Bulls & Bears

Bulls & Bears

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.

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Bulls & Bears: 10.13.08 – 10.17.08

Editor’s Note: Turbulent times call for rational thinking. For what it’s worth, Bulls & Bears is a new weekly column at Dealbreaker featuring the perspectives of market insiders from around the world.
Jim Oberweis, President & Portfolio Manager, Oberweis Asset Management
If we had to select a single word that described market sentiment today, it would be fear. While economic conditions are indeed dire, talk of economic depression is an over-reaction. In all likelihood, we face a moderate or possibly severe recession. As bad as it seems, today’s economic data is markedly better than that of the 1930s. During the Great Depression, unemployment peaked at 25%. Today unemployment stands at 6%. Back then, GDP fell 13% in a single year. So far this year, we have not even seen a negative number. It’s a very good time to be buying, but whether or not we’ve reached a bottom is hard to say. No one can make guarantees, but for investors with long-term investment horizons and the ability to weather short-term volatility, we believe that current conditions may offer an above-average buying opportunity.
Gavin Parry, Director, Helmsman Global Trading
Over the coming week or two, the current round of selling will exhaust itself, and the bargain hunters and bulls will re-emerge. But the equity markets have another difficult 12 months ahead and even longer for the real economy. We think the chart of the S&P is spectacularly clear. The S&P smashed through our 1,100 target. However, I am expecting a quick rebound back above this level before moving lower once again. We retain our call of a final bottom of 800 mid to late next year. The charts indicate a final low of 8,000 on the Nikkei. If this down trend continues we expect Hong Kong to bottom at 11,000.

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