Frank...these guys have left something O..U..T....Panel sees Dow 13,000 in Y2K
Experts bullish on market, call for lower interest rates
By Kristen Gerencher, CBS MarketWatch
Last Update: 3:58 PM ET Nov 2, 1999
Personal Finance News
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SAN FRANCISCO (CBS.MW) -- When a panel of distinguished
financial pundits gathered to hash out where the market is heading at the
popular "Money Show" convention here last weekend, the proverbial
bulls charged.
Economic commentator Louis Rukeyser moderated
the group that included Wall Street veterans Joe
Battipaglia, Gail Seneca, Frank Cappiello, and
John Dessauer.
Rukeyser kicked off the discussion with characteristic wit as he joked
about the Clinton scandal and reflected on the events of the past year.
"In recent years, as much as we love to argue and
debate about politics, the truth is politicians are
becoming increasingly irrelevant to our future
prosperity," Rukeyser told a crowd of 500 people.
His message to Washington: "Don't just do
something, guys. Stand there!"
Rukeyser cautioned investors not to be "slaves to
past performance" and attributed his optimism to a
new wave of freedom and free markets around the
world and at home, where he said investors will
make strides to lower capital gains tax and improve individual retirement
accounts.
"We are just starting to see signs of political clout of the new American
capitalist," he said. "Forty-three percent (of households) own stocks and
the number's growing. They know they can't depend on the government to
solve problems. They learned that they can do it better."
The market and interest rates
Rukeyser then opened up the floor to his colleagues by asking their
opinions on where the market is heading in the next 12 months. The group
demurred, preferring to talk first about broader indicators.
Dessauer, chairman of McGinn Investment Managements, said the dollar
is "grossly undervalued." Seneca, managing partner of Seneca Capital
Management, reported she was optimistic, and said that the market has
been "strong but also choppy." She said the early part of the year 2000
will bring a rally in the form of the "first rush of new liquidity on the market
once people put Y2K fears behind them."
Joe Battipaglia, chairman of investment policy at Gruntal & Co., outlined
four criteria for determining stock winners and losers in the next year. He
said companies must continue to meet or exceed earnings expectations,
build their businesses through acquisitions and alliances, have an Internet
strategy, and use any surplus cash to buy back stock.
On the question of interest rates, the consensus was that monetary policy
is too tight. "Alan Greenspan wants to take one third of the cut rates
back," said Cappiello, chairman of Cappiello-Rushmore Mutual Funds,
adding that he foresees one additional rate increase either later in
November or in February, but that rates next year this time will have
dropped back down, perhaps to 5 1/2 percent.
On Federal Reserve Chairman Alan Greenspan's actions, Battipaglia said
consumer loan rates have become too high for most people to handle in
the form of credit card debt and mortgages. "He confuses me at times,"
said Battipaglia. "I think I'm in the minority position that he won't raise
rates in November."
Higher rates have helped to push twice as many corporations into default
as last year, and Greenspan has to balance the needs of consumers with
those of industry, according to Seneca. "Part of the schizophrenia we're
experiencing in him is that maybe he sees he's gone too far," she said,
adding that the market needs more liquidity. "The last thing Greenspan
wants to engender is an economy that is either feast or famine."
Hard assets and Internet stocks
On commodities, Cappiello and Dessauer
recommended avoiding gold, although Cappiello
said oil is more like what utility stocks used to be
and doesn't qualify as a commodity anymore.
Seneca then moved the conversation to Internet
stocks and questioned the wisdom of investing in
".com" companies with no clear business model.
"One thing that turns me off is speculative plays with Internet companies,"
she said, noting that for some companies, failure to make money is a
temporary condition. "And then there are other companies where there is
no plan whatsoever."
She used Bluemountain.com, an Internet greeting card company, as an
example of what she called an incomprehensible play. "(It) was bought by
Excite@Home (ATHM: news, msgs) for nearly a million dollars. I may be
a blonde, but I don't get it," she joked.
Investors should view companies' lack of concern with profits as a red
flag, according to Seneca. "I would unfortunately put Amazon.com
(AMZN: news, msgs) in that category," she said. "Jeff (Bezos) seems to
think profit is a dirty word." One company whose business model she did
endorse, however, was EBay (EBAY: news, msgs) for allowing people to
trade their own inventory.
Dow 13,000 and stock picks
When asked where the best places to put money are, the panel listed their
stock picks.
Cappiello: AT&T (T: news, msgs), America Online (AOL: news, msgs),
Intel (INTC: news, msgs), Sun Microsystems (SUNW: news, msgs),
Federated Department Stores (FD: news, msgs), Staples (SPLS: news,
msgs), American Home Products (AHP: news, msgs), Wal-Mart (WMT:
news, msgs).
Dessauer: J.C Penney (JCP: news, msgs), Cendant (CD: news, msgs),
Ciber (CBR: news, msgs), Hilton (HLT: news, msgs)
Seneca: AMFM (AFM: news, msgs), General Motors Hughes (GMH:
news, msgs), Tandy (TAN: news, msgs), Motorola (MOT: news, msgs),
Xilinx (XLNX: news, msgs), RF Micro Devices (RFMD: news, msgs),
Crown Castle (TWRS: news, msgs)
Battipaglia: Nokia (NOK: news, msgs), SDL (SDLI: news, msgs), MCI
WorldCom (WCOM: news, msgs), Qwest (QWST: news, msgs), Bell
Atlantic (BEL: news, msgs), Johnson & Johnson (JNJ: news, msgs),
Merck (MRK: news, msgs), Pfizer (PFE: news, msgs), Warner-Lambert
(WLA: news, msgs), Schering-Plough (SGP: news, msgs), Amgen
(AMGN: news, msgs), Merrill Lynch (MER: news, msgs), American
Express (AXP: news, msgs), JP Morgan (JPM: news, msgs), Citigroup
(C: news, msgs), American International Group (AIG: news, msgs),
Home Depot (HD: news, msgs), Gap (GPS: news, msgs), Walgreen
(WAG: news, msgs), Nordstrom (JWN: news, msgs), Procter & Gamble
(PG: news, msgs), Unilever (UN: news, msgs), Norfolk Southern (NSC:
news, msgs), Federal Express (FDX: news, msgs), Airborne Freight
(ABF: news, msgs), Northwest Airlines (NWAC: news, msgs),
Southwest Airlines (LUV: news, msgs)
In closing, Rukeyser asked where each panelist would put the Dow by
August of 2000, the month of the next "Money Show" in San Francisco.
Cappiello called for a high of 13,200; Dessauer said 13,437 on high with
a low of 10,153; Seneca said to expect 12,000 to 12,500; and
Battipaglia called for a Dow in the area of 13,000, with Nasdaq checking
in between 3,500 and 3,600. |
