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

Top 560. Sep 14, 2002 3:57 PM

» KLR - Primitive Rituals

Primitive Rituals

Every Friday, investors across this great land huddle together in the great electronic village to celebrate a sacred primitive ritual.

Anthropologists and economists are divided as to the motivation for this tribal rite. Many simply credit ignorance and superstition. Some attribute the gathering to man's eternal search for a deeper meaning - to know the unknowable or divine the intent of the gods. Whatever the reason, the ritual has assumed importance to the participants and viewers far beyond any actual value.

The ceremony, almost as old as television itself, proceeds in strictly defined order. The high priest, resplendent in imported hand-tailored Italian robes, gives a short invocation. The invocation always ends with the introduction of a visiting priest who has journeyed from the village of lower Manhattan to pay his respects to the great one.

The two then engage in a highly ritualized duet ending with the high priest clutching and choking the visitor while chanting "names, please" and "what do you like?" When the visitor has disgorged enough names he is temporarily released.

The high priest then turns his attention to a panel of elders and lesser priests. At least one lesser priest must always dress as a bull while another poses as a bear. Each makes appropriate noises for his role and offers his reading of the entrails. (Under an agreement with the Society for the Prevention of Cruelty to Animals, no animals are actually sacrificed on camera.) While the lesser priests never agree on the portents, they are not allowed to actually physically attack each other, this being considered bad form.

The remaining priests all fill familiar roles. One must mutter and fret about market volatility while another advises the faithful to buy where their wives shop. Yet another endlessly intones, "Don't fight the Fed, don't fight the tape." The high priest gives each his blessing equally, bestowing a knowing smirk upon every remark, no matter how inane.

The high priest maintains a private collection of pet elves, which on a weekly basis attempt to divine the will of the gods and share their rapturous insight through a "sentiment poll." The gods must be crazy, or at least fickle, because the result has become a contrarian's delight. So poorly have the elves interpreted the omens that several years ago the high priest had them all slaughtered in a fit of pique. He then replaced them with new and improved elves. Unfortunately, the new elves have become an even sorrier lot and must be severely concerned with their own fate.

Still smirking - after all, nobody is catching on, everybody is eating it up, and he is actually still getting paid for this nonsense - the high priest offers a final benediction. After the benediction, a very minor priestess magically appears, silent as Vanna White, and leads the group into a spotlight where they all pretend to chat as the light flickers and fades from the television. A soothing voice offers to send transcripts of the sermon to the faithful.

As the light dies across the global village, each member of the congregation finishes his communion martini and begins to meditate. Under the spell of this powerful, mind-altering drug, each becomes convinced that the gods have transmitted a unique and startling insight to him alone. Armed with this sacred "insiders" knowledge, the villager expects to trade invincibly on the following Monday, extracting economic rents from the heathens.

What's Going on Here?

We have seen the dismal results that American investors endure. While we know that the economic and human consequences are severe, we also know that reasonably simple tools and techniques are available to dramatically improve investors' returns over time. We know that the average investor is intelligent and successful in most other aspects of his personal and professional life. Though few investors are intent on self-destruction, they often behave as if they were.

This is a very disturbing paradox. What in the world is going on here? Why haven't investors caught on? Why don't they get it?

If you have been wondering why the average investor hasn't got a clue as to how to meet his financial objectives, Wall Street Week may provide some interesting insight. Funded by Public Television (which should set higher standards!) and under the guise of sophisticated commentary, Wall Street Week is just about everything that can be wrong with the popular financial media...

http://www.fee-only-advisor.com/premier/...
(Chapter 22)

-- posted by KLR

Top 561. Sep 28, 2002 9:53 AM

» SteveT - 9-27-02

Lou reported the good news of the night, the third Quarter is almost over. The third Quarter of 2002 could very well end up being the worst since the "crash" of 1987. Not being one to dwell on the dark side Lou pointed out tonights guest has both a stellar long term record and a top notch one year performance in a difficult market.

John Kim is "still" bearish due to the almost daily doses of bad news. Low earnings visibility worries him. John pointed out at the beginning of this Quarter S&P 500 earnings estimates were projecting growth of 16.6% and now they have been cut in half to 8.3%. Kim thinks there is too much optimism and even if we avoid a double dip recession it will be a long time before earnings start recovering. An example would be GM offering 0% financing for 5 years. It will be hard for GM to make money even if they sell many cars. John thinks the NASDAQ 100 is still over valued but he does like small recession resistant companies. Some of his picks are Davita (DVA), THQ (THQI) SCP Pool (POOL).

