1. MAD MARKETS
2. LIVE RADIO INTERVIEW
3. JUNE STOCK OF THE MONTH
4. QUOTE
5. XXX
6. LETTERS
Despite this week's MASSIVE short
squeeze, it should be clear to all but a few diehard "internut" investors,
that the Alfred E. Neuman "MAD" market: "What me worry market?" is ending.
We continue to strongly advise cashing out of Index Funds and Aggressive
Growth Mutual Funds with large technology exposure. A bull market
can end in a single crash or deflate in a series of lows followed by rallies
to lower highs. We may even see a FINAL BLOWOUT in the next two weeks
- either way,
July 1 is coming!
Remember what Saturn/Neptune did to the Oil sector? We expect Saturn/Uranus to do this doubly for the technology sector. Last year the excuse was "the Asian Crisis"; this year it will be "Y2K." No matter, I believe it is MUCH better to be safe than sorry. Look at the charts of recent Internet IPO's like BNBN or DIR - that and more could be the fate of many technology-rich portfolios this summer.
I don't understand why it is radical to believe that stocks that have risen 1000% in a year can drop 90% in a year. Don't forget that few sober analysts thought Internet/Tech stocks were bargains last year! When Yahoo (YHOO) was over 220, we forecast it would be 20 before year end. Closing Friday at 147, it still has FAR TO FALL. One global money manager we know has a value target of 10 for Amazon (AMZN); although I am not sure it will break 22 3/4. AOL's stock price has long been a joke and I advise you don't let the Cosmic Giggle get you! RUN, DON'T WALK FOR THE EXITS.
While it seems obvious to me that the current bull market phase is over, (with a last charge to peak high over yesterday or by June's option expiration in place), how the bonds take out 6% will determine the duration and intensity of phase 2.
KEY DATES: June
7, 16/17/18
DJIA:
9980 to 10,799 or 10,614 to 10,999
BONDS:
6% Watch
2. Next Wednesday, June 9 from 6:05 to 6:25 PST [9:05-9:25 EST] you can listen to me live on the Internet or if you live in San Diego, live on AM 1130 KSDO. I am being interviewed by George Chamberlin on MONEY IN THE MORNING.
3. Our June stock of the month club falls just in front of a potential major market drop. Thus we do NOT "promise" more than 25% within in 6 to 9 months, but will be buying safety and value. Depending on their stock pricing, I am inclined to Sun Oil company (Sun) or the Drug tester Covance (CVD). I may also look to the funeral industry with Carriage Services (CSV) or the Neptune Society (Nptn) or even possibly the Loewen Group (LWN) depending on how its bankruptcy proceeds. If all else fails, there is always the high margin health and beauty sector which I was planning on buying in July/August.
4. Vice Fed Chairwoman Alice
Rivlin, who is considered to be in favor of low interest rates, said she
will resign effective July 16. She won't participate at the June meeting.
``If (the resignation) changed anything,
it must have been the amount with which the Fed is going to raise its key
rates, because we have little doubt that rates will be hiked at the end
of this month,'' said Walschots at Rabobank.
HW: Time to raise cash allocation
to 50%, or to 45% and 5% GOLD? Wait to buy US bonds at 6.23, instead
of 6.10?
5. In case you didn't know, Sex sells! Beate Uhse, (USE.F) Germany's biggest erotic good retails soared after its debut on Frankfurt's SMAX index Thursday, May 27. Demand was so high that the public offering of more than 8 million shares was 63 times oversubscribed and it was the third most heavily traded stock in Germany after Deutsche Telekom and Volkswagen. Hans-Dieter Thomsen, chief executive stated "We are largely immune to recession." Hmmm. Are Sex sector stocks appropriate defensive summer plays? Watch its stock price June 4 when Mars goes SD for a possible answer. On second thought, should one buy a sex stock that debuts on Mars retrograde? USE.F closed at 18 down from last week's high of 28.
7. READER: I am a new subscriber,
and do not understand a lot of the language used in your reports. So I
need some plain advice: I'm 70, pretty fully invested in mutual funds..have
to start withdrawing in 2000. What percentage of cash should I be
in? Do you think we're in for a long bear?
HW: I believe 40% cash is somewhat
conservative. First sell any index funds, and second, any holdings
with a high percentage in technology. It is too early too tell how
long a bear market will be, but most likely at least until the spring/summer
of 2000. Whether it is over then, or in 2002 or 2006, we will discuss next
year. As a long time investor, you have BIG, UNREALIZED profits,
so to take 1/2 is prudent now. I find nothing wrong with cash at
this time.
READER: Do you anticipate gold stocks
going up in July, as the market goes down? Also do you think once they
move up sharply, that they stay up for the rest of the year?
HW: We issued a Gold
trading buy last week. This is being played with tight stops. On Tuesday
Gold dropped $4 on opening, then started to slowly recover but then again
dropped dangerously at the end of the week and again a mild recovery. I
do realize it may take until the fall of the US dollar for a great gold
move, so act/react accordingly.
READER: Henry are you staying at
your 105 price for (IBM) & 67 for (JNJ). I would like to buy these
as close to your target as possible. Thanks.
HW: JNJ AT 68 will outperform.
IBM 105 was presplit, this is 53 AFTER split. Our portfolio 2000
stocks we plan on buying at 52 week lows, while B stocks at 104 weeks lows
and fallen angels at 90% discount. We will miss some of course, but will
be comfortable holding those we do buy. This is cat investing.
Be patient. The mouse will leave its hole eventually.
READER: I am a bit confused by the
Love Jet article. Is the product going to be a part of JNJ or will it be
a separate IPO?
HW: I doubt if JNJ is going to play
this one. But just imagine the advertising synergy: A love struck
couple meets. First, a quick mouth spray for bad breath, then the loin
spray for action. :)
READER: Could you give readers of
WSNW your view on which index out of the Dow Jones or the Standard and
Poors 500 index will fall the most percentage wise in the upcoming months.
I realize the Dow Jones is part of the Standard and Poors.
HW: While I would like to be short
both for July, I think the DJIA could be under more pressure.
READER: Is IHITF one of the stocks
you are selling? Seems to be going in the wrong direction.
HW: No, it's one of the few I am
buying buying buying, especially after Tuesday's press release!
READER: You said TO KEEP YOUR BIG
SPECULATIVE MONEY READY FOR JULY. Well, I do. Now what are
the stocks to short for July and August?
HW: Are you experienced at shorting?
Otherwise be careful and work with your financial planner or broker.
I like to short the Internet sector but you must take frequent profits.
READER: I am not experienced
at shorting. What are the price ranges you would short Amazon and Yahoo?
When would you take profits?
HW: Then I would advise YOU
SHOULD NOT do it. You will probably lose money doing it on your own.
Work with an experienced broker or financial advisor.
READER: Your OEYRJ is going down.
You want us to buy some calls on OEX instead of puts? What about some calls
on djv --dow index options? What about MU AND PHARMACEUTICALS like
pfe,mrk, wla, lly -- they are down badly--please give me the input.
HW: We doubled up on our PUTS, which
was either wrong or early. We will know which Monday morning. I find
all the pharmaecuticals rather pricely, not cheap, atlhough astrologically
this will be a strong sector again. I am thinking of buying Johnson
and Johnson (JNJ) and Covance (CVD).
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