WSW: Louis Rukeyser's Wall Street Summary &amp; Discussion $treet

:http://gsbwww.uchicago.edu/news/gsbchica...

Top 490. May 11, 2002 6:13 PM

» JeffChristy - Re: Re: Karen Gibbs on WSW with Fortune

In response to message posted by BrianMcG:

Here is some background on Karen Gibbs.

I think the success or failure of the new show will depend on the type of guests she has. Kind of like Leno and Letterman. I guess I will tape her first show while I am watching Lou.

-- posted by JeffChristy

Top 491. May 12, 2002 6:32 AM

» BrianMcG - Re: Re: Re: Karen Gibbs on WSW with Fortune

In response to message posted by JeffChristy:

Thanks for the info on Gibbs. I like her personality, and she seems very sharp. I regret Rukeyser's reported determination to air his program at the same time as the old WSW. Seems to me he has an "it's you or me" attitude and wants as badly to kill off the old show as to succeed on his new show. Well, he compared the people in Owings Mills to the Mafia, so that should tell you how hew feels. (I wonder if he would have been content to keep working for the Mafia if they hadn't asked him to step aside.) In contrast, Marshall Loeb wished Rukeyser well on WSW and said he was a friend. Change that to former friend. In my market, WSW comes on at eight on PBS and Louis Rukeyser's WS comes on at eight thirty on CNBC, so I can watch them both. There ought to be room for two programs on Friday night--there are scores of them all the rest of the week.

-- posted by BrianMcG

Top 492. May 13, 2002 8:33 AM

» Kirk - Liz Ann Sonders on CNBC 5/13/01

.
Liz admitted to Ted that this market has "been very humbling for a large cap growth manager" such as herself.

They reviewed her picks

VSN... Lis has capitulated on this at current levels, down about 75%

Veritas VRTS... down 47%, still holds this.

DNA, Genentech... down 41%... had sold it earlier when it was down 12% and say sit now makes sense to buy it.

Home Depot is down 11% and she says it remains her favorite.

-- posted by Kirk

Top 493. May 18, 2002 5:05 AM

» SteveT - 5-17-02

Lou opened speaking of the rally this week with "Well that's a little more like it isn't it." Followed by some sensible cautious remarks about the overall market condition. Lou pointed to optimistic news from consumers, increased orders for Dell Computer, as well as the Semiconductor Capital Equipment sector, and large stocks out performing smaller stocks for the week as notable changes in recent trends.

Brian Rogers says there is ample evidence the economy is improving sparked by the FED easing last year. The stock market is having a hard time overcoming the good economic news due to fears from Enron, other accounting concerns, and the Telecom meltdown. Rogers thinks valuations are neutral now. Not cheap by any means, but returns could surprise to the upside. Lou asked if valuations are not cheap why should expectations be high. Brian answered not all companies suffer from Enron type accounting and earnings should continue to improve. Rogers is buying Pharmaceuticals like Bristol Myers Squibb (BMY) on the theory not much more can go wrong with this company. It does have a low P/E and high dividend yield. He likes the entire Large Pharmaceutical sector.

Gretchen Lash thinks the economy has turned. She sees no inflation ahead and increasing corporate profits to the 20% range this year over last. She thinks the key thing to focus on this week was the market went up on good news where in the past it went down on good news. Lash thinks the market will have a nice move between now and the end of the year. Gretchen feels the market is fairly valued considering the yield of 10 year Treasury bonds. She went on to say companies have done a good job of cutting costs and earnings will be stronger than many suspect. She is buying old fashion companies, the kind with earnings. USA Education (SLM) is one that should dominate the student loan sector. Some of us may remember this company formerly known as Sallie Mae.

Bob Stovall says in some ways this market reminds him of the fear experienced in the late 1960s when the DOW first rose above 1000 (that's right only 3 zeros). Then inflation, a worsening war, and the oil embargo hit and it took over ten years for the DOW to get above 1,000 and stay there. He sees similar fear now but does not think things will be that bad this time even tough some news is gloomy. He referred to some comparing the U.S. market to that of Japan. Bob thinks the market will be higher in a few months. Stovall points to good returns in small and mid cap stocks as positive signs. He would buy Industries that have been beaten down. He likes large Pharmaceuticals too. A couple favorites are Wyeth (WYE) and Amgen (AMGN). Bob also likes the dividends paid by REITs, he would look at General Growth Properties (GGP).

