🚀 go-pugleaf

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This is a test of a potential investor newsletter, primarily for
overseas investors, but if it is of use to Canadians, so much the
better. Your comments are encouraged at
at954@freenet.carleton.ca. What kind of investment information do
you need about Canada and other world markets? 
Thank you in advance.


BULLETIN CANADA
THE NEWSLETTER FOR INVESTING IN CANADA AND THE WORLD

Updated Sunday, May 28, 1995 at 11:45 p.m. EDT.



TORONTO STOCK EXCHANGE 300 INDEX - 4,425.92 at the close Friday,
up 1.32 per cent for the week.



OUTLOOK
TSE - short-term and long-term buy

     Last week continued the big bull market in Canada that
has been expected for the past few months. 
     The market held its huge gains from the previous week and
added 1.32 per cent by Friday. Over the past two weeks, it is up
just less than four per cent.
     Why?
     1) Quebec increasingly looks like it will say ''no'' in next
year's referendum on sovereignty, a bullish factor in the market.
     2) Canada's federal and provincial governments continue to
hack away at their budget deficits. And these measures have more
and more public support. As looks likely, the federal government
will be forced to cut even more than its recent budget forecast
predicted, yet the public appears ready to support most any
measures to get finances under control.
     3) The TSE is good value. It is one of the few major world
markets that has not enjoyed the gains from the bull market of
1995 - at least until the last two outstanding weeks.
Traditionally the TSE 300 index is double the Dow Jones
Industrial 30, but, as of last Friday, the ratio is roughly one-
to-one. The upside in the TSE continues to be spectacular.
     4) The TSE has uncoupled itself from its usual mirroring of
the Dow. The index is moving independently, strongly forward, and
withstanding any drops in the Dow.
     5) Historically, the TSE soars when a Dow bull market
matures. Its primary resource and export sectors benefit as
demand south of the border for goods increases.
     This coming week will present some major obstacles for the
TSE. Turbulence in the Dow will test the resiliency of its rally.
Expect a few days of slow gains on the TSE while the Dow finds a
new level. This will be a good buying opportunity before the TSE
resumes its march to higher levels.
     An interesting broadcast report this week in Canada
maintained that much of the power of the TSE rally is from
European money coming into the market. Europe apparently thinks
that the Dow rally is mature and that Canada is one of the few
markets in the world with big upside potential.
     If nothing else, this is a good time to be in the TSE rather
than on the sidelines.



WORLD MARKETS

SUMMARY
     Canada at the moment is the only short-term and long-term
buy. Due to its stability recently while other markets have
skyrocketed, the TSE 30 is one of the last world underpriced
indices.
     The following contains a few comments concerning world
markets: 

NEW YORK - long-term and short-term hold

     Last week's enormous volatility in the Dow shows signs of
the market reaching a significant top.
     That said, a drop of 200 or 300 points in the Dow is a
buying opportunity in a long-term bull market. If the Federal
Reserve has achieved a soft landing (not at all a sure thing due
to last week's soft durable goods figures), we could enjoy a bull
market of steady growth not seen since the 1960s. All the Fed
would have to do is slightly tinker with the funds rate to ensure
a stable interest-rate environment.
     The Dow remains a long-term good bet.
     We are seeing a fundamental change in the U.S. market and
economy. Use of consumer and business technology is skyrocketing
and the NASDAQ and U.S. growth firms are the places to be.
Technology is in a long-term bull market and, as home consumers
get more computers, the labor market becomes computer literate.
The productivity gains with a computer literate population are
stupendous. As well, business is using technology to cut jobs and
increase productivity. 
     Any new jobs created, given the productivity
climate in the U.S., will be real jobs.
     Technology and productivity will initiate a circle of supply
and demand that will change North American business to its roots.
Until the world catches up to this cycle, North American business
is likely to prosper as it never has before. 
     The U.S. has the very practical NAFTA agreement to help its
trade as well as a low and stabilizing U.S. dollar for exports.
These factors bode well for long-term increases in the Dow and
particularly the NASDAQ.
     Recent Federal Reserve action on rates appears to show that
the Fed is happy with its current interest-rate levels and is
looking to see how the U.S. economy is reacting to its months of
tightening.
     The Fed, if the U.S. economy shows signs of recession, has
much room to lower rates to spur growth.
     Any move by the Fed to raise the funds rate over seven
per cent during the next year would probably be a signal to sell
U.S. stocks. That said, the likely direction of U.S. interest
rates (particularly given the recent durable goods figure) is
down for the short term.
     For low-risk investors, a good strategy might be to sell 10
to 20 per cent of U.S. holdings as a insurance policy against a
Dow decline. That money would be available for buying at lower
levels if last week's volatility is the sign of a market top.


FAR EAST - long-term and short-term hold

     The far eastern countries took a hit after the recent
collapse of emerging markets, particularly in Latin America. 
     Hong Kong, in particular, has begun a smart recovery.
Long-term, with China returning to the world of capitalism, the
far east is a good, but volatile, place to invest. 
     Expect some down side action in Hong Kong if the Dow has
reached a market top. Buy on significant weakness.
     Long-term investments are best to absorb the rollercoaster
nature of far east markets and cautious investors should keep
their far-east holdings at less than 20 per cent of their
portfolio.


JAPAN - long-term and short-term hold

     The strength of the yen will hold down exports in an export-
oriented economy. 
     As well, trade difficulties with the U.S. could
prove tough on the market. The Nikkei-Dow could be a buy at
14,000 or lower. Long-term, no one should underestimate the
entrepreneurial nature of the Japanese, though they are lagging
North America slightly in technology. 
     Odds are, Japan will take North American technological
innovations, improve them and make them more reliable and
profitable than the originals. But this is a long-term scenario.
     Short term expect a sluggish to slightly down market. Any
weakness in the yen could change this scenario rapidly.


LATIN AMERICA - long-term and short-term hold

     After the collapse of Latin American stocks and the Mexican
peso recently, these stocks have rebounded. It is
unclear whether they have achieved a trading range yet. 
     Nevertheless, Latin American stocks are a worthwhile part of
a diversified portfolio in small quantities. Long-term holding is
the key to eliminate the vagaries of Latin American market
volatility. As time goes by, more Latin American countries will
join NAFTA and profit from the economic and technological growth
it provides. 
     As well, the benefits of Latin American political stability
will create long-term wealth.


EUROPE - long-term and short-term hold

     A compendium of European indices compiled by Bulletin Canada
shows a 1.2 per cent increase over the last 12 months.
     There is little to recommend European investments now except
to say that they haven't participated very much in the bull
market of 1995. That said, there isn't much bad about them
either.
     Expect some short-term choppiness next week at the Dow
struggles to find a new level.
     Beyond that, European stocks should do their usual 10 per
cent per year and should be a small part of a balanced,
diversified portfolio. 


The writer, Kenneth W. Gray, is a journalist in Ottawa, Canada.



Copyright: Kenneth W. Gray and Bulletin Canada Newsletter
Company. 
This newsletter cannot be reproduced without permission.






--
Kenneth W. Gray, 17 Peacock Cr., Nepean, Ontario, Canada, K2J 3P1
at954@freenet.carleton.ca    phone: (613) 825-6521