This forecaster remains in an ill-...

This forecaster remains in an ill-looking rut. Make that a big time uncomely rut. My market calls since last fall have been in like manner pathetically wrong that even notorious Elaine Garzarelli is starting to direct the eye like Nostradamus. She turned bullish about 1500 points lower upon the Dow (at around 6500) Meanwhile this writer was fumbling with the idea that 1997 would inflect out to be the year of disappointment. I am sinking in quicksand. Help!

THAT DARNED ALAN GREENSPAN

They say plane the paranoid have enemies and that's exactly for what reason I am starting to be stirred My enemy, and that of bears everywhere, is Alan Greenspan. A leash of bon mots from Al and the market heads into the stratosphere. The bare suggestion from his lips that the U economy may have go intoed a world of lasting non-inflationary economic growing is sufficient to touch against a period of market exuberance-although no common is quite sure whether that exuberance is rational or irrational. Remember it was Alan's intemperate musings forward the subject of irrational exuberance and the fear of inflation that sent equity markets into a short-lived moreover severe tailspin last December.

Since April granting Greenspan promulgated a different view-which is that the combination of booming increase without visible upward pressure in succession inflation argues against the ne for higher interest rates. It is this view which the Chairman reiterated in late July The continuing upward splurge in the equity markets recommends that investors are accepting of the view that the dawn of a fresh era of investing, in which dramatically higher market valuations can be supported, is at hand. single wonders whether Al's recent nuptials are at the occasion of his now rosy view of the economic landscape. Unfortunately, all honeymoon must tend hitherward to an end.

Simply place my interpretation of the fundamentals remains at redundants with those of the F and its powerful Chairman. I diocese the underlying strength in the economy as a harbinger of upward compressing on inflation and interest rates. Ironically, at one point in the not too distant subsequent time Alan Greenspan will be shown to be more of a culprit than protector of the bull market. As I descry it, a pro-active dose of F tightening is vital to the preservation of a lasting economic expansion. Obviously this is not what investors want to behold in the short run. In pursuing a reactive stance Alan Greenspan is clearly giving investors what they want now still not what they need in the lengthy run. As a result, the risks of a too-strong economy accompanied according to accelerating inflation are probably being increased. The bottom line is that I remain confident that it's merely a matter of time before the rescript hits the fan. So it examines like I'm still bearish.

AT LEAST I'M NOT ALONE

While the bad recents for me is that my predictions have been guilty the good news is that I have haphazards of company. The majority of professional currency managers in Canada and the U have had great difficulty either getting the market direction right or in deciding which stocks to confess The net result is that professional managers have been unable to beat the stock market. The data in the Table upon page 15, which focuses forward the performance of actively managed Canadian equity stores over the past decade, confirms this painful reality Nearly two thirds of Canadian equity mutual capitals failed to beat the market athwart the past decade. Over the past five years, 70% of equity stocks had returns that didn't match the market, and from one side of to the other the past year, nearly 60% under-performed this benchmark. For those who think this situation is unique to Canada, consider again. The U.S. data as reported in a newly come issue of the Wall road Journal survey showed that in each of the past four years nearly three quarters of U equity mutual stores earned returns below the S&P 500 Index.

The conclusion: forecasting is actual difficult-especially when it's about the to come

EARL BEDERMAN IS PRESIDENT OF INVESTOR ECONOMICS INC., A CONSULTING FIRM SPECIALIZING IN APPLIED RESEARCH IN FINANCIAL SERVICES, ECONOMIC AND standard of value MANAGEMENT.

Copyright Canadian Shareowner Magazine Inc. Sep/Oct 1997

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