1. JUNE MARKETS
2. STOCK OF THE MONTH CLUB
3. QUOTES
4. LETTERS
SATAN IN THE STOCK MARKET?
What a week. No doubt you read on Friday about the South African cricket
captain Hansie Cronje who said Satan lured him into a betting scandal.
Hansie blamed the devil for luring him into accepting money from a bookmaker.
Makes me wonder if he was also responsible for this week's short squeeze?
This COULD explain why we had the cosmic power "correctly" measured, but
downside up - not the right directional move. We had expected a 1987 style
(~20%) move down last week, and we reacted slowly as the market rallied
in the opposite direction when investors believed the pressure was off
the Fed to raise rates aggressively in the near term. Predictability,
the US dollar continued our forecasted secular decline from our May 18th
seminar and gold rallied as well. Not predicted or quite believed
by us was Nasdaq's manic rise to challenge our May 5th positional short
of 3816.
Some technicans are now wildly bullish and forecasting new highs in the DJIA and SP by early summer. They believe the May lows will be similar to the lows of October 98 and 99. I am not sure whether last Monday was the start of a summer rally [the Summer Solstice is June 20], or a bear market rally. We will know better on Monday as this is a mini-zeitgeist day for us. We will then determine to what extent we buy and how much cash we will continue to keep in reserve until the forthcoming July eclipses.
RELATIVE VALUE VS REAL VALUE
Global Indices remain severely value challenged. A Value buyer likes
to buy UNDERvalued stocks, not stocks at value. Still, even with
our projected early October scare, it is hard to see Nasdaq reaching 2000
(real value), and 2794 (relative value). This may or may not arrive on
our trading screen this Summer or Fall. Likewise, the Internet index
[IIX] may see 300, but not drop below 200, as I perceive they "deserve".
Who beside Alan knows what the Summer will bring? Our choices are
to trade a lot, stand aside or start buying selectively. We will
do all three depending on the portfolio objectives of each account.
Last week during one of our many post conference press interviews, we were asked if our conference caused the recent market declines. I responded: "I only wish." Still, the US dollar has been declining, especially against the Euro, from the next day on. Having appreciated considerably, the Euro is a short term trading sell to cover, but remains an intermediate/long term investing hold for us.
You can fool some of the people some of the time, and all of the people all of the time.... US consumer confidence rose sharply in May, indicating that Americans remain upbeat on the economy despite volatile financial markets, recent interest-rate hikes and rough times in the technology sector. Just one example: Dell Computer (DELL) slashed the compensation package of its founder/CEO 85% - Dell's overall compensation plummeted $92 million to only $16.6 million [from $109 million in fiscal 1999.]
Monday is a mini-zeitgeist day for the June markets. If it is positive, {Nasdaq 4000 test} we will start buying as we are forecasting a short term rally the week after. If negative, we will wait until the end of the week and see a retest of Friday's close. But beware. This may be as much an opportunity to exit as to enter fresh positions. Remember, it's party time in July: Rock and Roll with 3 July eclipses.
KEY DATES: June 5
Market Pivots: 10800 DJIA, 3800 Nasdaq
US Dollar ->93
2. We are "reactivating" our Stock of the Month club in June. While the market is fundamentally hardly out of the woods, technically it is wild. We look for "relative" value: a return of 20-25% over the intermediate term (6-9 months) with "relative" safety. Our most likely choice for June is ATT (T) with a run to 42. We also may pick (buy) Energy Conversion Devices (ECD), Robotic Vision System (ROBV) or Staples (SPLS).
As to Microcaps, while they clearly peaked in March, we do expect another bull run beginning October (in addition to the usual year end tax selling opportunities). Many seem to be "undervalued" - time will tell. For our Mpick (under $5 high risk/high reward) we may choose either a beaten up stock, Corel (CORL), or perhaps one of our own client stocks that the market has recently slaughtered, such as Stox (V.URL). Note: Given our market views, this month's Mpick could be more risky than usual.
3. "The correction is over and we've started the summer rally."
Alfred Goldman, technical analyst A.G. Edwards
HW: The summer starts June 20.
''People will be looking for signs of economic slowdown, but the evidence
will have to be pretty convincing to bring the bulls back.''
Alan Skrainka, chief market strategist Edward Jones
HW: So "bad news" is "good news"? Anyway, it didn't take
much to get the mad bulls to charge, did it?
4. READER: What does the end of 2000 hold for the prices of bonds, treasury
(tax free) and zero coupon bonds?
HW: From a global perspective we do not particularly like holding the
US dollar unhedged; however, August and especially October may be favorable
times for US citizens to buy US Bonds.
READER: On the short article 5/23 I cannot log on to the highlighted
message. Have tried cutting the computer entirely off. Message
states to go to the "Premium Area" to log on. Please explain
HW: This is a subscriber
only area that requires you to enter your name-xxxxx and password-XXXX.
READER: Are IHI shares undervalued? What should its price be?
HW: It is most certainly not overvalued, especially given Friday's
news. It should be is whatever the markets wants it to be; we continue
to believe that will (much?) higher the closer we are to IHI day (August
15) and then Fall production.
READER: Looks like AFTI, LDW, UNDR, CELN and Stox have all been creamed.
When I asked last time, you said you would have info on your site,
but I see none. I know all but stox had bad news -- but I'd like
to know your read on the news and these companies - I've really taken a
hit.
HW: The broad market took a great hit. Microcaps tend to follow,
not lead after such times. They had a major bull run through March as we
thought and we expect another one later this year. If, in addition,
the market stay bullish over the Summer, Microcaps as a group would follow.
We will be posting more information on our web site later.
READER: Re: Netherland WEBS "EWN". Yes, they are subject to currency
fluctuation risk as they are portfolios of non-U.S. stocks. I'd rather
see an investment in AIM's European Development Fund "AEDAX" which is more
diversified (largest % of total assets is in the U.K. 23%+), then France,
Germany, Finland & Switzerland are represented. AIM's fund 1
year annual total return, thru 4/30/00 was 82.87% (at NAV) while "EWN"
posted a total rate of return of 0.18% thru 5/24/00!
HW: We think it will change, and it is because of the poor return that
I want it!
[I am NOT a momentum player, but a cosmic value investor: buy low and
sell high.] It offers a 9% yield, which, coupled with our forecast for
a 10%-15% Euro appreciation, could give an 18th month $30 target if the
markets don't collapse beforehand and not that terrible a negative return
[$20 floor?]) if they do.
READER: OK, I've seen SRI all over your site. Now would you please tell
me what SRI stands for?
HW: Socially Responsible Investing.
READER: Am I missing something? The economy slows so the Fed stops
hiking. When the Fed stops hiking, the stock market goes ballistic.
Then the economy heats up again. So the Fed starts hiking again.
Seems like this should end poorly.
HW: Who am I to disagree?
******************************************************************************
Subscribers please send your comments, questions and suggestions to
Letters.
Silver Investing subscriptions $300 one year; $500 two years; new subscribers
3 month $99.
Gold trading subscriptions $1000 one year; $1500 two years; $300 Quarterly.
Platinum edition for money managers $5000 per year; $7500 two years;
$1500 quarterly.
Institutional rate is $2500 per month.
"Can you afford NOT to have financial astrology
in YOUR future?"
Stop reading Wall Street, Next Week, last week: YES,
I WANT TO SUBSCRIBE
************************************************************************************