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Approximately 9:37 am Friday April 3rd, the market first cheered DJIA 9000. There is a well known tendency for hesitation at 1000 numbers, so there is a good chance for some consolidation, if not correction in the short term.
With continued poor corporate earnings expected, we still prefer the short side. However, we are forced to be more selective and shorter term in these trades. From a value perspective, we find little at SP 1000, NASDAQ 1000 or DJIA 7000, suggesting tulips buys at current pricing. Funny, I remember it LIKE only yesterday, one of my first market predictions, the "DAY" DJIA reached 3000.....
NEXT WEEK: Look to April 9 and 14th for the direction of the April closing number.
DIRECTIONAL DAY: April 9
US Bonds: Sell 5.76 OB
2. WHAT TO BUY WHENEVER EVERYONE WANTS TO SELL
We are assuming a market correction BEFORE and NOT after Godot arrives :). Higher number for growth players, lower for value investors.
COMPAQ CPQ: 18-22
INTEL INTC: 45-67
IOMEGA IOM 5
GOLD and Gold stocks have began a long anticipated break out. Clearly the March/April time frame is positive for this sector, unlike most others. This defined our April Stock of the Month choice.
Our favorite country Italy continued First Quarter 1998 as the leading major market performer. This past week, JP Morgan downgraded it from outperform to perform. I believe their financial astrologer is a bit early for that call as Italy's horoscope remains favorable for some time to come.
3. One of the primary differences between amateur and professional traders is how they handle being wrong. Do they "expect the unexpected" and have a clearly defined exit strategy BEFORE entering each trade, whether it is profitable or not. Trading is about: Risk/Reward and Probability.
JAPAN
While the Yen is an attractive intermediate BUY at 135 OB, most Japanese stocks are not. We recommended covering Yen shorts Friday. A brief spike to 138-140 is possible, at which price I would BUY YEN with both hands!
4. Bullish Portfolio managers have 3-5% CASH, most BEARS 20%. We currently recommend 40% for non-hedged portfolios, and Maximum Cash allocation for all others. Personally, I don't believe in buying and selling stocks, but in managing portfolios. (BTW we have a long awaited announcement about this coming soon!)
Naturally this implies either a sophisticated investor and/or professional money management and advice. The easy days of the 1982/1991-1998 bull market are surely ending. Fortunately there are many choices for the investing public with country funds, region funds, sector funds, bear funds etc ., offering more of the choices that previously only professional money managers had open to them
For small aggressive (high beta) portfolios, 10-12 stocks are sufficient.
For more diversification and less volatility, 20-25 stocks are needed.
Our favorite strategy is hedging: selling weak stocks/markets and buying strong stocks/markets. Hence, even though our recent shorts in the US are not yet as profitable as those in Asia last Fall, they suffered losses far less than our European (Italy, Netherlands) plays and hence hedged portfolios would have CONSISTENTLY remained profitable, each according to their individual risk/reward profile.
We are constantly on the look out for superior risk/and reward. We use financial astrology as our edge for finding the clues that allows us to ANTICIPATE buying when others are selling and SELLING when others are buying. In the case of the Astrologers Fund Inc we employ COSMIC VALUE criteria, although other market strategies can easily be substituted or merged with intersection theory or triple screen approaches.
Next time: Know the rules, know when to break the rules.
5. SMART MONEY Feb 1998 forecast revisited:
"The Dow could make a new high in the first quarter, but we can't see it going further. Then with midterm policiking beginning and Asian realities setting in, we'll be testing last October's low and possibly fall into the 650-7000 range. Could this be the first wrong annual forecast we have made in 10 years?"
HW: I hope not; my money is betting you are right.
Q: I am looking at some of the oil drilling stocks because it appears that there is some value here. If we are looking at an imminent inflationary environment, they could perform well. What is your outlook for oil this year?
A: OILS remain one of our LEAST favorite sectors for 1998 due to both astrological (Saturn/Neptune) and fundamental (supply/demand) issues. My advice here is the same as it was for the Gold sector in 1997: Buy 1/2 allocation when you think these stocks CAN'T POSSIBLY GET ANY LOWER. Then, when they are 10-20% lower, buy the other half and be prepared to hold for 2 years!
We have added some new photos to our Web Page showing the continued construction progress of our first factory in Delta, B.C. Please visit IHI and click on the Factory Progress button.
HW: Looks great. I will be attending IHI's first factory opening this summer along with a number of readers, friends and investors who will there as well. A wonderful excuse to visit beautiful Vancouver again - a US tourist delight with the cheap CD dollar, a major reason we like Canadian tourism this year and next.
" We apologize to those who have missed our market alerts recently. The market has been moving up and up with little regard to news -- good or bad. There's been nothing for us to alert you to except that money flows from Asia and baby boomers to the market. But you knew that."
HW: SO THAT IS WHY THE MARKET IS UP? I thought it was the put/call ratio and too much negative betting. And here I thought the stock market was a gambling casino and NOT a Ponzi scheme! Well how do you like that? But if that is true, why Friday morning when the markets was 9000+ and the calls volume increased, did it go down??? :)
PS Readers may wish to subscribe to the currently free BRS market analyses.
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