Harvey Eisen says the world is not ending. We are going through the bad news and pain that form stock market bottoms. Harvey advises not to get caught up in the bear talk and sell good companies. Eisen likes Value Vision (VVTV) and Citigroup (C).

Gretchen Lash says the economy is growing and the big unknown is earnings. With low inflation it is hard for companies to raise revenues hence we will not see a lot of earnings growth. To Lash the issue is to find companies that can grow earnings without raising prices. Gretchen likes SLM Corporation (SLM) and Pfizer (PFE).

Lou then introduced Ron Baron Chairman and CEO of Baron Funds. Ron attributes his good record to avoiding tech while admitting he has had some clinkers but they have been offset with some winners. Baron says now is the time for a long term view. He went on to say this is the most attractive time he has seen to invest in stocks in his lifetime, including 1973-4. With the poor returns the past few years, scandals, the negative psychology, and low interest rates now is a great time to buy companies that help people solve problems according to Ron. Some he owns and would recommend are Apollo Group (APOL), Choicepoint (CPS) and Krispy Kreme (KKD).

John pointed out Baron's low turnover rate and asked his sell strategy. Ron does not look at the stock market as a place to buy &sell stocks but a place to buy businesses. He sells if he makes a mistake, growth is no longer there, or there is a competitive change. Harvey asked what Ron would say to some who wonder why they ever bought stocks and have endured the pain of the bear market. In the short term nobody knows what the market will do but over the long haul you need stocks to have a chance to get a return above the inflation rate. Gretchen asked if he worries about small younger companies getting the financing they need to grow earnings. It is something he always worries about but he has found the profitable ones can get financing. He looks for low debt and good return on investment as part of the selection process in picking companies to invest in.

Lou finished asking how much longer Ron expects small companies to out perform the larger ones. "Forever". Baron did go on and explain his reasoning. He feels after 17 years of under performing at these levels and with the growth to value premium as low as he has seen it this is a tremendous opportunity.

I will be taking a one month break from doing these summaries but will return November 1st.

-- posted by SteveT

Top 562. Sep 28, 2002 10:08 AM

» Kirk - Re: 9-27-02 Show

In response to message posted by SteveT:

Thanks Steve

Here is a chart of Ron Baron's two main funds vs Vanguard GNMA and the S&P500:
<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>

Baron Asset Fund Small Capital Fund (BSCFX) has done well. Lets see how it has done against Fidelity's small cap value fund:
<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>
Looks like they are the same (Fidelity's fund on the Quicken chart has an error

This I didn't know until today:
Ron Baron hired a guy to run an internet fund to take advantage of all the money people wanted to put into that sector.

BARON IOPPORTUNITY - BIOPX:
<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>
I notice this internet fund has TROUNCED the internet fund Kevin Landis put together (TEFQX)

So the Baron fund family sure has some good RELATIVE performance in its asset classes.

-- posted by Kirk

Top 563. Oct 14, 2002 7:39 AM

» Kirk - 10/11/02 John Templeton Guest

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Dow Jones Business News

Hot Stocks On Louis Rukeyser's Wall Street

Sunday October 13, 7:54 pm ET

NEW YORK -(Dow Jones)- The Dow Jones Industrial Average, currently below 8000, will likely top 1 million by the end of this century, said Sir John Templeton, founder of The Templeton Funds, during the Oct. 11 airing of "Louis Rukeyser's Wall Street."

That climb equates to an annual return of about 5%, although the famed investor, during the interview, pegged the growth rate at 7%. "If you're patient, this is a good time" to buy stocks, even if, at present, stocks may be valued too richly, he said.

Inflation will average 2% to 3% a year for the rest of the century, he said.

China, Templeton said, is an especially attractive economy, given that its citizens are thrifty and the nation exports far more than it imports, but foreigners are largely thwarted from investing there. Templeton, however, said he is unwilling, generally, to invest in Russia because he doesn't believe he can trust the financial disclosures of firms there.

The following stocks were mentioned during the show: International Business Machines , Wal-Mart Stores , Microsoft

Over the next two years, shares of IBM, Wal-Mart and Microsoft will post significant moves higher as the bear market expires, said Mike Holland, chairman of Holland & Co. IBM, he noted, jumped 11% to $63.92 on Friday after Lehman Brothers branded the stock with its highest investment recommendation. This, Holland explained, shows that when this struggling market is served good news, " the upside is quite significant." Goldman Sachs Group

Goldman Sachs will benefit as the economy escapes the doldrums, said Lou Holland, chief investment officer with Holland Capital Management. Goldman Sachs, Holland's top stock pick, is the "preeminent" choice for firms seeking investment banking help, he said. Overall, investors should not pull money out of stocks now, Holland said, noting that stocks, following the previous 10 bear markets since 1962, rise sharply after the markets bottom. On average, stocks gain 31% the year after stock indexes hit their lows, he said; after two years, they have risen 47%. This, he said, is a time to be fully invested in stocks. Lockheed Martin

Defense spending will increase over the next few years, and Lockheed Martin will probably be "the best, most diversified" firm taking advantage of that environment, said Liz Ann Sonders, investment strategist with U.S. Trust.

