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January 16, 2001

Bulls Remain Uncowed Amid Market's Slide
By Cassell Bryan-Low, The Wall Street Journal

An 'A' for Effort, and 'F' for Accuracy ... Weiss comments

NEW YORK - The stock market may have entered the year with bearish tendencies, but many of Wall Street's most high-profile experts are still solidly bullish.

"We are getting through the final phase in the consolidation in the S&P; 500 and the Dow," says Charles Pradilla, chief investment strategist at SG Cowen Securities. "Bottom line: The year 2001, ... after a fairly volatile first half, should end up quite strongly," he says. He is particularly bullish on technology. "We're in the final phase of the correction in Nasdaq," he says. "In the short term, it could rally over 3,000."

Goldman Sachs's Abby Joseph Cohen is more bullish. With a 1650 year-end target for the S&P; 500, and a 13,000 target for the Dow Jones Industrial Average (the indexes, respectively, are currently at 1,318.55 and 10,525.38), "there is no dramatic downside risk in share prices from these levels," says the chief U.S. investment strategist for Goldman and a longtime, prominent bull.

"I don't see that we have a particularly weak economy," she says. "What I see is that we are going through an awkward transitional period."

Christine Callies, Ms. Cohen's counterpart at Merrill Lynch & Co., also offers an upbeat outlook, predicting a 20%-plus total return on the S&P.; "The stock market is in pretty good shape," she says. "Many of the excesses promoted by the tech bubble in 2000 have been neutralized, which we think will pave the way for a much broader-based market recovery in 2001."

So, who hasn't bought into all this bullishness? For one, John C. Bogle, founder and former chairman of mutual-fund titan Vanguard Group, and still a fan of stocks for the long term, warns there is at least a 50% chance of "further deterioration in the market in 2001, both for the Nasdaq and the S&P.;" He hazards a guess at a year-end target of between 1,150 and 1,200 for the S&P; 500, and a mere 2000 for the Nasdaq. Of the Nasdaq he says: "We've let a lot of air out of the bubble, but perhaps not all."

"We are moving very close to, if we are not already in, a recession," Mr. Bogle says. That said, "If you're a long-term investor and have a reasonably balanced position between fixed income and stocks, I do not believe this is a good time to get out of stocks, even if they are going to go down further," he says. That's because "the difficult decision then is when to get back in."

You can't fault the bulls for trying. At this point, they're doing everything possible to get investors back into the market. They know that the Nasdaq is already deep in a bear market -- at more than 50% off its high, there's really no question. But, they also see the Dow teetering on the edge of a cliff. With bad earnings coming out every day and more on the horizon, the bulls know that it's only a short time before the Dow and the S&P; join the Nasdaq in firm bear-market territory.

Last summer, Abby Joseph Cohen predicted that the S&P; 500 would end the year at 1,575 -- wrong! So what do you do when you've made a career out of telling people that the market can only go up -- and you've been proven dead wrong? If you're like Cohen and other permabulls, you simply ignore the past and keep on touting still over-valued stocks.

Eventually the bulls will be right -- after all, even a broken clock is right twice a day. At some point these experts will still be recommending stocks when they actually do hit bottom. But right now isn't that time -- and will anyone believe them when that day comes?

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