Jeff Saut, of Raymond James, has deja vu. In his latest daily missive Saut points out some remarkable and eerie similarities between today’s market and the 1998-99 environment. In 1998 Russia defaulted on their debt, the Hong Kong Monetary authority was forced to intervene in the HK market, the Yen surged during the Asian currency crisis and LTCM imploded here in the U.S.A. Global markets got crushed, but were quickly revived by a record sized Fed induced liquidity injection and one of the original bailouts of a “too big to fail firm”.
At the time, most investors remained risk averse heading into 1999 and the market took off in a Fed induced liquidity craze. It was one of the greatest divergences between small investors and professional investors in the history of the market and towards the end of 1999 the small investor threw in the towel and rushed into the market. We all know what happened next. The Fed induced recovery proved to be entirely fake and the market rolled over in 2000 in dramatic fashion. Sound familiar?
Saut believes we could potentially experience the same thing here towards the end of 2009. Much like 1999, Saut believes investors will chase the best performing names or high beta assets. What are some of his favorites? Laz-Boy, BEXP, RF Micro,TNS, Rads, Dine Equity, Hugh, Clarient.
Whether this move turns out to be a total head fake like the 1999 market is another story all together. Is this in fact a 1999 repeat all over again? If so, you might want to be a renter of equities….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.