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Strategies & Market Trends : Argentine stocks -- Ignore unavailable to you. Want to Upgrade?

To: Tom who wrote (280)	5/16/1999 7:34:00 AM
From: EPS	Read Replies (2) \| Respond to of 331

Hi Tom, Interesting comments by Barton Biggs. While he is definitely not my favorite guru his current position is dangerously close to mine at this particular stage of the game.. from today's NYT ................................................ The bad news is that all good things must end, a fact that worries Barton M. Biggs, chairman of Morgan Stanley Asset Management. Biggs took time last week to discuss Rubin's years at the Treasury and the markets he is leaving behind. Q. The sense seems to be that Rubin would not be leaving Treasury if he wasn't confident the worst of last fall's financial crisis had passed. Do you share that view? A. I am not necessarily convinced Rubin thinks that things are improving. At a small reception about two weeks ago, Larry Summers, his likely successor, cautioned people against being overly optimistic about global economic recovery. There are a lot of trouble spots, particularly Japan. Q. What do you consider Rubin's most important contributions to the country? A. We all had the confidence he was a steady hand, that if the markets and the global financial system got in trouble, he knew what to do. He did it with Mexico in 1994 and 1995 and again last summer. He understood markets and had great intuition. The fact that he decided to announce his departure now is because he felt the market was stable. Q. Has this view influenced your investment strategy? Worry about the future doesn't seem to be priced into too many of the world's equity markets just now. A. I am scared but fully invested, and we are hugging our benchmarks because we are scared about the tremendous excesses we see in these markets. There are literally no cheap markets in the world right now. Q. How have you weighted your portfolio? A. We are slightly overweight in equities, underweighted in the United States and Europe but overweighted in the United Kingdom and Japan by about 10 percent in each case. We are overweighted in non-Japan Asia and in the emerging markets. About 62 or 63 percent of our portfolio is in equities. The remainder is in bonds. Q. Given the performance of Japanese stocks the last decade, how can you say that market is expensive? A. Compared with the United States or Europe, Japan is not expensive. But compared with important market bottoms in the past, it is. Here is a country that is in a depression, and its market is selling at 75 times earnings and two times book value. In the 1930s, the U.S. stock market sold at half of book value. So, Japan is not exactly cheap by historical standards. Q. What about the emerging markets? A. Japan, other Asian markets and the emerging markets are coming out of long bear markets. They will be the best place to invest after the next bear market and will be the best places to be in the short run as long as this bull market lasts because they are going to go up more and come down less. But I can't say they're cheap. The same is true for small and mid-cap stocks in this country. They are as cheap as they have been in a long time relative to the S&P 500, but at about 15 times to 17 times earnings, they are not historically cheap. Q. On what is your worry about a looming sell-off based? A. Our economics people are looking for a recovery, but I think the United States is going to lose some momentum, that the Japanese are going sideways at best and that the Germans are bottoming out. There is still a great deal of overcapacity in the world. I was in Europe last week talking to businessmen and industrialists, and I didn't meet anyone who said economic activity was picking up, either from orders abroad or within Europe itself. These markets are priced for perfection, and if something bad happens, the market has the potential to go down a great deal. Q. In this environment, what advice would you give to individual investors? A. I would say they should not be deluded by advertisements that suggest any amateur can make money in the stock market. We are perpetuating a gambling mentality that is similar to the 1920s. I read somewhere recently that 15,000 new Internet trading accounts are being opened every week. That is frightening. nytimes.com