Do you like gold here?
METZ: Yes. But I think for a unique set of circumstances. Today is the only time that I can remember in my experience where every major central bank wants a devalued currency, whether it`s the Japanese, the euro, the Americans or the Chinese, which means no matter who you are, you cannot rely on your own currency as a safe store value. Therefore I think gold stocks are a good insurance policy.
from
04/02/04: "Market Monitor"--Michael Metz, Chief Market Analyst for Oppenheimer & Co.
PAUL KANGAS: My guest "Market Monitor" this week is Michael Metz, chief market analyst for Oppenheimer & Company. And welcome to NIGHTLY BUSINESS REPORT, Mike.
MICHAEL METZ, CHIEF INVEST. STRATEGIST, OPPENHEIMER & CO.: Thank you, Paul. Glad to be here.
KANGAS: Did today`s strong job creation report convince you that the economy has finally come alive, and give us your opinion to the stock markets reaction to that news?
METZ: I was not impressed. I think the market really is at the high end of its range. And unfortunately I think we have new problems here. Remember, a great source of strength in the economy has been the refinancing boom. That is probably over. If that`s true, I think housing prices weaken or go flat here. That would have a negative wealth effect on the consumer.
KANGAS: Both those groups were down today, the mortgage lenders and home builders.
METZ: But there`s another problem there. I think the so-called carry trade, that is, you have an enormous amount of speculation on interest rates, that is, people borrowing money on the short term to buy medium-term bonds. This has to be unwound. Unfortunately, I think it`s going to be a little bit disorderly in the process.
KANGAS: And you think the stock market is going to get caught in a downdraft because of these reasons?
METZ: Yes. In my judgment, it`s an opportunity to sell here, not to buy.
KANGAS: All right. Fair enough. But you must have some strategy for your own clients. What are you telling them to do?
METZ: Well, a number of things. First of all, I do believe that of all the markets, Japan is the most attractive. I happen to own the EWJ, which is the exchange-traded fund for the Japanese market.
KANGAS: We have a chart of that, I believe. If we can bring that up. And I see they have been doing rather well over the past year?
METZ: Yes, but that market is still selling for about a third of its peak over 15 years ago. Actually in Japan you have an economic recovery, you have very low valuations in stocks. You have a restructuring of corporate Japan, where earnings are rising very rapidly. And unlike the U.S., you have a very under-invested householder.
KANGAS: Now this is what they call the exchange-traded funds.
METZ: Yes. It`s really a collection of the major stocks. They are very little expense ratio, very little cost to carry it.
KANGAS: And you like the diversification. How many - approximately how many stocks are in that ETF, do you know?
METZ: Oh, well over 100.
KANGAS: So you do have a lot of diversification.
METZ: Yes. It`s basically a play on the Japanese market. The whole market. It`s like an index fund.
KANGAS: All right. Any other idea ideas on the buy side?
METZ: Well, I think one should be defensive. And here I refer to stocks as relatively immune to the business cycle, that have low valuations, good balance sheets and the PPH really is that - fits that bill perfectly.
KANGAS: Another exchange-traded fund.
METZ: Yes, this is a collection of the 20 largest pharmaceutical companies.
KANGAS: Now this one has had a real bumpy ride.
METZ: That`s right. It`s out of vogue because people (UNINTELLIGIBLE) for momentum stocks. It`s what we call "growth at a reasonable price." I think it`s a very good place to be over the next few months, the next few years.
KANGAS: But these are mostly American pharmaceutical companies.
METZ: Yes, they are. Yes.
KANGAS: All right.
METZ: But this is one area where America has a comparative advantage in my opinion.
KANGAS: And you do like the idea that they are defensive issues?
METZ: Yes, I do. I think we have seen the peak in the growth in the business cycle, not necessarily a recession, but I think it will slow down.
KANGAS: OK. And they both trade on the American Stock Exchange.
METZ: Yes. But they are both quite liquid and I think quite attractive.
KANGAS: The question comes to mind, gold, under bad circumstances, usually does well. Do you like gold here?
METZ: Yes. But I think for a unique set of circumstances. Today is the only time that I can remember in my experience where every major central bank wants a devalued currency, whether it`s the Japanese, the euro, the Americans or the Chinese, which means no matter who you are, you cannot rely on your own currency as a safe store value. Therefore I think gold stocks are a good insurance policy.
KANGAS: What is your favorite?
METZ: Well, the easiest one to buy is Newmont (NEM), NEM, which is the big North American, very well-run company.
KANGAS: The granddaddy of them all.
METZ: Yes it is. And this is the one the institutions buy. It has liquidity. It`s a good company.
KANGAS: All right. Now, do you personally own...
METZ: I own the EWJ only.
KANGAS: Just the EWJ. We just have about 30 seconds left. Any parting comments for our viewers?
METZ: I think bonds are very unattractive here as well. I think this is a moment to really keep your cash. I think there will be better opportunities to buy both stocks and bonds later on. You don`t always have to be fully committed to any of these asset classes.
KANGAS: So in the big picture, you are bearish on stocks in general and bonds in general, but there are some issues to be...
METZ: Yes. At this moment I think it`s not the right time to enter the market. There are always opportunities later on, I think there will be better opportunities.
KANGAS: Mike, thanks very much for being with us.
METZ: A pleasure.
KANGAS: My guest "Market Monitor," Michael Metz, chief market analyst for Oppenheimer & Company.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED
nbr.com
lurqer |
