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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (677)	6/25/2002 11:28:25 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

A Barton Biggs Interview in the recent issue of Barron's... --------------------------------------- Barron's: Rumor has it you've turned bullish. Why? Biggs: Things have worked out much as we thought since January. But we're either at or close to an important bottom, and the selling has gotten overdone. Sentiment has gotten too depressed. Valuations have become somewhat more attractive both in the U.S. and around the world. So I think we're setting up for a rally that lasts for a couple of months and takes the S&P up roughly 15% and the Nasdaq up 30%. And it takes a lot of these busted stocks up 50%. Q: But the market overall is not out of the woods, is it? A: No. There are still a lot of problems. But there are some fundamental reasons to think the market will rally, not just the fact that valuations are cheaper and the market is oversold. We've got at least three, probably four, quarters of favorable earnings comparisons ahead. Inflation is still very low. The Federal Reserve is still very easy. The U.S. and world economies are not going to fall apart. Is it going to be a slow, sluggish recovery? Yes. But real growth will be 3% in the second half of this year, and S&P earnings will be up 20%-25%. We are not into a new bull market, but we may well have hit the bottom of the trading range. Beyond this rally the market will just mill around, but within an environment of 2½%-3% inflation, because the Fed errs on the side of ease. To a certain extent it's a stagflation-type environment of relatively sluggish growth, a little increase in inflation and Treasury rates rising one-half to three-fourths of a percent. Q: So no new lows for stocks? A: A lot depends on whether there is another bolt from the blue, be it a terrorist attack that disrupts the economy or some kind of financial accident. If not, we're close to the lows. Q: Investors aren't acting that way. A: Individuals probably will sell into the rally. The institutions don't know what to do. They are trying to figure out how to justify 9%-return-on-asset assumptions. There aren't any big, liquid financial alternatives to get you there. They are going to have to be more aggressive asset allocators, selling stocks on strength and buying on weakness. Q: What should they be selling and buying now? A: Technology, media and telecom are all going to do pretty well, particularly names like AOL Time Warner, Nokia, EMC and Cisco. The same with some other busted stocks, like Tyco International, and groups like pharmaceuticals around the world. Abbott Laboratories, Merck and Pfizer are the good ones, and Schering-Plough and Bristol-Myers Squibb are the troubled ones. But the drugs are starting to look like value. I still like natural gas -- Burlington Resources and Phillips Petroleum. The financials will rally, but should be underweighted in the future. There are still more bodies to come up from the depths. All the losses haven't been recognized yet. Q: Some foreign markets are putting the U.S. to shame. Will this continue? A: International markets are going to outperform the U.S. Once you add in a declining dollar, foreign markets provide the American investor with 7%, 8%, 10% more per year than the U.S. That's probably the strongest trend of all. The dollar will fall another 5% before the end of the year and another 5% in the first half of next year. So we'll see the dollar down 20% over the next three years. Non-Japan Asia is the best place to be. I would invest in funds that specialize in Asia and the emerging markets. There's nothing the matter with Japan, either, though the turnaround is very slow. Q: That's for sure. Thanks, Barton.