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

Top 550. Aug 13, 2002 1:57 PM

» SteveT - Re: August 9 2002 - Wall Street Week

In response to message posted by pgp:

I went back and reviewed my tape I think Plavix is the drug you asked about.
http://biz.yahoo.com/djus/020807/2002080...

-- posted by SteveT

Top 551. Aug 17, 2002 6:59 AM

» SteveT - 8-16-02

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Lou opened this week with who would have thought Baseball, the once beloved national pass time would end up being coached by the stock market on how to get hated. One viewer noted that baseball endured strikes in 1981 and 1994 and in both cases the stock market had nice runs starting the following year, so his motto is let 'em strike. For the past several weeks viewers have been sending Lou suggestions for an imaginary show title in which he would interview a different corrupt corporate executive each week. The winner is "Dude you're getting a cell".

Frank Cappiello is encouraged by the market action the past few weeks but is worried by the last set of industrial production and retail sales numbers. He said the economy still has some weak links. Frank thought the FED should have lower rates as insurance while corporations start buying again. Frank is selectively selling Utilities and said now is not the time to be safe. He is looking towards more aggressive type stocks, Like Wellpoint (WLP) and IBM (IBM).

Mary Farrell says it is time to start building a portfolio for the future. This slow recovery is very characteristic of the after affects of a moderate recession. In her opinion earnings should improve but not like they did in the 1990s. Mary expects market gains to be in line with earnings growth for the foreseeable future. Farrell thinks some strong earners going forward will be DOW Chemical (DOW), Procter and Gamble (PG), and Genentech (DNA). She would sell stocks in the energy, telecom, and airline sectors.

Michael Holland said stock prices are fully reflected in the headlines. Mike has been rebalancing his allocation by selling some of his Treasury Inflation Protected Securities or TIPS as they are known and buying over the past few weeks stocks that are going to survive when some of there competitors will not. He has bought American International Group (AIG), General Electric (GE), and Pfizer (PFE).

Then Lou introduced Lawrence Lindsay, Director National Economic Council. Lindsay says the good news is the economy is moving. He predicted sustained solid growth. He went on to say the best thing the Government can do is to focus on the long-term and making sure tax and regulatory systems make America the best place to invest. Lou brought up dividends not receiving favorable tax treatment while corporations can deduct debt costs. Larry said many brought it up at the Waco economic conference this week and he thinks it is impairing investment and may interfere with good corporate governance. Lou then asked why the government can tax 100% of capital gains but limit you to $3000 capital loss in a year. Lindsay said the $3000 limit was set in 1978 and never adjusted but the reality is it would cost the Government much revenue. He did suggest a need to strike a balance in that regard. Larry said the budget deficits are not due to the tax cut of last year, but the tax cut pulled us out of the recession. The main reason for the deficits are we are not getting capital gains taxes due to the bear market. Lou wanted to know why the recovery is not more vigorous. Lindsay said he thought we were doing good to grow around 3 percent after a major wealth adjustment that started in 2000 when the bear market hit followed by the terrorist attacks last year. To him that indicates a resilient and fundamentally strong US economy. He expects growth to do a little better than 3% in 2003. Lou wanted to know what is being done to encourage business investment. A bill signed in March gives business a 30% bonus depreciation. Lindsay believes most budgeting is dome in the 4th Quarter so 2003 should see many take advantage of this.

Frank asked why not accelerate depreciation, it has been done successfully in the past. The bill passed in March will help but we also need to keep household demand up was the answer. Mary said consumer spending is up but so is debt, how long can this continue. It can if income keeps up. Larry pointed out an increase in the savings rate last Quarter. Mike said tax treatment of dividends was dumb and most investors would rather see higher stock prices than a tax bill for dividends. What is the political reality of changing this? Lindsay said he was not a political advisor but that question came up at Waco this week and the President wants to do what makes good economic sense.

Lou asked Larry to speak to the scarred, angry and investors that say they will never again buy stocks. Lindsay said to heed what Lou has been saying the past 32 years. You cannot beat the stock market for long-term investing. Keep some money in reserve in case you need it and do not borrow to invest in the stock market. Focus on asset allocation.

Next weeks special guest will be Ed Larson, President and CEO of Aim Capital Management.

-- posted by SteveT

Top 552. Aug 17, 2002 7:48 AM

» Kirk - Re: 8-16-02 - Frank Cappiello

In response to message posted by SteveT:

Thanks Steve!

Dow Jones Utilities Average (INDEX)
<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

Interesting he is selling some Utilities now…
I wonder if he bought them the few days they hit the low?

-- posted by Kirk

Top 553. Aug 17, 2002 7:54 AM

» Kirk - Re: 8-16-02 - Mary Farrell

In response to message posted by SteveT:

Thanks Steve!

-- posted by Kirk

Top 554. Aug 23, 2002 8:38 PM

» David_Korn - Investor's Intelligence

Lou discussed the contrarian nature of the Investor's Intelligence survey in his opening monologue. Steve, this show is right up your alley!

