Joe Battipaglia

Top 34. May 23, 2000 7:39 AM

» Roger_Babson - Jen...

. . ., thanks, but what does the Batman own, and how is he compensated? What are Gruntal's investment banking and brokerage businesses doing in relation to Batman's public pronouncements?

Inquiring minds "need" to know. ;-)

All of this chicanery will come to light in the turning-point election cycle ahead, and millions of folks (most of the people in the stock market now) will learn why they should never have given a dime of their hard-earned savings to the Wall Street manipulators.

Were I Batman and his peers, I'd be considering dual citizenship and offshore accounts and residences in preparation for the backlash (which he probably has already done).

Good luck. SOS!

-- posted by Roger_Babson

Top 35. Jun 5, 2000 7:34 AM

» Kirk - Monday, June 5, 2000

Monday, June 5, 2000

Weekly Perspective

The market rallied last week as expectations of further action by the Federal Reserve were revised downward. Friday’s weaker-than-expected employment report provides more evidence that tighter monetary policy may not be necessary as the economy cools further from it’s 7.3% growth rate attained in fourth quarter of last year. I expect output to moderate further with the annualized rate of GDP growth nearing 4% by year-end. As this happens, I believe the Federal Reserve will abandon it’s bias toward tighter credit and will move to a neutral bias. The combination of these factors and continued growth in earnings provides the necessary foundation for the major indices to move to new highs by year-end.

Following months of rising expectations, the futures market for federal funds now reflects growing uncertainty about the course of Fed action. It is no longer assumed that the Federal Reserve board will opt to raise short-term rates during their next FOMC meeting in June. Looking further out, the December contract for federal funds futures is now pricing in a 50 basis point increase by year-end versus the 75 basis point increase expected just two weeks ago. At that time, we said that expectations were overdone and that new data on the economy would show moderating growth accompanied by stable prices. Since that time, factory orders, durable goods orders, data on new job creation, wage increases, auto sales, and construction spending have all registered some degree of easing from their peak levels. As I have said before, this fundamental data will set us free from unwarranted "fear of the Fed" as conditions in the real economy dictate the ultimate parameters for policy choices.

I believe last week’s rally will extend through the election and on through year-end. It is worth noting again that ample liquidity ($7 billion a week of new capital flows into mutual funds), high levels of confidence (consumer confidence remains near a multi-year high), rising earnings (24% year-over-year earnings growth in the first quarter) and low inflation (the year-over-year change in the core CPI and PPI is just 2.2% and 1.3%, respectively) are all hallmarks of this bull market and remain fundamentally intact despite recent volatility. I continue to believe that good performance on earnings will remain the key catalyst for individual company performance and technology should provide leadership in this regard. Long-time investors in technology will remember, for example, that the NASDAQ composite has had some of it’s most impressive moves following sharp sell-offs. The adjacent table highlights some of the more significant sell-offs and recoveries over the past twenty years.

At this time, I am maintaining my asset allocation and year-end price targets of 12,500 on the Dow Jones Industrial Average, 1,625 on the S&P 500 and 5,500 on the NASDAQ composite.

Click to see Joe's tables and graphs to go along with his commentary
http://www.gruntal.com/research/joeb.html

-- posted by Kirk

Top 36. Jun 12, 2000 7:43 AM

» Kirk - Monday, June 12, 2000

Monday, June 12, 2000
See Joe's full report with graphs here
http://www.gruntal.com/research/joeb.html

Weekly Perspective
Last week, Federal Reserve governors Parry, Gunn and Meyer expressed their view that early signs of moderation may not be enough to confirm that the economy has entered a period of slower growth. Maintaining an “ever vigilant” posture, the governors continued to express concern about the threat of possible inflation. As I have said before, there remains no credible evidence an inflation problem exists and recent data on price levels continues to support this. The May PPI was unchanged with the core rate up a scant .2%

It does not surprise me, however, that the board of governors is not in a self-congratulatory mood. After all, it is the charter of the group to concern itself principally with attaining price stability through the appropriate application of monetary policy. For the foreseeable future, then, expect the board of governors to publicly express concern while they quietly choose to ease off the monetary tiller. Remember, the Federal Reserve seldom waives a flag signaling the end of a period of credit tightening, they simply demonstrate this through the policy choices they make.

Some years back, the term “Goldilocks economy” was used to describe a level of growth considered to neither “too hot” nor “too cold”. I believe we are entering into another such period as annualized GDP growth moves toward a 4% annual rate of growth away from the 7.4% rate of growth seen during last year’s fourth quarter. At the same time, I expect the core rate of inflation to remain between 2 and 3% per annum. In this environment, financial assets – particularly equities – should perform. Rising productivity and unit volume growth will remain the key formula for earnings growth.

The bond and equity markets have not lost sight of these favorable conditions. The yield on ten year treasuries has drifted down from over 6 ½% to 6.2% in less than a month and the broad market, represented by the Wilshire 5000 index, has advanced 10% from it’s recent intra-day low on May 24th. The NASDAQ composite also is righting itself from it’s correction – returning close to 20% from the same starting point.

I continue to forecast 15% year-over-year growth in earnings from S&P 500 companies with 30% or more growth in earnings from the technology sector and the NASDAQ composite where robust demand from business and consumers continues unabated. As I said before, it is this earnings power that will drive equity prices to new highs as the year progresses.