Lou then introduced one of his favorite Bears, Richard Bernstein Chief U.S. Investment Strategist Merrill Lynch. Rich is not as bearish as he was 12-18 months ago but is still cautious. He thinks investors can expect 5-6% returns over the next year or so. He warns the market still has risk. We may now be experiencing a trading rally, adding we may have come to far to fast. Bernstein thinks NASDAQ type tech stocks do have wide spread fundamental problems that only tremendous consolidation will cure. Explaining there are to many companies fighting for market share and as a result profit margins are low. One tech area he does like is Areospace/Defense. His favorite is Northrop Grumman (NOC), another smaller example is Alliant Techsystems (ATK). Bernstein does like the Consumer staples area very much. He thinks they will do well if we get a global synchronized recovery. In the consumer staple area his favorites are Gillette (G) and ConAgra (CAG). He also likes dividend paying Utilities, one to check out is Florida Power &Light (FLPLP.OB) Bernstein says if you own tech sell into strength as he thinks the longer term prospect is miserable. His bond allocation is neutral, thinking at some point inflation fueled by global recovery and a weaker Dollar will be a problem. The bonds you own should be weighted to shorter duration Corporates. He recommends an over weighted cash allocation.

Brian asked which asset classes investors should focus on now. A slight over weighting to small cap stocks with no clear advantage to growth vs. value is his recommendation. Gretchen asked if we do have global recovery and productivity increases won't earnings growth and margins increase to contribute to more than 5-6% returns. Rich answered as follows. The increased productivity helped consumers hold up during the downturn in the economy. During that time Corporate profits went through their worst recession since WWII. Bernstein thinks companies are going to have to take back from consumers to regain profitability. That makes him cautious on consumer cyclicals. Bob asked which sectors are good buys if the Dollar continues to weaken. The Dollar has been so strong for so long it has no place to go but down. Rich thinks most will benefit with increased foreign trade. The top of the list would be Consumer Staples, Industrials, Materials, and Energy. He does not think the Dollar will get weak enough to help over come the tech problems mentioned earlier.

Bernstein feels gold can be used for some trading opportunities but is not for long term investment. He finished by saying in this cycle there has been a disconnect between the economy and the stock market. Equity investors were bullish last year as the FED began easing, this is not normal. The economic outlook is brighter than the stock market. Earnings may disappoint again in 2002. Setting the stage for a better 2003.

Next weeks special guest the legendary Jack(AKA John) Bogle Senior Chairman and Founder Vanguard Group. If you can't see it live be sure to set your VCR. Jack is truly an inspiration.

-- posted by SteveT

Top 494. May 18, 2002 7:23 AM

» Kirk - Re: 5-17-02

In response to message posted by SteveT:

Thanks Steve. This part caught me

He Richard Bernstein Chief U.S. Investment Strategist for Merrill Lynch thinks investors can expect 5-6% returns over the next year or so. He warns the market still has risk.

If I was a panelist I would have asked him: "5 to 6% looks pretty good compared to the 1.81% Vanguard is paying on money funds. GNMA's are paying 5.8% but if the Fed starts to raise rates then the overall return will go down and GNMAs will do even less. Why not just buy stocks now and forget about what happens in the short term which nobody predicts well?"

-- posted by Kirk

Top 495. May 18, 2002 8:28 AM

» SteveT - Re: Re: 5-17-02

In response to message posted by Kirk:

Kirk good point. I thought Gretchen Lash made some good comments. She talked about what a good job companies have done cutting costs and they could have better earnings than many suspect. I know this is true with the companies I follow. When she asked Bernstein about returns above 5-6% due to a global recovery and increased productivity which I thought an excellent question. Bernstein kind of bailed referring to consumer cyclicals only. They obviously will be hurt if the consumer buys less due to increased pricing he alluded to. Consumer cyclicals are far from the entire market. I would expect continuing sector rotation as investors regain confidence in equities. My two cents worth.

-- posted by SteveT

Top 496. May 20, 2002 10:55 AM

» Kirk - Merrill Lynch reiterates selling tech into strength

To:PCSS who wrote (485)
From: Elwood P. Dowd Monday, May 20, 2002 1:32 PM
Respond to of 488
http://www.siliconinvestor.com/stocktalk...

