Kabushiki
Shinbun

March 12, 1997

A Direct hit to Mr. Armstrong, a Worldwide Analyst

The Nikkei Average Stock Price hits its Bottom this Year

Q: What is your outlook on Japanese stocks?

A: For the Nikkei Average, a key resistance lies at 19,500 and a support at 17,000. If the support will fail to hold on a monthly closing basis, the Nikkei declines to 15,000. The Nikkei has an 8 year cycle, which shows the year of 1997 as a year of a bottom. This leads to a rally into 2002 – 2002.

According to circumstances, the Nikkei could be at 12,500 – 11,000 level with the Dollar against Yen reaching 134.00 in June – July period. Foreigners keep the Japanese stocks off due to a progress in Yen’s weakening. However, the market turns to rally after the bottom is in place due to coming out of an adverse view that Yen’s depreciation is a positive factor for Japanese economy like export oriented companies.

At the time of the great depression during 1929 – 1933, President Roosevelt made a virtual devaluation of the US Dollar by altering the exchangeable value of Gold from Dollars 20.00 to 35.00 and this resulted in the return of business. The sterling Pound recovered against the US Dollar to 1.90 after the 1985 low at 1.03.

Upon such currency fluctuations, economy gets better. People regard inflation negatively but reasonable inflation is needed. An tendency is necessary for Japanese economy to take a favorable turn.

Even a New High will be Possible During 2002 – 2003

Q: If a bottom at 12,500 – 11,000 will be in place this year, what sort of highs of the Nikkei do you expect in 2000 – 2003?

A: A new high will be realized.

The best investment objectives remains to be the US stocks after correction, the Sterling Pound and commodities.

Q: How do you see the global commodity markets represented by Gold?

A: Gold has become very volatile as we saw its 30 point recovery in a month time from the low of 338 this year. It is still possible for Gold to hit a low at 328 – 338 in June – July period and Gold will be on an uptrend in the second-half of this year at the earliest or as from the next year without fail. Gold gives a feeling of considerable relative cheapness to other goods as same as the US stocks did in 1994 and will reach 1,000 into 2000 – 2003. But Gold always comes last among commodities. Crude Oil and commodities make a rally and then Gold does.

Australian Stocks give a Feeling of Relative Cheapness

Canada has the Biggest Risk

Q: Early this year, you raised the US stocks, the Sterling Pound and commodities as the best investment objectives for the year.

A: They remain unchanged. Commodities are especially cheap in comparison to the others and might rally 600 – 700% in several years to come. To add one thing, a stock market which gives a feeling of relative cheapness most is Australian. On the other hand, a country with the biggest country risk is Canada. Canada’s debt is far from decreasing but rather growing. As far as the state of finance is concerned, many of the third world countries are in a better situation than Canada. A plan at IMF to set up a special relief fund has not specified a country as the target but probably bears Canada in mind. We recommended to sell Canadian bonds at the end of the last year. The Canadian Dollar could depreciate nearly 30% this year provided that G7 would not take any counter.

ProfileMr. Armstrong is 47 years old. He was named as the top North American Economist by Equity Magazine in 1990. He provided the Brady Commission with his research report who was to investigate the causes of “Black Monday” and also provided advice to Presidents Reagan and Bush. Funds managed by him performed a high rate of annual return of 29.67% on the average (in terms of Yen, excluding the commissions) during 1991 – 1996.