-Nick Baker, Dow Jones Newswires; 201-938-4047; nick.baker@dowjones.com

-- posted by Kirk

Top 564. Oct 14, 2002 7:40 AM

» Kirk - Comments on the Show

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To:Gottfried who wrote (3576)
From: Lizzie Tudor Monday, Oct 14, 2002 12:05 AM
View Replies (1) | Respond to of 3582

"The Dow Jones Industrial Average, currently below 8000, will likely top 1 million by the end of this century, said Sir John Templeton, founder of The Templeton Funds, during the Oct. 11 airing of "Louis Rukeyser's Wall Street."

The show must have been generally bullish

The show was bullish- the panelists were bullish but Templeton wasn't really, (I don't remember that quote, even... strange since its memorable)... anyway he said 50% long treasuries, 25% long individual stocks and 25% short S&P index... he recommended a hedging strategy.

The one area I saw as strongly bullish in Templeton's comments was his positive outlook on the future of individual investing- he talked about the highest % of households owning stocks and how an investor perspective is good for business overall. He didn't seem to think individual investing was a "fad" nor did he imply money would be removed from the mkts by individuals. This contrasts some bearish views (Bill Gross for example) who feel the public is too squirmish to stay in stocks long term.

Lizzie

To:Gottfried who wrote (3576)
From: Nancy Monday, Oct 14, 2002 12:48 AM
View Replies (1) | Respond to of 3582

The panelists are all bullish, as usual. and what is most interesting is the former tech bull LizAnne ? has not said a word about tech. i forgot what she recommend, but i know it is not tech at all. a defense industry stock i believe.
Sir John Templeton is not bullish at all - his remark is more like a tone in cheek type. He recommend individuals to find a very good stock fund and then hedge same amount of investment in spx short.

To:Lizzie Tudor who wrote (3577)
From: Sultan Monday, Oct 14, 2002 1:15 AM
View Replies (1) | Respond to of 3582

(I don't remember that quote, even... strange since its memorable)...

Yep.. He said that and Lou R. did a quick calculation and said some thing to the effect that it is only 5+% a year and Sir John said it is closer to 7%..

I think he was cautious.. He also said couple of times that he is only right 50% of the time with his calls..

Sir John was a bit slow.. But still looked pretty good for his age.. I think during introduction his age was mentioned as 90..

To:Gottfried who wrote (3579)
From: Nancy Monday, Oct 14, 2002 7:51 AM
Respond to of 3582

Templeton has not rec stocks for 3 or 4 years now. it is not a new stance for him. his own port is 50% in treasuries with stripped coupon or whatever - i.e. interest payment is stripped, for over 2 years he said on the show.

-- posted by Kirk

Top 565. Oct 14, 2002 7:46 AM

» Kirk - 10/11/02 Sir John Templeton

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Sir John was very gracious and I think he had old Lou weeping with his high praise for how much Lou Rukeyser helped the small investor learn about stocks the last 30+ years and enter the market in record percentages.

Near the end of the interview, Sir John said he'd be 50% bonds (US Treasuries I believe) and 50% in a good, MANAGED US mutual fund with a 50% short of SPY. The idea here is that we will be in a stock pickers market for some time so this removes the market risk with the short and you buy the ability of the stock pickers.

I wonder if Sir John has read Jack Bogle's book that says most mutual fund managers don't outperform the index funds? Maybe Sir John would answer that index funds are only good for bull markts?

Question? If you are not a British citizen, then do you really get to use the title "Sir"?

-- posted by Kirk

Top 566. Oct 26, 2002 7:33 AM

» SteveT - 10-25-02

Lou opened stating an unfamiliar emotion has been creeping back to Wall Street recently, hope. Bear markets temporarily replace hope with skepticism, cynicism, and despair. He did warn stocks might not be out of the woods yet. We did have our share of bad news this week both on the economic and political fronts. It is encouraging to see after a long period of the market focusing on bad news now paying more attention to good news.

Frank Cappiello is glad to see the market spreading out with gains in most sectors. After many failed rallies he thinks this one may have legs. Frank likes the health care areas of hospitals, HMOs and drug stocks, with Wellpoint (WLP) one of his favorites. He also likes Southern Company (SO). He is selling nothing saying this rally could be the start of a new bull market.