The following is an almost word-for-word rehash of the what an ML honcho was preaching on the Rukheyser(sp)CNBC show Friday night.
El

9:55AM Merrill Lynch reiterates selling tech into strength : Merrill Lynch in a pre-open note said that "mainstream" technology is not a growth sector anymore, and reiterates long-standing strategy of selling tech shares into strength given NASDAQ's recent rally; fragmentation, overcapacity, margin pressures, and pro forma reporting continue to plague the industry; however, the Pentagon may be the next "Killer App". Recommends redeploying assets into attractive themes such as: dividend-paying utilities, consumer staples, aerospace/defense, drugs, energy, and corporate-oriented financial stocks

-- posted by Kirk

Top 497. May 25, 2002 6:39 AM

» SteveT - 5-24-02

Who among us needs to go to the carnival? Not investors that is for sure. They daily attend the financial carnival. The roller coast of this month has been exhilarating. Plus we have the house of horrors provided by our own Government concerning terrorist threats. Not to mention the cotton candy that passes for research from many brokerage houses. The fortuneteller booth seems to only attract the attention of those predicting bad news. Look at how the tech sector reacted to the downgrade on semiconductor capital equipment by Goldman Sachs while virtually ignoring a more upbeat news from Sun Micro. On the economic front GDP was reduced but still grew at the fastest pace in a couple years and new home sales grew nicely.

Ralph Acampora says his charts show mid cap stocks have done good but thinks they are due for a rest as the Dollar weakens. He thinks the rally of last week where large cap stocks led is the beginning of a short term trend. According to Acampora's charts the bottom is in for the DOW and mid cap stocks. He is not so sure about the NASDAQ. He suggested following the Peter Lynch style of stock picking, buy what you know and use in the consumer area. Some of his favorites are Staples (SPLS) and McDonalds (MCD)

Lou Holland believes we are in a trading range and will not make much progress until a catalyst appears. Two big areas of uncertainty are terrorism and earnings growth. Lou said the P/E of the NASDAQ 100 is still at 55 while the S&P 500 is at 22. Holland is not an asset allocator, being 100% invested at all times in stocks. He is constantly looking for cheap stocks to buy. Now he likes mid cap with a P/E around the expected growth rate of earnings. Or a PEG of around 1. To add a margin of safety he likes to buy stocks beaten down to near 52 week lows that he thinks still have good prospects. Three that fill that bill are Allergan (AGN), International Speedway (ISCA) and AOL Time Warner (AOL).

Nick Sargen says we are in a sideways market but he is certain the economic recovery is real. The only question is when will profits come back? He thinks a key test will be in July when second Quarter earnings come out. Sargen says the U.S. is leading the way to economic recovery around the World but Emerging Asia is looking good too. Japan has shown signs of life but still needs to work on improving the structure of the economy for long term success. The big areas Japan needs to address are deflation, bad loans, and budget deficits. Nick recommends being diversified and looking for good value. Some of his favorite stock picks include FOX Entertainment (FOX), Cardinal Health care (CAH) and Metlife (MET).

Lou then introduced Jack Bogle Founder Vanguard Group. Bogle keeps busy today after stepping down at Vanguard in 1996 with The Bogle Financial Markets Research Center. http://www.vanguard.com/bogle_site/bogle... Bogle admits this year as always some managed funds will beat the indexes. But if you look at the data the S&P 500 is beating about 2/3 of large cap managers and the Wilshire 5000 is beating about 3/4 of all managers. Adding that is not a bad year. Bogle prefers the Wilshire 5000 as it includes the whole market and gives a better picture of all U.S. stocks. Jack said you cannot make a mistake buying index funds. For those that feel the need to "play the market" do so with no more than 5% of your total assets. Lou asked if it was his view that nobody can beat the indexes consistently. The answer was "That is my exact view". Jack went on to say over a ten year period data shows maybe 1 in 5 managers beat the index return. Over twenty five years about 1 of 10 beat the index. Over fifty years maybe 1 in a 100 are up to the task. The reality is it is very hard to capture 100% of the returns the indexes make due to costs. We spent around $300,000,000,000 last year managing our own money. By using Index Funds you come as close as you can to capturing all the return you have coming. Index Funds currently own around 15-18% of all stocks in the U.S. so there is plenty of room for active management and we do need liquid capital markets adds Bogle. Jack thinks the credibility on Wall Street is disgraceful. He views handling other people's money as a solemn responsibility. Bogle says the Mutual Fund Industry has lost sight of that. To fix this problem stock owners need to speak out. They need to stand up and say we are not going to stand for this misleading guidance, misleading accounting, misleading future returns on pensions, grotesque abuse of stock options, and executive compensation. Bogle said 75 institutions own 42% of the stock in the U.S. they are the ones that need to speak out yet they are silent. It is a question of character and in the long run character counts. He called the Merrill Lynch settlement a gain of two feet on a 100 yard field.

