|
|
A Navy brat, Christian DeHaemer had sailed the seven seas, stood on four continents and upward of 38 countries before he could drive. Always on the move since, and despite his abrasive nature, he learned to make friends and high level contacts using the old-school technique: "You tell me what you know and I'll tell you what I know." It worked.
Today, Christian DeHaemer has over 500 high level contacts in over 50 countries. He uses these contacts to get the inside scoop on virtually any company to come down the pike. I've seen him talk to warehouse workers and finance ministers; skate punks and fund managers; CFOs and window washers. And the amazing thing is, he never leaves any conversation without information he can use.
Educated at Loyola in Baltimore and Leuven in Belgium, Christian cut his teeth as managing editor of two international financial and business letters with readers in 108 countries. In addition to his duties at Taipan, DeHaemer is the editor of The Hammer.
|
|
|
M |
Outlook for the U.S. Stock Market and Interest Rates
by Christian DeHaemer
Last year, Taipan predicted that 1999 would be a frustrating year for investors. We said that there would be big sucker rallies and violent sharp corrections that would crush both bears and bulls. We further stated that it would be a stock pickers' market and that those that sung the hymn of the S&P 500 index would be losers.
We were right.
It is a well-known maxim on Wall Street that once a theory drifts down to the commonplace, where your mother-in-law is telling you that she heard it on Regis and Cathy Lee, then that maxim no longer has value. At this time last year, the "buy the index fund" mantra was bandied about in fern bars from Peoria to Pascagula.
Never take investment advice from a fern
The S&P went sideways for most of the year. A recent rally has brought it back to a respectable 23 percent gain. We will see if it holds up through December.
As you can see from the chart on the next page, the S&P crowd didn't have to worry about losing to the market, because it was the market--the wrong market.
Buy a tech ticket and ride the train
Last year was the year of the stock pickers. And pick them we did. From Zi Corp. to Indonesian Telecom, from PLDI, York Research, Oracle, Sun Microsystems, to Safeguard Scientific, Internet Capital Group and VerticalNet--we chose our positions wisely, and soundly beat any indices in existence.
Value the dogs
Sure, we've had a few dogs. It's a tough game, and that goes with the territory. However, our stable of Y2K drought picks haven't played themselves out quite yet: TSR Inc., M&A Corp and Analytical Services are all down. Some are down considerably, but with an average P/E under ten, I'm not going to sell them before Q1 when I believe a post Y2K sector rotation will bring them back into fashion.
We went with time-tested Taipan traditions and pulled out every trick in the book. We bought blood in Indonesia and Russia, got ahead of the trends with some familiar big caps and picked up some hot new Internet B2B stocks that were waiting to skyrocket.
 Fine, you say, you may have even been right, but what good is the past? What good indeed? It's the future we're after. In the years I've been with Taipan, it's been my privilege to present my best studied guestimate for the following year. So, with further ado, here's what I think will happen to...
U.S. Equities
America is beautiful. Inflation is at a historic low of 2.7 percent for 1999. Unemployment is running below 4 percent, unprecedented since the fifties. Interest rates are running around 6 percent--low enough so that everyone and his mother can buy that dream house in the country. The Federal government, as well as most state and local governments, are in surplus. Even the endless bipartisan haggling means that this surplus will go to reducing the deficit--bonus.
 It seems like God himself, in the form of Alan Greenspan, is at the helm of the Fed. Crime is down, the number of unwed mothers is down, and more people go to the opera now than go to NHL games--ah, culture. We are in an economic nirvana, a new age, a virtuous spiral: Even the seventh doomsday October in a row couldn't tarnish our beloved, long-lasting and historic bull.
All of this is true
Last year, at the 1998 Taipan Conference, I gave ten reasons why the bull market would continue. They included new markets, new peace, new technology, a new demand for shares, and a more productive means by which to attain them--the Internet. These reasons have been around since the fall of the Berlin wall. But they are still true today. It really is a new age.
And yet....
A simple glance at the Dow Industrial Average will reveal a parabolic rise of horrific proportions. If what goes up must come down, there is plenty of altitude built into that chart. If you say that the historic valuations of the S&P 500 indicate that we are overvalued--you won't find an argument here.
Three Trends for 2000
The death of the Desktop -- broadband, baby!
The resurgence of the stock picker -- undervalued small and mid-caps!
B2B Internet--where money meets hype!
Historic P/E ratios have stood at 6 or 7 at the bottom--rather than today's 35 or 36. Dividend yields have a historical value in the 3-4 range--today, they are non-existent. Price-to-book and price-to-sales are all at historical highs. The Dow would have to fall 70 percent, to 3,500, before it became a buy based on historical factors. And don't forget derivatives and option plans--two very real boogymen waiting in the bushes to slaughter the unwary.
 Right now, you are paying more for a share in a company than at any given time in the past. However, you must remember that you are living in historic times.
At no time in the past have so many markets been open to so many people. At no time in the last 70 years have we been so free of tyranny in the world. Nor has it ever been as cheap and fast to move goods and services around the globe. Nor has technology so lowered the capital required to start and run a business.
The Second Coming
I believe the U.S. market is priced for the times. That said, there is no way you can call it cheap, though there is value to be found among select small caps. Nor do I believe that you can call it a bubble (except for certain tech sectors). If the unprecedented wave of prosperity continues, the market will rise--unless some unforeseen glitch occurs...
Read on...
|
MMM |