Frank Gannon worries about stocks going up while short positions are increasing and earnings are not. Gannon thinks earnings estimates got so low now many are going to beat the third quarter by a penny. He does think 4th quarter and all of 2003 estimate are to high. Frank would like to see the market take a breather for a while and then move higher. A couple stocks he owns and recommends are HCA Inc. (HCA) and Bank of America (BAC).

Nick Sargen thinks we are experiencing a relief rally. He is glad to see companies in most cases not lowering 4th quarter guidance. The improved earnings are mostly due to lower costs and restructuring, not revenue growth. When we see revenue growth then we can have a bull market. Stocks Nick likes are growing revenue they include Microsoft (MSFT), Pfizer (PFE), and Constellation Brands (STZ).

Lou introduced Donald Yacktman President Yachtsman management. His value style had him near the bottom of the performance rankings in 1999 but his patience has paid off since. Donald says a contrarian often looks smarter than he really is and the other side of the coin is often looks dumber than he really is. His criteria are 1. Good businesses with a high return on assets. 2. Avoiding things that require a great deal of assets and are economically sensitive. 3. Management that is rational in capital allocation. His funds are concentrated with the top five holding often accounting for 20%- 40% of the fund total. Current top holdings are Tyco (TYC), Liberty Media (LC), Qwest 2010 bonds yielding 7.9%, and Lancaster Colony (LANC). His average holding period is around 4 years. Yacktman sells when stocks get expensive relative to other things available. He is a bottom up stock picker saying price entry is critical. He spends little time worrying if the broad market is under, over, or fairly valued.

Frank Cappiello noted Don seldom visits managements and wondered why. Donald said he would rather look at the books and see what a manager is doing with free cash flow versus getting a sales pitch. He likes to see them reinvest in the business, buy back stock, pay dividends, make strategic acquisitions, or pay down debt. Frank Gannon asked how volatility helps investors. Yacktman said value investors enjoy volatility. It creates buying opportunity for rational investors that do their own homework. Nick Sargen asked if investors should diversify away some of the volatility associated with his funds by owing some index funds. Yacktman said not really. His funds have a beta of .5 or .6 and own above average companies bought at below average prices. Don pointed out in August 2002 his funds were at virtual all time highs.

Lou asked what makes Donald decide a stock is to expensive. He compares them to other companies and long-term treasuries and sells them when he is uncomfortable. He shies away from companies that create technology and prefers those that use technology. Yacktman finished by saying index funds are like someone that puts a mediocre baseball team on the field to fill the park.

Next weeks special guest will be Jean-Marie Eveillard manager of First Eagle So Gen Funds. Jean-Marie specializes in Gold and International investing.

-- posted by SteveT

Top 567. Nov 2, 2002 7:32 AM

» SteveT - 11-1-02

Lou talked about seasonality in Wall Street and how it often stops working the very first time you put your money on it. Wall Street can be inconsistent you know. This year many called for a summer rally that never seemed to get off the ground. Last month many experts were gloomy about October citing 1929 and 1987 as examples. Turns out October 2002 recorded its second best month ever for the S&P 500 and for the DOW the best month in 16 years. You betcha. In the fickle forest of finance good news is often bad and bad news is often good.

Mary Farrell thinks the worst is behind us but would not be surprised to see more volatility with an upward direction overall. Lou asked why this time the bottom is really in. Mary says the economy and earnings are gradually improving, low inflation and interest rates will help also. She is encouraged to see third quarter earnings moving upward for the first time in eight quarters. Farrell is cautiously buying Colgate Palmolive (CL), Fifth Third Bancorp (FITB), and TJX Companies (TJX). She would sell Telecom and Utilities.

Laszlo Birinyi did predict on August 9th the bottom was in and admits he was wrong since we have made new lows but he is still comfortable with his conclusion. He is optimistic because in the last short lived rally European stocks were sold in the rally, this time they did not sell off. Laszlo also pointed out in the 9th inning of a bear market the general public sells short more than member firms, and he is seeing that now. Birinyi thinks decimalization and regulation FD (fair disclosure) will make buy & hold less prevalent with average holding periods of 3-6 months. Lou asked why that is. Laszlo said from 1990-95 there were an average of 40 earnings warnings a year and in the last two years the average has been 2000 per year. (E.C. I have always had a great deal of respect for Laszlo but can not help but wonder if those numbers will not come down in the future. I think the drastic increase in earnings warnings has been due more to a slowing economy. On the other hand when was the last time you heard the term whisper number?) Laszlo figures we will see continual volatility and people will trade the rallies. Birinyi likes American Express (AXP), Dow Chemical (DOW), and Fannie Mae (FNM). He also thinks people are starting to look ahead so some tech stocks could do well. He would sell any small NASDAQ stocks with more hope than reality

