[1998 Version] Opportunity Knocks or Apocalypse Postponed?
Extracts from a 1999 note to Dennehy Weller & Co. clients
Posted by: Brian Dennehy
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It was early 1999 and markets remained in turmoil after the Autumn crash of 1998. In 1996 Alan Greenspan, head of the US Federal Reserve, had referred to "irrational exuberance" in the markets - but the markets ignored him and carried on and up.
Then in Autumn 1998 the market fell sharply as some clever New York hedge fund managers (LTCM) put the world financial system at risk by believing their own complex maths, rather than applying a bit of common sense. It caused utter confusion, and confidence collapsed, particularly in the investment industry, as the note below highlights.
I most certainly was not enthusiastic about markets, and we had no clients in technology funds (which were at the centre of the extraordinary bubble which still had a way to go).
Yet my analysis was that the market had further up to go.
I sent a note to the advisory clients of Dennehy Weller & Co to paint a picture of what might lie ahead - the cover and two key pages are copied at the end of this blog. It started by setting out the view that this sharp fall was just a correction in a trend which was set to continue. Taking a longer view into the noughties I could see a series of sharp downs and ups. The spirit of this shape was shown by the hand drawn line on the right of the page shown below. A fair piece of analysis - not perfect for sure, but fair, with the benefit of hindsight.
This wasn’t me being Nostradamus! I was simply applying the analysis I set out in the most recent teleconference (recording available here [Gold Membership required]).
In the next teleconference I will build on that analysis. This would ordinarily be next week (mid month), but as we are midst writing the latest edition of the TopFunds Guide it will be the following Wednesday 24 January.
Below are extracts from the note sent to DWC clients in 1999.