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To: hunchback who wrote (32408)	4/23/1999 11:06:00 AM
From: Bobby Yellin	Respond to of 116796

great post

To: hunchback who wrote (32408)	4/23/1999 8:41:00 PM
From: Alex	Read Replies (1) \| Respond to of 116796

WARNING: WATCH THE EXITS A guru advises caution as markets surge HE CAN SET OFF AN INVESTOR STAMPEDE. In 1993, Barton Biggs declared himself "maximum bullish" on China - and Hong Kong's stock market surged to great heights. So what does the guru say about the current global rally? Enjoy it while it lasts, says Biggs. He is standing by a forecast he made last year that the Dow Jones Industrial Average would eventually fall to 7,000 points, despite the fact that the remarkably resilient index has been breaking record after record before closing at 10,448 points on April 20. The chairman of Morgan Stanley Asset Management, which handles $160 billion in institutional investors' money, Biggs, 65, is also Morgan Stanley Dean Witter's global equity strategist. He spoke with Asiaweek's Alexandra A. Seno. Why are you so bearish on U.S. markets? At some point, we're going to have a serious market decline. What would provoke it would be the bursting of the bubble in Internet stocks and Internet stock trading. [Net counters stumbled badly on April 19, but recovered the next day.] That is going to have some effect on the real economy. The U.S. saver and consumer is so oriented to the stock market that a decline there would cause a decline in the economy rather than vice versa. The combination of disappointing corporate profits, a slowdown in the economy and the end of the [stock market] euphoria could easily cause the stock market to fall 20% to 30%. There will be no soft landing for [U.S.] stocks. What is the impact on Asia? In the long-term, Asia will do fine. But I just think in general, markets around the world are very euphoric and at some point in the next three to six months, we're going to see a serious correction. I would guess 15% to 20% in Asia and Europe and maybe 10% in Japan. You seem optimistic on Japan. I've been bullish on Japan since November of last year. Principally, it's because the Tokyo market is in exactly the opposite end of the cycle as the U.S. and European markets are. Japan has been through a devastating bear market for years. The Japanese economy is also at the opposite end of the cycle. It has been through a long recession, which is almost really a depression with deflation. A lot of bad things have already happened in Japan, which is not the case in the U.S. and Europe. I believe that although the course of the Japanese economy is uncertain, Japanese companies have begun a major move towards making themselves more efficient, towards rationalizing - the whole restructuring process that has been going on in the U.S. and Europe for a long time. Investors like restructuring stories. Japan is the last big restructuring story. The Japanese market has already gone up quite a bit. I have no idea what the fair value for the market is, but I know it is higher than what it is today. We are assuming that Japanese companies, over the next 10 years, will get their ratios on return on equity, return on assets and cost of goods sold back to 75% of the level they were between 1975 and 1991. The gain in earnings-per-share of the Morgan Stanley Capital Index Japan would then be 20% a year. By the nature of what has happened to Japan, the Japanese market is less risky than the U.S. markets. What about Korea? Korea went into the Crisis first, so it's coming out of the Crisis first. Korea has made a lot of progress. Its ability to raise financing on favorable terms is very impressive. Korea is part of the restructuring story too. The Korean market has already gone up quite a lot, though. For new money, I'd rather go into Thailand. And other emerging markets? We're seeing a major revival in investor enthusiasm for Asia. What happened today [April 16] in the Asian markets confirms that. I think the best values are probably Singapore, Thailand and still Hong Kong, simply because they have been through their bear markets. They've had their wealth destruction. They've had their recession. And it looks to me like the Asian economies are bottoming out and you really have the potential for a significant recovery. It's not going to be boom, but a decent recovery. And as stock market money gets more confident, it's going to move towards Asia. What industries and stocks do you like? There isn't any particular industry, though I think the whole financial services industry, the banking sector, is still attractive. Cyclical companies in general are probably very cheap. I would say it's more company-specific than industry-specific. I don't want to name companies, though. Do you still see the emergence of a new world financial architecture? It's clear that the U.S. government has got some ideas in that direction. But I think the fact that the markets have recovered the way they have means that there won't be enough urgency to push. It will emerge out of the next bear market, the next Crisis. But I don't think it will occur until then. How should investors play today's markets? Make sure to keep the exit door clearly in view at all times. We're still in this global sweet spot, which means markets are going to go up. But it's a very dangerous environment. WILL THIS REBOUND LAST? Barton Biggs of Morgan Stanley Dean Witter thinks the Japanese stock market can fall 10% and the rest of Asia by 15% to 20%. But he believes Asia will do well in the long term. On the Dow, Biggs is standing by his forecast of a plunge to 7,000 points at some point. pathfinder.com