Bob Stovall said October 9th was the bottom but does expect some volatility. In contrast to Lou's monologue Bob thinks we could see some seasonality upside this year. Stovall said bears often have Thanksgiving but bulls usually have Christmas. He does not think we will see new lows. He pointed out the third year of a Presidents term the market usually does well. Bob would buy stocks in the Materials sector, health care, and energy. His picks are Pope and Talbot (POP), Smith Kline Beacham (I do believe he meant the ADR of GlaxoSmithKline plc ticker NYSE: GSK) and Suncor Energy (SU).

Lou then introduced special guest Jean-Marie Eveillard manager of First Eagle So Gen Funds. Currently Jean-Marie views gold as an insurance policy in case something bad happens. Lou asked why gold mining stocks go up more than the price of the metal. That is due to operating and financial leverage. Eveillard is not gloomy on the U.S. market, but saying the S&P 500 is not undervalued. His strategy is to try to buy in a declining market and sell in a rising market. Lately he has been doing more buying than selling with cash levels about 6 or 7% in the funds he manages. In his global funds he is buying more in Europe and Asia than the U.S. Some stocks he has been buying are Liberty Media (L), Tyco International (TYC) and Vivendi (V). His typical holding period is 4-5 years, seldom buying the popular "high fliers". Eveillard is bothered by the idea of operating earnings saying "sometimes wall street is a vast promotional machine". He is more in favor of S&P’s idea of core earnings. Lou said, You like them when they take out the hot air. smile

Mary asked for his outlook on Japan. He is hopeful but using self-restraint, from the bottom up things look pretty good. Eveillard is worried about problems that do not seem to get addressed in banking and the government. He said in some ways the society and government seem almost paralyzed. Laszlo asked for his thought on AOL. He does own it indirectly through holding Liberty Media but would not own it directly. Bob said we are seeing a little revival in dividends and there is talk of legislation next year making them more tax friendly. Bob wondered what the dividend yields were in other nations. They are very good with the average yield in Europe about 3%. Several of the mature industrials yield 5-6%.

Lou asked what Jean-Marie is selling. Stocks that have reached what in his judgment is their intrinsic value. That is determined when he buys them and is constantly checked. Eveillard does not think the value style dominance will continue forever, saying market styles are cyclical. Growth is important but he does not like to pay for it. Jean-Marie never takes reported numbers at face value, he is skeptical about most of what he receives. He independently judges companies trying to understand both their strengths and weaknesses.

Next week one of Wall Streets best known bears Barton Biggs Chief global strategists Morgan Stanley. Lou said to expect some surprisingly upbeat news.

-- posted by SteveT

Top 568. Nov 2, 2002 8:22 AM

» Kirk - Re: 11-1-02

In response to message posted by SteveT:

Thanks Steve.

I really liked Jean-Marie Eveillard as a guest.

Eveillard is not gloomy on the U.S. market, but saying the S&P 500 is not undervalued. His strategy is to try to buy in a declining market and sell in a rising market. Lately he has been doing more buying than selling with cash levels about 6 or 7% in the funds he manages.

Now where have I heard that one before, buy when going down and sell when going up? smile

I got a kick how easily he explained how he "dollar cost averaged" into TYCO where he started to buy when it hit $20 and continued to buy all the way down to $10. Now that it is back up to $15, he's about even. I do that all the time with stocks I scale/trade into and out of around a core position. I also do it when I want to buy new securities... and I usually stop buying if they fall more than 50% so I can examine my assumptions and make sure I still like the company, even on sale. I really understood his comment that we don't look too smart when we are buying ... becuase they go lower and we don't look too smart when selling as many think we are selling too early rather than just taking profits or locking in nice gains.

I wish more people would learn that you don't make money buying stocks at their peak popularity.
Lou did a good job getting that message out with his guest Jean-Marie Eveillard.

BTW, I am starting to hear so much about Liberty Media from many value guys... I haven't heard this much stuff about good value since WCOM and TYCO were all the rage in value circles... I am sure tempted as I like the CEO of Liberty Media as he seems a straight shooter, not a crook and I like their products.

Jean-Marie Eveillard did say he would NOT own AOL, a stock many here are in love with. He said he was OK owning it through Liberty Media. Perhaps selling half your AOL (whomever owns it) and buying Liberty Media might be a decent diversification move with that would gain some value?

-- posted by Kirk