Her Ladyship's Appearnace on last nights NBR..
"Market Monitor"-Elaine Garzarelli
KANGAS: My guest market monitor this week is Elaine Garzarelli, president of Garzarelli Capital Incorporated, with offices in Boca Raton, Florida; Chicago, Illinois; and New York City. And welcome back, Elaine.
ELAINE GARZARELLI, PRESIDENT, GARZARELLI CAPITAL INC.: Nice to be here, Paul.
KANGAS: The Dow Industrial Average last week dropped 317 points. This week, it was off 194 points. A lot of the technical underpinnings of the market are weakening and we're getting just a whole bunch of earnings warnings from major corporations. Are you losing a little faith in this market?
GARZARELLI: Not at all. Paul, I think that this is the beginning of a new bull market in the small stocks. We went through a complete bear market from April until October in the NASDAQ, down close to 40 percent. And a correction over a-month and a half in the S&P 500 and that bottomed August 31. So we're in the very first leg of a new bull market and I think that it's normal to have a correction like this. So far, from a daily close to the intraday low today, the Dow's only dropped 3 percent.
KANGAS: Where do your 14 indicators stand on a percentage basis?
GARZARELLI: They're at 71 percent when...
KANGAS: That's high! That's strong.
GARZARELLI: Yes, it's very high. When we bottomed August 31, they went as high as 76 percent which is one of the highest in history.
KANGAS: And before in mid-July when the Dow was at its first peak of the year, they went all the way down to 40.
GARZARELLI: Right.
KANGAS: And you put out a "short-term bear" signal.
GARZARELLI: I looked for a correction, right.
KANGAS: OK. So, this doesn't bother you and yet, everything
seems to be going wrong at once. How about the impeachment proceedings, is that going to be a negative?
GARZARELLI: Well, I think the market needs to correct a little bit anyway. It was just moving so fast that our valuation indicators were getting a little stretched about a week ago. So the market will find the news its needs to do what it has to do which is kind of settle down a little bit before it gets enough steam to go back up.
KANGAS: How do your institutional investors feel about the market?
GARZARELLI: Well, it's interesting. Sixty percent of them think we're in the continued bear market and this is just a bear market rally. So that's excellent news in that they still have a lot of cash to put into the market, probably in January.
KANGAS: How do you feel about the collapse in so many commodity prices, particularly oil? Do you think this might be signaling a global recession?
GARZARELLI: Yes. I think a slowdown for sure. Recessions in some areas of the world. I think, here,we're talking about a significant slowdown of maybe 1 1/2 to 2 percent real GDP which is great for interest rates.
KANGAS: All right. Now, you don't think the Fed's going to cut again, do you?
GARZARELLI: Yes, I do. I believe ...
KANGAS: Really!
GARZARELLI: Yes! Sure.
KANGAS: When?
GARZARELLI: I don't know if it will be December. But definitely, in the next six months they'll cut again, maybe two more times. Earnings are down in the third quarter. They were reported down for the first time -4.4 percent. And that should continue for the next three quarters.
KANGAS: All right. Let's talk stocks. Since last year, you recommended a lot of big ones.
KANGAS: Procter & Gamble, Rohm & Haas (NYSE:ROH), Johnson &
Johnson (NYSE:JNJ), McDonalds (NYSE:MCD), Banc One (NYSE:ONE), Chase Manhattan(NYSE:CMB) and Philip Morris (NYSE:MO). They're all way up. Are you taking any of that money off the table?
GARZARELLI: No. No, I'm just shifting into different industries, the kind of industries that do well...
KANGAS: OK.
GARZARELLI: ... after major bear market bottoms.
KANGAS: Baker Hughes (NYSE:BHI) was one of your recommendations and it's way down,although you did sell it in late June...
GARZARELLI: Right.
KANGAS: ... well above where it is now. And the other-the only other loser you had was Hilton(NYSE:HLT) at 33. It's now down around 21 or so. What are you going to do?
GARZARELLI: I love Hilton.
KANGAS: You do that?
GARZARELLI: I would buy it...
KANGAS: OK.
GARZARELLI: ...definitely buy it now.
KANGAS: Schering-Plough (NYSE:SGP) was one of your favorites when you were last with us in October, I should say May. And it was 42. Mow it's the high 50s. You've taken some money off the table there?
GARZARELLI: Yes. I would take some money off the table in the drug industry...
KANGAS: OK.
GARZARELLI: ...and put it into some of the others that have a lot more potential.
KANGAS: How about Conseco (NYSE:CNC)? That was at 50. Now it's in the mid-'30s.
GARZARELLI: No, I would stay with that.
KANGAS: OK.
GARZARELLI: That's an interesting one.
KANGAS: And Avon (NYSE:AVP). Avon at 41. It's down about 4 points.
GARZARELLI: We like that.
KANGAS: OK. Any new ones? We only have about a minute.
GARZARELLI: Yes. I love the brokerage firms. Merrill Lynch (NYSE:MER) and DLJ (NYSE:DLJ)are still down 40 to 50 percent. The banks have taken a very big hit, something like CitiGroup , Chase Manhattan Bank (NYSE:CMB). I think with interest rates coming down on the 10-year bond to 4 percent. Centex (NYSE:CXP) which is a home-building stock, looks excellent. And you know, I'd also be in a lot of the leisure time stocks like Brunswick (NYSE:BC).
KANGAS: OK.
GARZARELLI: Those are the industries, typically, that do very well in a new bull market.
KANGAS: And obviously, you like bonds here?
GARZARELLI: I love bonds.
KANGAS: OK.
GARZARELLI: I think you'll get probably the same return in bonds as you will in stocks over the next 12months.
KANGAS: You say 4 percent on the 10-year?
GARZARELLI: Right. Right.
KANGAS: OK. All right. A very bullish Elaine Garzarelli. It's good to have you with us again.
GARZARELLI: It's nice to be here. Thanks.
KANGAS: Thanks very much. Elaine Garzarelli, president of Garzarelli Capital Incorporated.
(c)1998 Community Television Foundation of South Florida, Inc.
quote.com
DD |
