On Mar 25, 6:54=A0am, "ltl...@[EMAIL PROTECTED]
" <ltl...@[EMAIL PROTECTED]
> wrote:
> http://online.barrons.com/article/SB120615098415256845.html?
>
> --------------------------
>
> Are You Ready for Dow 20,000?
My guess is the Dow will stay around 12,000 for a while longer.
> By JONATHAN R. LAING
>
> DESPITE THE BEAR STEARNS BAILOUT AND THE FED'S rate cut, a sense of
> foreboding is still abroad on Wall and Main Streets. Few investors
> feel good with an economic slowdown gathering force, the dollar in the
> dumps and contagion threatening to hit financial sectors previously
> unscathed or not even suspected of being at risk.
>
> This in mind, we contacted James Finucane, a 67-year-old stock
> strategist who now works as a consultant in West Lafayette, Ind., home
> of Purdue University ("modest cost of living, a great brew pub and
> incomparable high-school hoops," he gushes). Among his talents: pool
> hustling. He was the 1961 National Student Unions pool champ,
> representing Notre Dame.
>
> He also has been great at calling stock-market lows, including that
> reached in the week after the October 1987 crash. "Lows have always
> been easier for me to call than tops. I was premature in seeing the
> 2000 stock market high, for instance," notes Finucane, who long
> labored in Chicago at Stifel, Nicolaus.
>
> To him, we're now at yet another extraordinary low, especially with
> the unprecedented actions taken by the Fed of late to offer liquidity
> to investment banks and to commercial banks stuck with mortgage-backed
> securities of uncertain value. In fact, he foresees an explosive
> rally, with the Dow rocketing to 18,000 to 20,000 within a year from
> its current 12,361. The climb, he says, might begin imminently or take
> a few months of backing and filling before the market takes off.
>
> Finucane argues that financial crises invariably yield spectacular buy
> points, especially when they reach crescendos. He points to calamities
> such as the 1970 Penn Central bankruptcy, the 1984 failure of
> Continental Bank, the 1994 Mexican peso devaluation and the 1998
> collapse of the Long Term Capital Management hedge fund. Each time,
> im****tant lows were made either simultaneously or within a month of
> the crisis.
>
> He concedes that the latest crisis, which began last summer with the
> subprime-mortgage meltdown, has been "like a forest fire," spreading
> throughout the debt market, sometimes jumping fire walls to spring up
> in unforeseen areas. Yet he's now confident that the "panic lows" in
> the Dow, posted on Jan. 22 and 23, when it sank as low as 11,508, will
> hold. To him, the Bear Stearns bailout was a crescendo event.
>
> Certainly, the news is hardly encouraging these days, with scary
> economic and market headlines like those for Alan Greenspan's recent
> assertion that the current financial crisis is the worst faced by the
> U.S. since World War II. A nasty recession impends or is already here.
> But crisis lows are always accompanied by hair-raising rhetoric and
> dire economic forecasts.
>
> Finucane has long kept score, carefully cataloging predictions made at
> past economic inflection points. He points out, for example, that
> Greenspan contem****aneously described the Long Term Capital collapse
> in 1998 as the worst crisis he'd seen in his lifetime. Time magazine
> wasn't being intentionally ironic when it called the ad hoc government
> group cobbled together to grapple with the 1994 Mexican peso crisis
> the Committee to Save the World. Financier George Soros was just as
> downbeat after the 1987 stock-market crash as he is today, each time
> predicting a depression.
>
> Why is Finucane bullish? For one thing, he observes that "governments
> and central banks have a clear incentive to promote growth, so to bet
> on a prolonged slump is to bet against the government, markets and
> human nature." He also takes comfort in a host of technical factors,
> including liquidity. Money-market cash, for example, has soared to
> $3.45 trillion, versus $2.2 trillion at the market low in March 2003.
> And U.S. domestic equity funds have seen a record nine consecutive
> months of net outflows, a skein that probably will hit 10 months when
> the Investment Company Institute releases its February numbers. The
> previous record was eight months, following the 1987 stock-market
> crash. The Conference Board Consumer Expectations Index is at a 17-
> year low. The Reuters-University of Michigan Consumer Confidence
> Survey is at its worst level since 1992. The American Association of
> Individual Investors finds small investors more bearish than they've
> been since 1990. And on and on.
>
> What make these statistics all the more telling is that, by Finucane's
> reckoning, investors in 2003 had suffered more pain and yet were less
> fearful. By March 2003, for example, they'd endured 36 months of
> mostly falling prices, including 90% wipeouts in some top tech names.
> Retail sales had buckled in the run-up to the invasion of Iraq. United
> Airlines had filed for bankruptcy protection the previous December,
> the month in which McDonald's re****ted its first quarterly loss in 37
> years. Industrial production was punk. Many forecasters warned of a
> double-dip recession close on the heels of the 2000-2001 recession.
>
> In Finucane's estimation, months of stock liquidation and cash
> buildup, horrible sentiment and a bailout that could alter investor
> psychology have lit the fuse for an explosive rally. It will be
> ignited by one of those mercurial ****fts in mood from abject fear to
> tentative confidence and, finally, wanton greed. "The setup is
> perfect," he asserts, using a pool-hall term. And he's confident that
> investors won't end up behind the eight ball.
>
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