Ralph asked about reversion to the mean and if it fit in to his plan. Jack did a nice job of defining the term and said yes it fits because it is an unyielding rule. Lou Holland asked if Jack thought small and International managers could add value due to those markets as they are less efficient. Bogle said some can, but the argument for indexing does not depend on efficiency because not all active managers can win. In fact after costs, more under perform than beat the indexes. Nick asked if he thought George Sorus was right saying Index Funds contributed to the bubble. Bogle said this simply is not true. In a typical technology stock where the bubble was most pronounced, index funds account for about .4% of the yearly trading volume. Can the tail wag the dog? Absurd.

Bogle finished saying the Mutual Fund Industry should be embarrassed. The year leading up to the peak of the boom theycreated 600 new aggressive growth funds. A case of pandering to the public. They also advertised the performance of the hot funds. He went on to say "The Industry needs more stewardship and less salesmanship". He is waiting to see that. The real problem is costs. During the Bull market from 1984 - 2000 the market returned about 15% per year. The average fund stock fund returned about 13%. Over that cycle a $10,000 investment at 15% returned about $120,000 while that two percent drop in returns yielded around half that!

Next week Super Bear Doug Cliggott President Brummer & Partners.

-- posted by SteveT

Top 498. May 25, 2002 6:58 AM

» Kirk - Re: 5-24-02

In response to message posted by SteveT:

Great job on the summary Steve, as usual!

I have to agree with Soros on this:

Nick asked if he thought George Sorus was right saying Index Funds contributed to the bubble. Bogle said this simply is not true. In a typical technology stock where the bubble was most pronounced, index funds account for about .4% of the yearly trading volume. Can the tail wag the dog? Absurd.

Maybe not to the point of saying that index funds caused the bubble but that they clearly suffered from it and were NOT a good investment. I often said here that I was not buying them "because they had too much Cisco for my taste" back in the 1999 and 2000 time frame.

The company that hired me to help pick stocks also had a problem with index funds as they are cap weighted and were heavy into technology. Add in the fact that most of the private clients out this way in the silicon Valley had large tech holdings and it was clear that index funds were poor choices for people that already had large portfolios and wanted to diversify. Perhaps it would have been better for all these people to sell at the top (duh, of course!) but what we advised was to sell some technology (like I did with my HP) every quarter (or month) and diversify into individual stocks and bonds to make their own diversified "index like" portfolio.

Looking back, when you consider the taxes and impossibility of picking the top (some stocks more than doubled between Dec 31, 1999 and their peak in 2000) then it looks like we made a decent choice.

Now I am speaking for making lump sum investments in already established portfolios when I say that. I think Index funds really shine where you add in "time diversification" with a dollar cost average program. As Jack said, some sectors will always get ahead of themselves, but then they crash back and others take their place. I just think the 1999/2000 period was unusual in that we had such a bubble in stocks like Cisco. Right now, it is hard to find a better investment than a Wilshire5000 fund... unless you work really hard to find or be one of those top 10% of money managers that beats the averages over 25 years:

Jack went on to say over a ten year period data shows maybe 1 in 5 managers beat the index return. Over twenty five years about 1 of 10 beat the index. Over fifty years maybe 1 in a 100 are up to the task.

What they don't tell you is once a manager proves to have the top 10 or 20% talent, then they often leave the mutual fund companies to start their own funds or are hired away by hedge funds. Fidelity handles this by rotating most of their managers... keeping them from gaining too much fame. smile

-- posted by Kirk