Byron Wien, of Pequot Capital Management, a long time and successful market strategist made a rather astounding call on CNBC yesterday. I have watched Mr. Wien for almost my entire career, particularly when he was chief market strategist at Morgan Stanley. I have never known Mr. Wien to be what I would call overly optimistic. In fact, there have been many times when I thought he was the biggest bear around. Anyway, he is now positive but cautious on U.S. stocks. Below is the link to his spiel on CNCB yesterday morning.
http://www.cnbc.com/id/27193509
I watched an interesting panel on CNBC this morning. The panel included Vanguard’s John Bogel, Abbey Cohen of Goldman Sachs, PIMCO’s Paul McCulley and Black Rock’s Bob Doll. Wow, that’s a lot of brain power. On the whole, the panel was positive but cautious. Most notable for individual investors, John Bogel urged that if they had reasonably diversified portfolios and didn’t need the money for five years to not be panicked into making long term strategic decisions. Also, Goldman’s Cohen reiterated that they expect that the U.S. is in a moderate recession which would end in mid 2009.
Goods earnings news (better than expected) was had Wednesday from Wells Fargo, Coca Cola, Intel, and JP Morgan and this morning from United Technologies, Citigroup and several others. This was largely ignored however as the futures market focused Wednesday on a significant 1.2% drop in retail sales and the market dropped sharply. As I write this the market appears to be opening higher on Thursday. Of concern are higher average mortgage rates 6.46% vs. 5.99% last month. By the way these numbers are pretty much right on the historical long term average of 6%. Mortgage apps were up 5.1% last week. There was pretty good evidence that the commercial paper market was back to levels (volume) of a year ago. I am trying to get some numbers on this. Now if we can get some money to move out of t-bills, the markets will feel a lot better.
More good news that I think is being overlooked is that that crude oil is down almost 50% from its high last summer. I don’t know about you, but my gasoline tab is down by 25% from just a few months ago. I don’t remember where I read this but someone calculated that this pumps about 100 Billion dollars a year back into the pockets of Americans. It also helps businesses where fuel is a significant part of costs. Also local governments and school districts will benefit.
Another thought I had this morning as I was doing my morning reading is that yes, recessions hurt investors, but they are a necessary part of a capitalist economy. Excesses build up and must be worked out. Sometimes there is a lot of short term pain but always … I repeat always, the economy recovers and grows. You are welcome to stop by my office and take a look at my historic chart of the Dow. Look ahead a little with me for a minute. Two things that were hurting the economy and making life miserable for all of us were the high cost of energy and the high cost of buying a home. Going forward we will have, at least for a time, cheaper energy and for a great while cheaper housing. This is important because the echo baby boomers are poised for household formation and this would be a great leg up for an entire (and large) generation and an important foundation for our economy.
Greg Staub, CFA
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