-- posted by David_Korn

Top 555. Aug 24, 2002 7:36 AM

» SteveT - 8-23-02

Lately sentiment has been one of the main movers of the stock market. Along with corporate scandal and the economy. Lou said unlike the other two, with sentiment the worse the news the better. The Investors Intelligence survey of advisors the past six weeks has been unusually pessimistic. Historically this has been as Lou called it "a marvelous negative indicator." Is it any wonder the S&P 500 has been up the last five weeks in a row for the first time in nearly two years.

Nick Sargen says we have found a bottom. He is encouraged by the August 14th deadline for corporate officers to certify financial statements came with out new accounting scandals. The yet to be known is when will profits increase. In most cases Nick says companies have cut costs, what we are waiting for is revenue growth. Until revenues start growing we are most likely in a trading range. Sargen likes companies with strong balance sheets like Wellpoint health networks (WLP), Wells Fargo (WFC) and Adobe systems (ADBE).

Elizabeth Dater in this slow growth environment likes smaller companies that are growing from a lower base. They do need to have access to capital and have a unique business plan with some strategic value. Dater says often it is easier to talk to top management in smaller companies. In an ideal world these businesses would have the characteristics of strong free cash flow, strong franchises, and the ability to control their destiny in some manor. Beth likes Devry (DV) and Harte-Hanks (HHS) She would sell young tech with high valuation and those that may not have access to capital. Examples would be Red Hat and Marvell Technology.

Roger McNamee is not bothered that some tech companies do not want to expense stock options. He does favor it be fully disclosed who gets options and why they are getting them. He fears if options become taxed they will be focused only on top management. If taxations does come to pass Roger says it should be applied equally to everyone. If taxing options is avoided it will be a real plus for small start up companies. The matter of expensing options sounds easy but is rather subjective in that it requires companies to make a forecast on the future. McNamee is bullish on consumer tech stocks like Concord EFS (CEFT), Overture Services (OVER), Take Two Interactive Software (TTWO), and Cisco Systems (CSCO).

Lou then introduced Ed Larson, President and CEO of Aim Capital Management. Ed oversees strategy and investment policy. Larson predicts we are not going to see a double dip recession. The summer slow down should stabilize and the economy should begin growing at 2-3% in the near term. This means investor will have less to worry about in terms of future inflation. The kick we get coming out of recession will be less than normal however. Stock selection should be stable growers and those with visible earnings he advises. Ed thinks the odds favor the market higher over the next 6-12 months. This is due to government spending, huge amount of liquidity provided by the Federal Reserve, and loads of cash in money market accounts. He likes Pfizer (PFE) and said it has had the best buying opportunity the past 30 days it has had in the last five years. Larson also thinks many tax dollars are going to be spent on defense with the war on terror and Homeland security. His favorite in that area is Northrop Grumman (NOC), he also likes L-3 (LLL) and Lockheed Martin (LMT). He is avoiding the Areospace sector. Larson considers Tyco (TYC) to be 50-100% undervalued with the new management team coming onboard and would buy that as well.

Nick said value has been the place to be the past two years and wanted to know where is the place to be the next two years. Larson thinks most of the imbalances have been worked out so he recommends diversified approach with all asset classes represented. Beth asked for a broad asset allocation plan for retirees. This is a one size does not fit all, it depends on many factors such as age, balances, and time horizon. Ed said to start with 100 minus your age to determine equity percentages, acknowledging it is flawed but can be used as a starting point. From there do not leave out any equity classes, be diverse. Roger noted the past few years the high growth segment areas have had huge losses and imbedded capital losses and may provide tax shelters for years to come. Is now the time to put money into places the hardest hit. Ed pointed out losses have been in most segments and it is possible to find funds that will not have tax worries for as much as five years.

Lou closed asking about redemptions. Larson said they are unpleasant but a reality at the moment. July could prove to be one of the record months for industry wide redemptions, adding this is often good news about the future. [E.C. and here we are back where we started, sentiment]

Next week a special feature "The Best of Rukeyser" Highlights of the show so far since the move to CNBC, among them clips from Peter Lynch and Bill Gross.

-- posted by SteveT

Top 556. Aug 29, 2002 6:57 PM

» SteveT - This weekend

Let all know I am taking this weekend off from doing summaries. The show is going to be a series of highlights from the first four months.

-- posted by SteveT

Top 557. Sep 7, 2002 7:09 AM

» SteveT - 9-6-02

This week was another "Best of Rukeyser" featuring replays of interviews with Legendary Vanguard Founder John Bogle and David Komansky CEO of Merrill Lynch. Should you care to read my summary of the May 24th Bogle appearance it is here. http://www.suite101.com/discussion.cfm/i...