My year-end forecasts for the major indices remain 12,500 on the Dow Jones Industrial Average, 1,625 on the S&P 500 and 5,500 on the NASDAQ composite. My asset and sector allocations also remain unchanged.

-- posted by Kirk

http://www.gruntal.com/research/joeb.html

Top 37. Jun 19, 2000 6:55 AM

» Rande - Bullish Perspective:

Bullish Perspective:

Monday, June 19, 2000

Weekly Perspective
The evidence continues to mount that the economy has decelerated and inflation (excluding energy) remains tame. May retail sales declined 0.3%, below expectations of a 0.1% increase. Retail sales excluding autos were unchanged, below expectations of a 0.3% increase. April retail sales were revised downward. The Federal Reserve’s beige book on regional economic activity showed more of the same. Overall, 11 of the central bank’s 12 regional districts, said that “scattered signs of cooling are in evidence or the pace of growth is slowing.” Excellent news on inflation was found in the May Consumer Price Index (CPI) which was a scant 0.1% below expectations of a 0.2% increase. The CPI excluding food and energy was up 0.2%, in line with expectations.

These results cap several weeks of similar data that have pushed fear of more Fed rate hikes off the investment landscape. Moderation in economic growth and continued low inflation support my outlook that Fed action is at or near an end. The first quarter’s real Gross Domestic Product (GDP) growth of 5.4% should be the highest reading of the year. Recent increases in energy prices should be reflected in the June CPI, but it is well understood that the Fed cannot control such prices and that, if anything, higher energy costs have a dampening affect on economic activity if sustained over a long period of time. I expect the Organization of Petroleum Exporting Countries (OPEC) to raise output at its late June meeting, pushing energy prices back down to $25-$28 per barrel. The current oil price squeeze is manageable and should be of passing concern.

In response to these positive developments, U.S. equity prices have snapped back and are trending higher. The holiday-shortened Memorial Day week delivered a 19% gain in the NASDAQ and a 7% gain in the S&P 500. But since those fireworks, markets have been somewhat restrained. Without taking a breath, investors have switched from Fed fears to profit worries, with the knee-jerk response to slowing economic growth must mean a profit squeeze. I believe that this notion is without merit. Second-quarter profits will be as powerful as the first quarters, and the remainder of the year will benefit from overseas growth and a none-too-shabby 4% run rate in the U.S. expansion. Moreover, the U.S. economy is dominated by service versus manufacturing, and there are numerous subsectors at different stages of activity in this the tenth year of economic expansion. Favored sectors such as technology, pharmaceuticals and financial services should not be affected by a modest slowdown while benefiting greatly from rate stability and diminished inflation worries. After the last credit tightening cycle of 1994-1995, these sectors’ stock price performance was among the best while basic materials, energy, and capital goods, all truly economically sensitive, were among the underperformers.

Investors should not lose sight of the remarkable performance of the U.S. economy (10 years of expansion and still clocking 4% growth) as well as corporate America’s profit explosion (record levels of profits in both absolute and percentage terms). Generally speaking, stock price valuations are validated by this extraordinary performance. The next leg of the bull market will be more discriminating, relying most heavily on corporate management’s ability (or inability) to create shareholder value. To repeat, Managements must meet or beat “street” estimates; undertake mergers, acquisitions and strategic alliances; have an internet strategy; and, lastly, buy back stock with excess cash flow. Successful achievement of these steps should push a company’s equity price higher regardless of industry type and company size. Meanwhile, the favorable economic outlook and investors’ preference for equities should produce new highs on all the major equity indices by year-end.

Year-end projections:

DOW JONES INDUSTRIAL AVG 12,500

S&P 500 1,625

NASDAQ COMPOSITE 5,500

-- posted by Rande

Top 38. Jun 19, 2000 7:45 AM

» Kirk - Thanks Rande

Thanks Rande

I found this key piece especially informative:

Without taking a breath, investors have switched from Fed fears to profit worries, with the knee-jerk response to slowing economic growth must mean a profit squeeze. I believe that this notion is without merit. Second-quarter profits will be as powerful as the first quarters, and the remainder of the year will benefit from overseas growth and a none-too-shabby 4% run rate in the U.S. expansion. Moreover, the U.S. economy is dominated by service versus manufacturing, and there are numerous subsectors at different stages of activity in this the tenth year of economic expansion. Favored sectors such as technology, pharmaceuticals and financial services should not be affected by a modest slowdown while benefiting greatly from rate stability and diminished inflation worries.

Joe may be too bullish for many, but he sure spotted the key kink in the bear argument. The bears suddenly jumped from fears of tight money (lowering the demand for stocks) to fears of lower earnings (forgetting that a slowing gives companies time to catch their breath and train some of the workers they've hired and get them online and productive!)

I STILL find it hard to believe the NASDAQ will go to 5,500 by year end…but his DOW and S&P numbers seem believable.

-- posted by Kirk

Top 39. Jun 19, 2000 7:59 AM

» Rande - Kirk,

Kirk,

Yes, good to get all points of view. That was a key passage and indicates a nice wall of worry out there. As Rosanne Rosannadana used to say, "If it's not one thing, it's another." Good news, actually, for those worried about complacency. Makes for interesting times since everybody can't be right.

-- posted by Rande