Recession, $40 Oil May Be 2001 Surprises: Morgan Stanley's Wien
New York, Jan. 2 (Bloomberg) -- Consider this scenario for the coming year: The U.S. and Japanese economies slip into recession, the euro falls to 75 U.S. cents, causing unrest on the streets in Germany, while oil goes to $40 a barrel, causing unrest in the U.S.
Those are possibilities outlined by Byron Wien, chief U.S. strategist for Morgan Stanley Dean Witter & Co., in his annual list of 10 ``surprises'' that might occur this year.
``Man oh man. He is just a bearer of good news,'' said Allan Meyers, manager of the $700 million Kent Growth & Income Fund. Meyers said he reads Wien's annual surprises list as food for thought. ``It makes you think about the coming year.''
In item No. 5, Wien suggests that the U.S. economy ``dips into outright recession in the first half of 2001,'' while unemployment heads to 5 percent (from 4 percent now) and the Federal Reserve cuts short-term interest rates by 1 1/2 percentage points.
Even with lower rates, ``recovery is muted'' in the second half of the year, Wien writes. Corporate profits continue to disappoint investors, and ``the major (stock) indexes do not have a major rebound.''
Wien presents his surprises as events that have a 50-50 chance of happening while the ``consensus'' gives them one-in- three odds of coming true.
Hot Retail Stocks
Wien said consumer electronics and home improvement retailers, such as Best Buy Co. and Home Depot Inc., ``could become hot stocks in the second half of the year.''
For surprise No. 9, Wien says that the business cycle in the semiconductor industry improves, helped by the Fed's rate cuts. ``New products associated with wireless data and optics begin an important new growth trend,'' he writes, boosting Broadcom Corp., National Semiconductor Corp., Applied Materials Inc. and Teradyne Inc.
Wien did well with his industry calls last year, predicting that hospital management companies would finally come into favor and oil service stocks would rally as oil prices soared.
Among hospital companies, Wien's picks included HCA-The Healthcare Company, which gained 50 percent in 2000, and Tenet Healthcare Corp., which rose 89 percent. The oil service stocks he singled out for ``big gains'' included Schlumberger Ltd., up 42 percent in 2000, Smith International Inc., which climbed 50 percent, and Halliburton Co., which fell 10 percent.
Recalling Wien's previous lists, Meyers said, ``Didn't he predict the Internet would crash last year?'' He did. Wien included on last year's list the possibility that the Internet ``meets its Waterloo,'' with some Internet stocks falling 50 percent and Congress moving to charge sales tax on Internet transactions.
In fact, Internet stocks fell harder than he predicted, without any interference from Congress, sending the Bloomberg U.S. Internet Index down 66 percent in 2000.
Bush's Prospects
Beyond the economic doom and gloom in this year's list, Wien saves his kindest predictions for the president-elect. In item No. 1, George W. Bush proves the ``fears of legislative gridlock'' unfounded and gains passage of income tax and estate tax cuts along with major healthcare and education bills. ``Bush proves to be a `unifier' after all,'' Wien writes.
In surprise No. 10, Bush lifts the economic embargo on Cuba, causing a split with his brother Jeb, Florida's governor. The rift is healed by Thanksgiving as Cuban trade and travel provides an unexpected boost to the state's economy.
Still, political forecasting may be Wien's weakest skill. Last year he predicted that former Sen. Bill Bradley would defeat Sen. John McCain in the presidential race, carrying a Democratic majority with him in Congress. |
