Saturday, March 21 (and 22). My notes from Saturday's and the first half of Sunday's programs. The 2nd half was preempted by a hockey game. Sorry I didn't get this out sooner, was too busy shoveling snow.
He began Saturday's show picking on the bad news bears, stating the annual gains. "With friends like this we dont need any enemies". " The fundamentals of this market are nothing short of Nirvana". CPI stats for last 12 months are up 1.4%, up 0.1 for February. One area where inflation is scary is high flying real estate areas like San Fran, Silicon valley etc. San Francisco and San jose are 2.5 times the national inflation rate due to real estate prices. Overall, inflation is not a concern. market trading at 23.5 times trailing earnings, the highest level in history. This record eclipses the previous record, set in 1961 by 10%. Again the fundamental under-pinnings of the market are the key...low interest, low inflation are the reason we broke that record.
Bob has no buy/sell/hold recommendation on the medical stocks. He rated Motorola a hold in response to a caller. This caller claimed his portfolio went from 500,000 to 2 mil in the 10 years he has been listening to MoneyTalk. He advised the caller to go 60/40 equities/fixed. The caller was in his 50's. Bob is only interested in operating earnings when evaluating stocks and the market. A 73 year old caller asked what his allocation should be. Bob said 50/50 in stocks and bonds. He said for a $100 portfolio he would allocate $37.5 in US $12.5 foreign, $50 in 5 yr treasuries or GNMA's. He explained the beta coefficient principle which compares a stocks' performance relative to the overall market. This will help investors measure the volatility of the stock as compared with the market.
He re-stated that many funds do not outperform the indexes due to expenses etc. Switching between funds is a lateral move, DCA does not apply in these cases. He spoke of the sell signal on Brandywine due to its high cash position, and discussions with the management of the fund. Brandywine is up 2.5% so far this year. The total market is up 12.8% so far this year. He said REIT's gained more than he expected last year. "The funds got ahead of themselves". I expect them to continue up, about at the level of the market. However, you should not expect to see much correlation generally, between REIT's and the stock market. Dow up 276% since Oct. of 1990, not including dividends, add those in, the market is up 300% (DJIA). He referred to it as the "stodgy old dow". "HOW SWEET IT IS". He remarked on the pathetic forecast's of the bears, and how they go into hibernation and never admit or apologize to their investors that they were wrong. These bears have cost investors billions of dollars. "Its so sad"
The median capitalization of the S & P 500 is 30 billion. The median market cap of the small caps is 600 million, the median cap of the mid cap is 1.5 billion per Bob....a big difference. "If you could only own one fund in the US, the Total Market index is "to die for." GNMA's are Bob's favorite treasury security. He emphasized to a caller who was burned in 87 and 90 (I think) in the market the importance of dollar cost averaging. The most expensive brokerage stock is Siebert Financial. The shares have risen sharply recently.
The stock trades at 90 times earnings. In response to a caller on whether he should roll is standard IRA to a Roth IRA, he said that's iffy on the premise never pay taxes today that can be put off til tomorrow. "Consult your CPA. "I think the IRS is trying to trap un-sophisticated investor's to pay taxe now instead of later.
He spoke of the importance of earnings prospects on share price performance citing Compaq, (down 40%), Motorola (down 40%),and Intel as examples. ( down 25%) "This is what specific stock risk is about." "Earnings Rule." He said the day of reckoning has already come to those who fell for the bear market trap responding to a caller that asked about the Asian crisis. The greater good of the Asian problem is that it has held down inflation and interest rates in the US. A caller referred to an accounting mistake stated in Barrons, (Mickey Mouse Accounting) Bob said, since I am an employee of the company, I will make no comments whatsoever . Bob uses a 4 week moving average (from investors intelligence survey out of New Rochelle NY) for the Bull/Bear sentiment gauge. Bob is part of the survey. We're steady at about 64% bulls to bears currently.
Earnings weakness has not been a concern from the Asian crisis so far for the overall market. In the absence of recession, we could be looking at higher earnings in 99 than in 98. Especially if Asia solves its problems. Bob does not recommend using leverage when buying securities. Bob's Asian sell signal was issued July 11, 1997 due to poor performance. "We have no way of knowing how severe a downturn will be, but it ended up being a meltdown". He advised a caller with money in Asia to re-adjust it to 75% US, 10% Europe, 10% international growth and 5% emerging markets. "With regard to US investments, we're dollar-cost averaging at this time".
He re-stated the non tax states in the US, Alaska, Nevada, Washington, Wyoming, South Dakota, Texas and Florida. Two other hybrid states are New Hampshire and Tenessee where you are taxed on your dividends and interest, but not earnings. (The others, you are taxed on neither.) God, why do I live in upstate
NY ???!!! A woman called in stating she turned 500,000 into 3 mil in the last 12 years listening to MoneyTalk. Bob was pleased to hear this of course. "This can be done, it wont get done with the get rich quick or the penny stock crowd, but it can happen by investing in quality mutual funds".
He spoke of the great performance of the utility sector, mentioning the Fidelity utility fund. It's had a banner record. "When one looks at the electric utilities, one has to be impressed with the fact that if you go back in history, electric utilities have traded at a discount to the market of about 20%, but if you look at them right now, the discount approaches 30%. That means they have the potential to do very well", even though they are a conservative investment. Home building stocks are also trading at a large discount....35% to the market multiple. There "could" be good value here.
He told a caller never to buy a stock just because it has split. The caller had recently bought Compaq. Bob said, "maybe you bought mine"!!! He advised a caller with 60,000 to put 5% in emerging markets, 10% in Europe, 10% in international growth and the rest dollar cost average into the US market. A caller asked about Ford stock. Bob said the auto industry is trading at a 45% discount to the market, however, earnings are projected to decline. Bob is neutral on the industry. Bob referred to an article in the Investors Business Daily regarding computer stocks. The article points out the new kids on the block which provide internet telephones, internet appliances such as web-tv boxes etc. He see's this as a new challenge for the PC industry since people will be able to browse the web with much cheaper hardware. PC proliferation currently at 45% per Dataquest.
My kids are putting pressure on me, let me post what I have, they're may be more, if so I'll post it later.
Have a good day.
Regards,
Joe |
