Prognosis by John Manley-Smith Bareny [Market outlook]
Hi there Ken:
In case any of you missed this. Say things are looking good from where I sit,what do you think????
[Source:NBR]
Market Outlook With John Manley-Salomon Smith Barney
SUSIE GHARIB: Well, Paul, our guest tonight sees the Dow hitting 10000 by the end of the year. And joining us to talk about his outlook for the markets is John Manley, chief investment strategist for Salomon Smith Barney (NYSE:CXB). John, you have been talking about a bullish market for a long time now, and you're still bullish. Tell us why?
JOHN MANLEY, INVESTMENT STRATEGIST, SALOMON SMITH BARNEY:
Because the things that made it go up are still there. If you think about it, and we have a tremendous fear of any deviation from the perfect growth path. So we're going to get the perfect growth path. If you think of the last two or three months- the first concern about inflation, and then concern about deflation. The market's over- react. That's exactly how you keep on the Goldilocks growth path. So while valuations are high and while the earnings are slow, liquidity is still very good and the economy, for all the stresses, is still going straight down the middle.
GHARIB: Well, that's definitely what we saw in today's market. Where do you see the leadership coming? It seemed like everything was up today.
MANLEY:
Well, it seems like, everything with a symbol, as someone once said. I think we need to focus on a couple of things. Number one, I think technology has been sold down. It's starting to come back. The Intel number was a little bit light but I think that's still a pretty good place to be. We have had inventories come down in that business. We've had estimates come down. The stocks are reasonably cheap. And I'm getting a sense that perhaps Asia's marginal impact has gone to zero. So that's one place.
Number two, drugs. I think the drug area is still a fantastic collision between demand and supply. Great technology pipelines. Tremendous demand because of demographics. Bristol-Myers (NYSE:BMY) is a good story. And then, finally, banks. I think the whole financial area is still very interesting. I believe that rates will be lower a year from now and we won't be in a recession. That's a good sign of the times.
GHARIB: All right, let's talk about individual stocks. Intel, you said technology. Would you buy Intel at 80, $81 a share?
MANLEY:
It's a tough one because the quarter was a little bit light and I think you may have some backing and filling. But I think Intel is still a great company. Every now and then you look back and you say, when the good ones are down, if you can stand the heat over the short term, you want to buy them. I think Intel is a good buy.
GHARIB: What about these Internet stocks-Yahoo! (NASDAQ:YHOO) again, up, it's at 186. Amazon.com (NASDAQ:AMZN) at 115. Do you buy these, or you sell them, or ...?
MANLEY:
I'd rather, I'd rather tell you what the meaning of life is. You know, it's impossible to say. I think you just trade them. There are people smarter than I. I think you have to realize that it's not entirely irrational. The valuations are very hard to swallow. But you do have a tremendous growth vehicle that no one knows how fast it is going to grow. And you also have the short term potential that somebody wants to get into that business. And they'll pay the high multiple. You know, Yahoo! is at a very high multiple, but you take a look at a big conglomerate, how much would that cost a big conglomerate to get the toehold?
GHARIB: You talk about valuations being high and yet you mentioned stocks like Bristol-Myers at 122. That's where it's trading now and some of these bank stocks also astronomical. If you got some money right now, what would you tell investors to do, go in or wait?
MANLEY:
I think you go in. Now, you know, you might get the 5 to 6 percent correction. You can't say it's not going down again. You certainly can't say it's never going down. But the forces are still there in place and you have a lot of people with a lot of nerves on the sidelines. I think you still want to be in it.
GHARIB: OK, the force be with you. That's the story here. Thanks so much, John Manley. And we've been speaking with John Manley, chief investment strategist at Salomon Smith Barney.
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