism, we have to present both sides of the story. Defend yourself. STACK: That's a good question and it's a fair question. It was 16 years ago when you first invited me to be a guest. KANGAS: 1983. STACK: That's right. When I was first invited as a guest on NIGHTLY BUSINESS REPORT. Over those 16 years I earned the reputation for being objective, not as being a perma bear. And I think that's most important in keeping in mind that the last three years of being in a high cash position, a high cash mistake, have been an objective decision not to take part in what I think has developed into one of the highest risk markets in our lifetime. It is certainly the most overvalued based on earnings, dividends and even book value. KANGAS: All right now. What would turn things around? This is almost a mania I think you've called it in several of your letters. What would stop this mania? STACK: Well, obviously from a monetary standpoint, everyone on Wall Street thinks the bull is going to keep going until the Federal Reserve tightens. For the 30-year Treasury bond right now has been tightening, actually rising in yields ever since the Fed first cut the discount rate back in the fall. The 30-year Treasury bond yield is at 5.5 percent. It's reported every night here on the NIGHTLY BUSINESS REPORT. If it keeps rising above that level, it would probably sound the death knell for Wall Street. KANGAS: So but as interest rates are going up without the help of the Fed and they are not fooling around with it right now. STACK: Well, that's right. But what's happening internally in the market I think is far more important. From a technical standpoint, both leadership and breadth are showing some of the strongest divergence, that is the breakdown that we have seen in 70 years in Wall Street history. For example, this year the majority of days this year have seen more stocks hitting new yearly lows than new highs on a daily basis, including today. KANGAS: That's true. STACK: And from a breadth standpoint you have to step back 70 years to find a market advance that had such narrow participation as this one off the October lows. Only 3 percent of the S&P 500 stocks accounted for almost two-thirds of the gain in that index from those October lows. KANGAS: So you see a dangerous imbalance developing here. STACK: Well, a lot of stocks have already seen their peak. In fact the Russell 2000 Index, the Value Line Index of 1700 stocks hit their peak in April of last year. The average equity fund out there today is lower than it was in July of last year. KANGAS: Isn't it true that a lot of the new investors that have come along which account for a lot of the new money of course don't know about the bearish problems. It's like a child in the forest, sees a ferocious bear, doesn't realize it's dangerous and the bear sees no fear in the child. Is that what's going on here? STACK: It is and it's also what has Alan Greenspan the most worried. The fact that what's driving this market right now is not fundamentals. It's investor psychology. KANGAS: OK. STACK: It's expectations that this market is going to keep going up. KANGAS: What is your strategy? STACK: I think the best strategy is to watch the 30-year Treasury bond yield I mentioned earlier. Of course keep one eye on the Federal Reserve. They don't want to pop the bubble. They want to let some of the air out of Wall Street gradually. But the other point, key point for every investor in this market is to treat the next one or two years differently from the next one or two decades. KANGAS: OK. STACK: If I'm wrong, then the profit you're giving up is minimal. If I'm right about what lies ahead, then we could be looking at one of the best buying opportunities of our lifetime in the next one or two years. KANGAS: Quickly, your allocations. How much in cash? STACK: We're running over 70 percent in cash. We're running 10 percent in a defensive gold position and we have 20 percent in bear market positions. KANGAS: OK, Jim. Thanks very much for being with us. STACK: Thank you, Paul. KANGAS: My guest Market Monitor James Stack of Investech Research. Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed by FDCH. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c)1999 Community Television Foundation of South Florida, Inc. quote.com DD