Ferris says there's no telling how long bulls will run

March 26, 1998|By BRENDAN KIRBY

Ferris says there's no telling how long bulls will run

Riding the longest bull market in history, anxious investors are turning to the brightest financial minds in the world for a sense of how long it will last.

But George M. Ferris Jr., chairman of the giant brokerage firm Ferris Baker Watts Inc., brought some sobering news to Hagerstown Wednesday afternoon.

"Point No. 1 is nobody - nobody - can predict the market," he said at a Hagerstown Rotary Club luncheon at the Venice Inn.


Ferris said analysts armed with the most comprehensive data available can calculate the intrinsic value of stocks. But that is only half the equation, he said.

"The second factor is unpredictable - that's emotion," he said.

So investors will continue plodding forward into uncharted territory, Ferris said.

Ferris said analyzing the past is much easier. He attributed the 16-year bull run to three great forces: the end of the Cold War, improved efficiency of American businesses and a flood of retirement funds pouring into the stock market.

Between 1991 and 1998, the value of mutual of funds in the stock market jumped from $1 trillion to $4.3 trillion, Ferris said.

After getting "their heads handed to them on a platter" by foreign competitors in the 1970s, American companies have become more efficient, Ferris said.

Ending the Cold War helped the market by freeing up millions of dollars for more productive uses, Ferris said.

Ferris cautioned investors to hold on to a few proven axioms. One is to be patient for the long term.

"I believe the only people who make money trading for a few points of profit are we brokers who get the commissions," he said. "Time in the market is much more important than trying to time the market."

Ferris said smart investors ignore bad newspaper headlines. If the underlying conditions of a company and industry are sound, troubles usually are short-term, he said.

Even the best managers can make mistakes, Ferris said. When they do, Wall Street tends to punish them.

Ferris gave examples of companies that have enriched shareholders after missteps caused their stock value to plummet.

Wells Fargo bungled a merger a year ago, but recovered to increase its value by 27 percent, he said. Pepsico Inc. and Nike have increased the value of their stock by three and four times in the last few years after mistakes caused a fall, Ferris said.

In an interview before his speech, Ferris brushed aside concerns that the money crisis in Asia could pull down the U.S. market.

He had breakfast with Alan Greenspan two weeks ago, Ferris said, and has never seen the Federal Reserve Board chairman so confident.

"What will bring an end to the (bull) market is some major event that puts a lot of fear into investors," he said.

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