I did not do a summary of the June 7, 2002 show in which David Komansky Chairman & CEO of Merrill Lynch appeared. I will hit the high spots. E.C. I am sure most of you know Merrill Lynch was among the first of the brokerage houses to have doubt cast on their creditability regarding conflict of interest by analysts and investment banking.
Komansky said he is proud of the overall culture of his firm and he is very embarrassed by a few e-mails indicating analysts gave positive outlooks on stocks to the public while privately giving a negative outlook. He understands in times of cynicism the entire industry is being painted with a wide brush because of the actions of a few. Komansky said investors should be focused on the long term but also want and easy to understand stock rating system. This ML new system is a buy, hold, or sell rating with additional ratings on volatility and dividends over a 12-month time horizon. Dave thinks investment banking, research, and retail brokerage can coexist in one firm and the inherent conflicts managed. He also acknowledged the difficulty in allocating IPO shares.

Lou ended the show reviewing some of his famous one-liners that were well received over the past four months, they included. "Nothing like a bull market to bring out the crooks, and a bear market to start catching them" and "It is summertime and the living is sleazy". Our host also reviewed a list of possible new show titles where Lou would interview a different corrupt executive each week. The winner was revealed on August 16th, "Dude you’re getting a cell".

Next week the show will be live with special guest Walter Wriston former Chairman & CEO of Citicorp. Citicorp merged with Travelers Group in 1998 to become Citigroup. Walter retired from Citicorp in 1984 after 17 years service as CEO. He has written a few books. "Risk and Other Four–Letter Words and The Twilight of Sovereignty". He has also had a book written about him. "Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy" by Phillip L. Zweig

-- posted by SteveT

Top 558. Sep 14, 2002 6:55 AM

» SteveT - 9-13-02

Lou proclaimed what we have now is neither a bull market nor a bear market, but a crab market. A crab market in both mood and movement. With a slow economy, talk of war, and worries of more corporate crime sentiment is worse than fundamentals. Upon closer examination we see growth albeit anemic continues, inflation is under control, and the consumer is still spending.

Frank Cappiello thinks the overall direction of the economy is upward. War with Iraq and fears of more corporate corruption are holding the market back. Frank noted we have lost two groups of equity buyers, Foreigners and with net redemptions, Mutual Funds. Interestingly enough the past few weeks the NYSE is not making lower bottoms or higher tops, we need a catalyst according to Cappiello. Stocks Frank owns and recommends are Talbots Inc. (TLB) and United Parcel Service (UPS).

Barbara Marcin started quoting Yogi Berra "It ain"t over till it's over" to describe the frustratingly slow economy and markets. Barbara said the consumer sentiment numbers coming worse than expectations and retail sales above expectations shows consumers are saying one thing and doing another. She thinks financials represent good values now. A couple of her favorites are JP Morgan Chase (JPM) and Lehman Brothers (LEH). Marcin would take profits in companies that have held up well of late and redeploy the capital to beaten down stocks in the telecom, utility, and financial sectors. She would sell airlines thinking they are going to do poorly for sometime due to a weak business structure.

Tom Gallagher says the dominant issue in Washington D.C. now is Iraq. Most assume war will take place. The question is when. Tom thinks it will be well into 2003 unless Sadam makes a bad move, and then it could be in early 2003.

Lou introduced special guest Walter Wriston former Chairman & CEO of Citicorp. Walt said we have had three shocks as far as trust is concerned; 9-11-01, problems within the Catholic church, and Enron/WorldCom. Restoring that trust is going to be a long and rather difficult situation. The real problem is the integrity of a handful of people. Wriston says it is up to the rest of the business community to step up and try to restore the idea of integrity. He went on to say we don't need more laws and regulations. He observed "The more regulation you have the more chance you have for a smart lawyers and merchant bankers to walk you through the thicket." He also said during boom times many problem are covered up and after the boom every flaw shows. Wriston thinks CEOs are over compensated and the boards need to correct this. Of Citigroup (which I own) Wriston said it is an enormous operation globally. Salomon Smith Barney has been in the news and he accepts their word they broke no laws. He did go on to say it is a question of judgment. For a long time on Wall Street many practices were normal, now with a spotlight on them it is not the thing to do anymore.

Frank asked if he saw a parallel between the U.S. and Japan markets. Walt thought it a bad analogy, we have extraordinary productivity based on technology and Japan has had a ten-year recession with money supply problems. Barbara asked if financial deregulation brought on our current problems. No, Wriston spent most of his life trying to get rid of regulations so banks could compete. Repeal of the Glass Steagall Act allowed much innovation and leveled the playing field for banks. Tom asked about if stock options should be required to be treated as an expense. Walt said the problem is nobody knows how to value them. Options distort earnings and the least distortion is zero. The only way to put a definitive number on it is to value them at exercise. Black-Scholes was designed to value tradable short-term options. Wriston added Black-Scholes methodology was used at Long-term Capital Management.

Lou asked Walt if he could change one Government Policy what would it be. He quickly gave three, Make the last round of tax breaks permanent, Repeal Capital gains tax, and continue to ratchet down marginal rates.

Next week I am taking the weekend off so be sure to set your VCR for special guest Milton Friedman Nobel Laureate for Economic Science.

-- posted by SteveT