Editor’s Note: Bulls & Bears is a weekly column featuring the opinions of market insiders. Wall Street’s most revered investing maestros Jim Cramer and Donald Trump didn’t return our calls this week (we were later told to refer to their shows, vintage bankruptcy filings, respectively, for comment). But for what it’s worth, in between the throng of the mid-day mob, the following agreed to tell us what they thought for this week’s feature. Make of it what you will:
Tom Au, Director, R.W. Wentworth & Co.
I’ve picked the fair value of the Dow at 7,000; that’s its “investment value”, which is book value plus ten times dividends. In the 60 years from 1932 to the end of the Persian Gulf War in 1992 the investment value was essential for valuing the Dow. But the Persian Gulf War created a new era and a new economic mentality, with America as the world’s global superpower. But now we no longer have the strong dollar, low oil prices, and we’re no longer the world’s unchecked superpower, so all the things that have led American and European investors to take the Dow above its investment value have just disappeared. Warren Buffet appears to be buying into the post-1992 value of the Dow; by that measure stocks look cheap. But if you take the Dow at its 1932 – 1992 value, stocks are still expensive.
Art Hogan, Chief Market Analyst, Jefferies & Co.
Even if you factor in the downdraft we’re in right now and the one coming in 2009, the value of the S&P 500 still doesn’t point to expensive stocks. In the worst-case scenario in 2009 we go down 25%. There’s so much support in the financial space right now with the federal reserve and other central banks continuing to pour liquidity into the system, so financials will bottom out and look good. [But] energy stocks go down faster with a drop in the energy price than they go up with a rise. Consumer discretionary type names such as homebuilders still have some way to go, and things tied to ad spending should be avoided.
Robert Pavlik, Chief Investment Officer, Oaktree Asset Management
Everyone is pointing to what Warren Buffett said the other day in the New York Times, and he makes a good case. You can liken it to doing a little fishing; throw a line out there and sit back. I have a lot of good till cancelled orders out there much below the market level right now, so if I end up owning one of those quality companies at a much-reduced value, I end up getting even more of a bargain. Any company in any sector is going to get pitched through some kind of lasting recession, and you have to look past that to the third or fourth quarter next year.
Jerome Booth, Portfolio Manager, Ashmore Investment Management
The past few weeks have been turbulent for most asset classes. However, the decline of emerging markets asset prices masks continued strong underlying financial and economic performance of emerging markets. The current market distress has therefore provided substantial opportunities to pick-up value unprecedented for ten years. Emerging markets’ current account balances on average have swung into surplus accompanied by a significant increase in international reserves. The current market environment represents an important buying opportunity for emerging market assets.
Yiping Huang, Economist, Citigroup
The [Chinese] reserve requirement ratio still stands at 16% and could be lowered significantly to provide more liquidity for banks. Economic uncertainties mean that we shouldn’t expect sharp currency appreciation any time soon. But it is also very unlikely that the central bank will allow the currency to depreciate against the U.S. dollar continuously. Housing prices have already begun to fall significantly in southern China. To some extent, China is already experiencing a type of credit crunch.
John Davidson, President & Chief Economist, PartnerRe Asset Management
From an economic point of view, the situation we are in now is more serious than 9/11. It’ll take some time to see how markets respond to the current efforts of fiscal stimulus; the key to this is the credit markets. Most of the time we say, “Where’s the bottom in the stock market?” but if you really want to know, the best clues are in the fixed income markets. Some people take a look at the LIBOR spread – these things are better keys to the [bottom of] the stock market than this quarter’s earnings.
KILL YOURSELF DANIEL HARRISON
Harrison, I didn’t like you at first. I and many others missed Joe Dubya. But I like this feature. You are getting some solid footing. But fuck up once and I’ll break that foot. Capiche…
– Commander Bear
When you start working weekends then you get me vote.
Blood, sweat, and tears
Weekend grind those gears
Jeffries?
Dan, what did I say about unleashing your inner bitch?
Eg.
