Gotta love it when Abby shows up and the market immediately tanks. LMAO!!!!
Here she is from last night on NBR:
02/03/03: One on One With Abby Joseph Cohen, Chair of the Investment Policy Committee of Goldman Sachs
SUSIE GHARIB: Our market guest tonight sees some positive trends for the U.S. economy and corporate earnings. Joining us now: Abby Joseph Cohen, chair of the Investment Policy Committee of Goldman Sachs. Hi, Abby, nice to have you on the program.
ABBY JOSEPH COHEN, CHAIR, GOLDMAN SACHS INVESTMENT POLICY CMTE.: Thank you, Susie.
GHARIB: Let`s start first with your view on the news flow that we`ve gotten on earnings recently and also economic statistics. What`s your assessment so far?
JOSEPH COHEN: Well, the most recent information has been somewhat encouraging. It`s not that it`s the most vigorous and robust period we`ve ever seen but certainly things are better than they were just three months ago. We have the economy growing a little more rapidly than it was, more rapidly than people expected, but I think the really big news is that corporate profits seemed to have turned a corner. Two-thousand-and-two may very well have been that major point of inflection during which companies threw away all of those write-offs, made the adjustments they needed. And we`re seeing pretty good profits so far. Thus far up about 11 or 12 percent in the reports that we have for the fourth quarter.
GHARIB: But what about going forward? Many of the CEOs who have appeared on our program and have talked to us, the guidance that they`re giving at best is murky. So much uncertainly out there with what is going to happen with the economy, especially if there is a war with Iraq. How do you factor all that in?
JOSEPH COHEN: I think that there is a great deal of murkiness for everyone. With the potential for military engagement with Iraq, there is uncertainty obviously about how companies will be performing. In addition I think many companies would rather keep expectations as low as possible. And so we have many companies indicate that the results thus far have been good but they`re not sure about the future. We see that - the same pattern in the consumer confidence numbers, where consumers say they`re happy about their current financial circumstances, they`re planning to spend money now but they`re not too sure about six to 12 months from now. I think it`s all part and parcel of the uncertainty over the geopolitical situation.
GHARIB: We`ve gotten off the year with a bumpy start for the month of January, all of the major stock indices have been down. And you`re forecasting the S&P 500 at 1150 for the year and its equivalent for the Dow at 10800. So from where we are now, we`re talking about an increase of something like 30 percent. Now Abby, I know that you`ve gotten a lot of criticism about maintaining a very bullish stance. But I`m just wondering when we`re going to see this rally that you`re seeing by the end of the year?
JOSEPH COHEN: Clearly we have to make our judgment about price targets based upon a fundamental forecast. We`re assuming, for example, profit growth of about 10 percent this year and no return back to recession. The expectation being that growth will be even better in 2004 and we come up with the price targets that we have. Let`s keep in mind that just the way investors were very tolerant of risk in early 1999, through early 2000, they`re now very intolerant of risk. A lot of the pressure we saw in the market in January related to selling pressure, but let`s recognize that momentum usually is not a reason to buy or sell. Long-term investors are better off thinking about the valuation and the fundamentals rather than what has happened in the markets over the most recent weeks, months. { Riiiiigggggggghhhhhhhhtttttttttttttttttttt, sell that BS somewhere else Abby! }
GHARIB: I know you don`t want to talk about specific stocks this evening, but can you tell us then, given the scenario that you`re painting, where do you see momentum? What stock sectors will have opportunities for gains?
JOSEPH COHEN: We all have to wait until there`s some clarity on the situation with regard to Iraq. And until that happens, I think it`s fair to say that many investors will prefer to stay in the safest possible securities. In some cases that means Treasury securities. In other cases it means equities that are in very defensive areas.
GHARIB: Like?
JOSEPH COHEN: If, however, we`re able to look out toward the end of the year, and presume that we are past whatever happens in Iraq and the economy is moving again, we think some of the more economically sensitive areas can do better. In the short term, people are obviously focusing on things like pharmaceuticals, consumer staple names, looking out a little bit further we think there is an opportunity in some industrial categories, some categories that could bounce back including technology, maybe even some airlines that are currently under incredible pressure.
GHARIB: What about any risk factors here? You mentioned about investors have an intolerance. Surely there`s no rush to go out there and buy stocks from the feedback that I`ve been getting. To what extent is that going to impact your scenario, if we have a war particularly?
JOSEPH COHEN: That`s a wonderful question, Susie. Clearly people who do work like mine which is quantitatively based are always quick to point out that a valuation model is not a timing device. We can say that based upon the outlook for the end of 2003 and 2004, a fair value for the stock market is X or Y, but we have to get there first. And the catalyst and the impediments are critical. Right now we are facing the problems in Venezuela, the problems involving Iraq, even the discomfort over the tragedy this past weekend. And so I think investors should think in terms of a market that moves like a step function. The next time we get a bit of good news, market moving up somewhat and then we sit back and wait and see what the next round of fundamental information is.
GHARIB: Unfortunately we`re going to have to leave it there. But Abby, thank you so much for giving us your thoughts on the market. We`ve been speaking with Abby Joseph Cohen of Goldman Sachs.
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