All-Star Roundtable: Phillips' Favorites

03/07/2003 12:00 am EST


Paul Kangas, co-anchor and financial commentator of The Nightly Business Report, is television's leading provider of daily stock market information. At the recent Florida Money Show, he hosted the All-Star Roundtable, featuring advisors from the Phillips Publishing family. The comments below introducing each advisor and the questions they are asked come from Paul Kangas.

"Do you think the market and the economy will rebound strongly as soon as the situation in Iraq is resolved?" asks Paul Kangas of the full panel. "Or, do you think there are still fundamental weaknesses that will lead to another disappointing year for investors in 2003?"

Skousen, Mark"We begin with economic expert Dr. Mark Skousen. For the past 23 years, he has been the editor of Forecasts & Strategies , one of the most influential economic newsletters in the country:

"The answer is yes! I think there are some fundamental problems and I think 9-11 has changed things forever. Economic growth rates suggest a major recovery. I do think the market will make a significant recovery if the war is cleared up fairly easily. In that case the markets will recover. Any inkling of any positive development should cause the market to jump. That will be major future trends, and we will see the market recover. But that is primarily due to the fact that we are in an oversold situation. As far as the long-term situation, the war on terrorism is going to stay with us for some time, and it will continue to impact investor thinking. The result will be a defensive, conservative approach to investing. As a result, our primary focus is on income investing. And I also think gold is also an area we want to be in."

Lowell, JimJim Lowell is a leading national expert for Fidelity, and is the editor of the award winning newsletter The Fidelity Investor, and editor of the technical trading service, Fidelity Sector Investor. He also operates a private money management firm:

"Unlike Dr. Skousen who focuses on economics, I have spent less time focusing on macroeconomics which change daily, and I am much more interested in fully understanding the Fidelity fund managers that we invest with. We follow their career histories over many market cycles and seasons. I do agree that 9-11 has changed the basic psychology, which has led to increased volatility. As a result, we have taken much more defensive positions, even in our more aggressive growth portfolio. At the moment we are moving away from bond funds of any duration and beginning to shift into money market funds. Our assumption is that at this point, the bond market is oversold."

Navellier, LouisLouis Navellier is president of Navellier & Associates, which manages over $5 billion in institutional, individual, and pension portfolio and is editor of two investment newsletters, the Blue Chip Growth Letter and MPT Review:

"I think the market will have an incredible reflex rally as soon as the Iraq situation is dealt with, whether through diplomacy or the hard way through military action. But I still expect any rally to be fairly narrow. Corporate earnings have been very good. Earnings in the fourth quarter were up 15% on average for the entire market. Those were the best earnings in two years. Right now we are trying to stay in the top 18% of the stocks in our proprietary stock grader database. We remain prepared for a narrow market environment, even in a post-Iraq scenario."

Smith, TobinTobin Smith is the author of The New York Times bestseller, ChangeWave Investing. He is the founder and chief investment strategist for ChangeWave Research. He is also a contributing editor to FOX News:

"Two years ago, we said to sell technology stocks, because we felt the business world was going to retract. We shifted our stock holdings to what we call Ballast Stocks, which are investments that produce high income no matter what the environment. Our research showed we were not just in a recession, but that we were seeing a fundamental shift from a bubble world to a new type of investing. We were right for the past two years, and I think we will be right for this year as well. I think we are going to have a stock market that is maybe "buy and be long" in March, but be gone by May or June. The reason is that the fundamental issues behind stocks just aren’t there. In addition, when you can own investments that earn 15% or more from gas royalty trusts and other select income stocks, why in the world would you want to time when general equities will come back. We have to ask what happens to stocks in a post-bubble world? Thus, we are holding 80% of our assets in ballast income stocks and 20% of our funds in growth stocks. But for now, we don’t see anything more than a potential 20% reflex rally and then a return to the same old grind. We’d rather just get checks every month, so that our accounts get larger."

