05/23/03: Market Monitor-Elaine Garzarelli, President of 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.
KANGAS: Do you think the upturn in the stock market since the March lows has already factored in the tax cut and its potential stimulus for the economy or can this market go a lot higher?
GARZARELLI: Well, I think it's factored in some, but, no, I think it can go a lot higher. I think we have a major, major, major signal here that we haven't had before, since 1999.
KANGAS: Well, we're hearing a lot of technicians say that this market is not cheap at all. It's high on an historical basis. What do you think?
GARZARELLI: I don't think so, because when we bottomed October 9th, the S&P 500 as a share of GDP was lower than it was in the bear market bottoms of the 1960s. There were three bear market bottoms where this time was it lower. And, also, if you took price as a percent of profits, the income tax profits, it's the same situation. In each of those bear market bottoms, the market ran up at least 70 percent before we went into another bear market.
KANGAS: So you obviously feel we are in a new bull market. Is it just a cyclical bull and a secular bear market or is it a secular bull market?
GARZARELLI: No, I think -- well, I think it's a secular flat market and I think we're in a cyclical bull market.
KANGAS: OK. So it's not going to last forever. You don't buy and put them in the lock box, is that the idea?
GARZARELLI: No, I think it could last for a year, a year and a half.
KANGAS: OK. And how high do you think it can get, let's say, in terms of the Dow?
GARZARELLI: Well, I think it can go up another 25 percent at least from here.
KANGAS: All right. Now you were quite bullish on your last visit with us as a market monitor August 16th of last year. The Dow was just a little bit higher than where it is now and we're higher on the NASDAQ than we were then, so you're right on NASDAQ. You gave us stocks like G.E. (GE) and Pfizer (PFE) and Darden Restaurants (DRI), and they're just a little below what they were. They had been higher after you came on and recommended them. But Sears (S) was a major disappointment. That's way down. What do you think about that?
GARZARELLI: Well, Sears is up 50 percent now since the bottom in March, on March 11th. So it's rebounding. The reason the market came down a little bit was because of the war and the uncertainty there.
KANGAS: But you did make some good scores with Lowe's (LOW) and Home Depot (HD) and Carnival Cruise (CCL). They are all higher than they were even back in August, and they've been even higher than that. So those were good calls.
GARZARELLI: Yes, well, all of them are about two or three times greater than the percent gain in the S&P since the March bottom, the March 11th retest bottom.
KANGAS: So you still like all of those?
GARZARELLI: I do, every one.
KANGAS: OK. Now, we're hearing a lot of talk about deflation. Do you think it's a real threat?
GARZARELLI: It could be. It could be. You know, China is in a deflationary environment. Germany's CPI is about to go negative. And there are recessions developing again in Europe. So there is a slight possibility, and I don't think Alan Greenspan wants that to happen, because we don't know what to do with deflation. We haven't had it since the 1700s, 1800s, except for the Depression.
KANGAS: Right. OK. You know, the old saying is take your profits in May and go away for the summer. But you seem to be quite bullish. Give us some new recommendations. I assume that you and your fund own all that we've mentioned already. Is that true?
GARZARELLI: Yes, I do. I do.
KANGAS: OK. How about some new recommendations, especially with this dividend tax cut? What about dividend paying stocks?
GARZARELLI: Oh, yes, there are a lot of good ones out there, Paul. I made a list of a few. For example -- and I own all these myself -- RJR (RJR) is yielding 11 percent and the stock is down 53 percent from its 52 week high. You know, Philip Morris Altria (MO) down 30 percent and that's yielding over six percent.
KANGAS: So you like the tobaccos.
GARZARELLI: Yes. J.P. Morgan (JPM) down 20 percent, yielding 4.4 percent. And Con Edison (ED) here in New York, minus nine percent from its 52 week high, and that's yielding 5.4. The other thing that you mentioned about going away in May, we looked over the last 20 years since 1980, not looking at the last three years of a bear market, but in 80 percent of the cases, the stock market actually went up from May through September, or stayed flat.
KANGAS: All right, so that doesn't bother you then?
GARZARELLI: Not at all. Not at all.
KANGAS: All right, very good, Elaine. We've got to run, but thanks very much for being with us again. We'll look forward to your next visit.
GARZARELLI: Thank you.
KANGAS: My next guest market monitor, Elaine Garzarelli, President of Garzarelli.com. |