Yiping Huang, Economist, Citigroup
China is as fucked as the US. Housing has fallen more there than in the US. But don’t expect the Commie to provide liquidity for the banks or let yuan appreciate because fuck you!
Pardon me, but I seem to have stumbled upon Kiplinger’s. Anyone know the way to Dealbreaker?
@ 5 these are Yiping’s words, not those of my inner bitch
@ 6 Yes, just click the dealbreaker logo at the top
Isn’t Wentworth one of those shops that pitches buyouts of lottery payments and legal settlements on cable TV?
LFMAO
http://www.un.int/russia/new/MainRoot/docs/press/201008eprel.htm
@6 Asphincter says what?
Why is it so hard to spell Warren Buffett’s last name? He’s only in print 1,500 times a day, yet every jackass “investor” and “journalist” insists on spelling his name “Buffet.”
i like this guy. keep on keeping on, daniel
“investment value” = hilarious, completely arbitrary. where did wentworth get that guy?
#11. Cause he is the only one who can look at every company in the world sort of like it is a buffet.
#13
I think it was used in the wrong context?
“investment value”
Definition
The estimated price a convertible security would sell for on the open market if it lacked convertibility. also called straight value.
CONGRATS BESS
This is really validating for DealBreaker and shows just how pivotal this place has become for the latest on finance.
Great idea for a weekly column
Excellent work, Joe or Daniel or whatever your name is. Keep it up.
@16- wtf does this have to do with bess?
Daniel,
Way to find your balls man. I’m neutral about the column, as I think it’s by and large fluff, but I’m a fan of you telling people to fuck off — and a large majority of them deserve to hear it.
I am the CEO of a hedge fund. What is a bull or bear?
k, this is serious, I heard today about a foreclosure in an upper middle lower upper class neighborhood closely associated with WS.
Daniel, you need to sum it up at the bottom with something snarky directed at something other than people you actually quoted. That wraps the piece and lets you “put your stamp on it” whilst appearring “above it all.”
So do that next time.
You could finish it off with something a bit punchier, like… “And that’s a wrap, you soon to be unemployed toe rags!”
Otherwise, keep up the good work Daniel.
Daniel is Bess’ boy toy.
Art Hogan. Wow what a scoop.
things slow on CNBC and QVC this week?
too long. did not read.
Daniel is this really how you met Bess?
http://www.youtube.com/watch?v=3xQLTxvDkk4
@ 16 – yeah, this column is my idea, and my own reporting, although I won’t take away from the fact that Bess, Joe, John etc. have built the site up to the kind of place that pivotal people want to be featured on. To be honest, that is fucking tough to do. Actually, after last week’s B&B column, 2 of the guys phoned me back to say thanks since so many people had commented they saw them on DB. Which is awesome, and a great credit to the site and those who built it.
@ 23 & 23 – Thanks for your advice. This is my opinion on snark, let me know if you disagree. I think it’s mainly something chicks are better at than guys, largely because we’re too simple/blunt/obvious etc. Moreover, I think snark only works if you are really good at it, and I’m pretty shit at it in all honesty. I’m OK at being inadvertently funny, but snarky is not my strongest point. But the idea for an ending punchline next time is excellent – thanks!
Good job.
http://www.realclearpolitics.com/articles/author/thomas_sowell/
read this
Tom Au seems to be blind to the fact the we have a dynamic world that is continually changing. The companies of today is more efficient than the comanpies used to be in the 50′s or 60′s. It doesn’t matter that much how the Dow was valued between 1932-1992.
if Art Hogan’s wife weren’t working at Fidelity for all those years , he would’ve been fired a long time ago
if Art Hogan’s wife weren’t working at Fidelity for all those years , he would’ve been fired a long time ago
“The companies of today is more efficient than the comanpies used to be in the 50′s or 60′s. It doesn’t matter that much how the Dow was valued between 1932-1992.”
In other words, it’s different this time.
Daniel,
Good job.
Please, filter out those comments that sound like college juniors or laid off embittered analysts.