Murphy, MichaelMichael Murphy is the editor of the California Technology Stock Letter, Technology Investing, Health Investing, and Biotech Investing. Michael Murphy is a graduate of Harvard University and a CFA and has been involved in analysis since 1970:

"There’s no doubt that a resolution to Iraq – no matter whatever that means – is going to be a big relief, not just to the stock market but the economy. It is clear that consumers have started holding back spending, and businesses have also held back spending waiting for a sign that there will eventually be decent demand. Meanwhile, oil prices are starting to really bite across the economy, and resolving the war in Iraq will solve those three problems and let us get back in gear. We are still worried about domestic terrorist attacks, but you simply need to factor that into your asset allocation decisions, such as what percentage of your assets you are willing to expose to equities. For those concerned with terrorism-related market drops that we may get from time to time, I would point to the Israeli stock market. That market still takes a sharp hit every time there is a terrorist attack, but then the market comes right back. I think we are going to see an awfully good year in 2003. I think we will see what at this point is drastically pent-up capital spending cut loose in technology in the US and Europe. Companies know they are behind, but they are just afraid to spend given the geopolitical situation. I think they will soon accelerate their spending, but keep in mind that this may not happen until September or October."

Dessauer, JohnJohn Dessauer, editor of Investor’s World, has been traveling the globe for over 30 years to discover the best companies to invest in no matter where they may be located. Before launching his newsletter, in 1980, he was CitiBank’s chief investment office in Europe, overseeing the bank’s private money management operations:

"My feeling is that the Iraqi situation will be resolved within about six weeks, and I think public opinion will flip right around and be on our side. But certainly, I don’t think investors should construct any investment strategy on any single event, even a war. In my mind, the overall fundamentals have been getting better and continue to get better. The dollar is down, which lifts the weight off the economy. Productivity remains strong and positive trends are in place. Productivity last year was up at a 4.7% rate – which is almost unbelievable. Short-term interest rates are down and the discount rate is ¾ of 1%. It has only been lower than that once in our history and that was 1942. But I believe long-term interest rates are still way too high under the current circumstances. Until they come down, we will not get the economic growth that everyone is looking for. I think we will see the 30-year mortgage rate at 5% before the year is over and the Moody’s AAA bond yield decline from 6¼% to 5¼% . At that point, we will get enough economic growth, perhaps 2% this year rising to 3%. I also agree that there is a pop coming in the stock market of 15% to 20%. We may knock on 10,000 on the Dow, but I don’t expect us to go through that level. From there, we’re likely to go sideways until people are convinced that the fundamentals are developing as I think they are. When earnings come back, they will come back strongly, because so many companies have cut costs. They are now ready for any increase in demand. Turn on demand in even the slightest way, and you’ll see earnings give us a very good year in 2004. I look for perhaps 15% to 20% on the Dow this year and that’s just the beginning for the next couple of years."

Band, RichardRichard Band is the editor of Profitable Investing, which has grown to be one of the nation’s largest financial newsletters, by stressing value and safety. His newsletter covers the waterfront from bonds, stocks, and mutual funds to insurance, taxes, college, and retirement planning:

"When you ask about where the market is heading in the next six months to a year, I’m reminded of the old saying that there are two kinds of forecasters: those who don’t know and those who know they don’t know! I think I’d prefer to be in the second category. One thing I’ve learned from this bear market is not to bet everything on any single market forecast. Rather, what I try to do is set up a portfolio that I can live with in almost any circumstances. For me that means about 60% in stocks and 40% in bonds or other fixed-income investments. Then, I will adjust those percentages depending on whether the market seems to be strong or weak, and whether my indicators are good or bad. At the moment, I’d say that we are on our way down to an important low. We aggressively bought at last October’s low, and then took money off the table in December and January. We lowered our stock percentage from 75% to 60%, which is where we currently stand. Now, we are looking for an opportunity to begin increasing that equity position in the next few weeks. Now is the time to learn how to be a dynamic asset allocator – not a stopped-clock bull, or a perennial bear. You must be an investor that can adjust to the times, because I think that will be the secret to survival in not just the next six months or year, but for the next ten or 15 years, or probably for the rest of your effective investment life. So become more flexible than you have been in the past."

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