Here is a copy...received it via an e-mail
PAUL KANGAS: My guest market monitor this week is Abby Joseph Cohen, U.S. stock market strategist and co-chair of the
Investment Policy Committee at Goldman Sachs. And welcome back, Abby.
ABBY COHEN, CO-CHAIR, INVESTMENT POLICY COMM., GOLDMAN SACHS:
Thank you, Paul.
KANGAS: You have been one of Wall Street's most outspoken bulls on stocks during this decade, and correctly so. Now just this
week, we've seen many of the popular market averages hitting record highs. The broader list of stocks, however, is not rallying as
impressively as indicated by advance-decline and new high and low ratios which just have been mediocre, along with moving
averages of various lengths which have barely held support levels or even broken them, below them. Have these factors tempered
your bullish outlook?
COHEN: Not really, Paul, because I think the disparity in performance within the stock market really closely parallels the disparity
we're seeing in the economy. So many people are aware, for example, that sectors of the U.S. domestic economy are performing
well. But portions of the global economy are not. And I think the disparity in terms of stock market performance really reflects the
disparity in fundamental performance.
KANGAS: So it's no longer true that a rising tide lifts all ships?
COHEN: That's especially true now Paul. The market is roughly at fair value, and many investors are paying even keener attention
than they did previously to the fundamental developments for specific companies and sectors.
KANGAS: Do the second quarter corporate earnings reports you've seen so far support the relatively high valuations we see in
stocks now?
COHEN: It's a little bit too soon really to do any meaningful statistical analysis. But clearly, the results we have seen so far, so far,
so good. Our expectation is that profit growth this year and next will be between 6 and 8 percent, and we think that that is
supportive of stock prices where they are.
KANGAS: An increasing number of analysts are saying that the worst of the Asian turmoil is behind us here in the United States.
Do you agree?
COHEN: It's not quite clear, Paul. Clearly, the Asian situation does seem to be calming in any number of countries. But it's going
to take several months before we see inventories finally cleaned out, and before we see the normal distribution systems cleaned
out. So I think there may be some uncomfortable numbers ahead, but we never expected a black hole from Asia. We certainly
don't think we're going to get one now.
KANGAS: The last time you were with us as a market monitor, you gave us some wonderful stocks. That was almost a year ago,
incidentally. Microsoft, Intel, Travelers, Citicorp (NYSE:CCI), Sun Micro, IBM, Northern Trust (NASDAQ:NTRS), Fannie Mae
(NYSE:FNM), and Freddie Mac (NYSE:FRE). They're all way up. Are you taking some money off the table on those issues?
COHEN: At this point, Paul, we're not. Obviously, we always like to be selective. But we are still very keen on technology and
we're still very keen on financial services. These are growth categories in our industries and we think growth areas for the stock
market, as well.
KANGAS: Would you have any new recommendations other than those that I mentioned?
COHEN: Well, let me give you a couple of additional names. So for example, Lexmark (NYSE:LXK), originally a spin-off from
IBM, is a technology company that has good revenues, good products. And is selling at a P/E ratio notably below some of the
others. And in the financial services area, in addition to some of the names you've already mentioned, I'd look at something like
AIG (NYSE:AIG), American International Group, or AFLAC (NYSE:AFL) two U.S. based multinational companies that are
benefiting from some of the conditions in Asia.
KANGAS: Interesting choices there. You know, your target for the Dow Industrial Average, if I recall, was 9300. We are here
now. Are you upward revising your objective on the Dow?
COHEN: We don't revise our target on a frequent basis, Paul. When we put those numbers together earlier this year, we told our
clients that this was a target that we thought could be easily achieved. And indeed, it has been.
KANGAS: Yes it has.
COHEN: We also told our clients that we expected the market to go notably beyond those levels. When we have more information
on how companies actually did in the second quarter, we will do what we always do on a quarterly basis. And that is, review the
price targets because the targets ultimately are based upon corporate profits, inflation, interest rates and so on.
KANGAS: Are there any areas in the market right now that you would really avoid?
COHEN: A year ago, there were some that we were very unhappy with. This included some of the commodity-related sectors.
Commodities ranging from energy to paper to D-RAMS. Anything where the producer didn't have pricing flexibility, we are less
uncomfortable now than we were a year ago.
KANGAS: OK.
COHEN: Relative price performance in these categories has not been as good, but we think that there are some buying
opportunities developing.
KANGAS: OK. They're getting closer to a bottom! All right. Very good, Abby. Thanks so much for being with us.
COHEN: Thank you, Paul.
KANGAS: My guest, Abby Joseph Cohen, U.S. stock market strategist and co- chair of the investment policy committee,
Goldman Sachs. |
