08/16/2002: Market Monitor: Elaine Garzarelli, President, Garzarelli.com
PAUL KANGAS: My guest market monitor this week is Elaine Garzarelli, President of Garzarelli.com. Welcome back to NIGHTLY BUSINESS REPORT, Elaine.
ELAINE GARZARELLI, PRESIDENT, GARZARELLI.COM: Nice to be here, Paul.
KANGAS: Clearly the majority of individual investors and a great many analysts have found the stock market's recent behavior difficult to explain and quite frustrating. Give us your assessment of current conditions.
GARZARELLI: Well, my indicators turned bullish, actually, from a neutral position July 26th so…
KANGAS: Your 14 famous indicators.
GARZARELLI: Yes. They went from 40 percent and they jumped all the way up to 73 percent. So they're in clearly bullish territory right now. And with interest rates coming down the way they are, the major reason for the upgrade was valuation looks much, much better. In addition to that, money supply is exploding. So I think that this is a very good signal.
KANGAS: What about these reports of a waning, you know, recovery? We've seen consumer sentiment questionable now and housing construction down, according to a report today. What do you think?
GARZARELLI: Yes, I think that that's temporary and I think that with the refinancing activity booming, that's putting more money in consumers' pockets. I think that that will be a very good trend for consumption in the future. Business spending is off and that's going to be slower this time around. But we have government spending at both the federal, state and local levels, a rebuilding of inventories and the consumer coming back a little bit. I don't see a double dip at all. I see slow growth, but I don't see a double dip. But I think we bottomed in terms of corporate profits.
KANGAS: So then you characterize what we're in now as a bull market. But is it a secular or just a cyclical bull within a huge bear market?
GARZARELLI: Yes, well, that's the key. From 1967 to 1982 we were in a secular bear market, but we had cyclical bull markets where you could make 40 to 70 percent. So they're worth playing. And that's one of the reasons back then we determined what moved the market and created the stock market indicators. So we could go in, go up 40 to 70 percent and then when it was finished get out and go to cash, and then get back in. So I think we're in at a flat, flat trend. We're not a buy and hold market at all these days.
KANGAS: You can't put them in a lock box.
GARZARELLI: You can't just buy and hold anymore. It's a different situation now.
KANGAS: Your last visit us with in the middle of February, you were fairly bullish. You liked stocks like Alcoa (AA), General Motors (GM) Lehman (LEH), Engelhard (EC), G.E. (GE), Maytag (MPY) and Hilton Hotels (HLN). And within two months every one of those stocks had a nice gain. But the question is now they're all lower than they were in February. Did you get out?
GARZARELLI: Yes. We, actually, when our indicators went down to 40 percent we cut back. On average they were up about 25 percent after I was on before.
KANGAS: Yes, they had good moves.
GARZARELLI: So, actually I still like all of them.
KANGAS: Every one of those?
GARZARELLI: Yes.
KANGAS: OK. And anything new on your buy list?
GARZARELLI: Yes, well I do have a few. G.E. is down 27 percent.
KANGAS: Well, that was one of those that you liked.
GARZARELLI: Right. And I continue to. Now Pfizer (PFE) down 27 percent. Maytag, again, down 40. Carnival (CCL) is a new one. That's down 30 percent. And I think as the consumer comes back -- and it's pretty much not the consensus viewpoint right now and that makes it a great opportunity. Restaurants, we like Darden (DRI), we like Lowe's (LOW) and Home Depot (HD), which was off a lot today.
KANGAS: OK.
GARZARELLI: What an opportunity in Sears (S).
KANGAS: And you said last time in February you expected the market to be 20 percent higher by the end of the year. Are you still with that?
GARZARELLI: From these levels it wouldn't surprise me at all.
KANGAS: OK. Now the stocks that you mentioned that you are owning or you will buy, do you own some of these yourself or does your fund or any of your interests?
GARZARELLI: Yes, our fund owns, I'm sure, most of them. And I think I own probably most of them, too.
KANGAS: Well, I guess that's sort of a vote of confidence in a way, isn't it?
GARZARELLI: Absolutely, because I'm the kind of person that goes totally to bonds, totally to cash and only when my indicators say to I go back in the market.
KANGAS: So when your indicators get down to 40 percent, that's a sign to start reducing. Thirty percent outright sell, but right now it's an outright buy.
GARZARELLI: Yes, 40 percent is a large correction.
KANGAS: OK.
GARZARELLI: Thirty percent is a bear market.
KANGAS: All right, very good, Elaine. Thanks for being with us.
GARZARELLI: Thank you, Paul.
KANGAS: My guest Elaine Garzarelli, President of Garzarelli.com.
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