Kangas: A Talk with Straszheim

09/03/2004 12:00 am EST

Focus:

Paul Kangas

Co-Anchor and Financial Commentator, Nightly Business Report

I'm always impressed with the top-notch guests that Paul Kangas selects for Nightly Business Report. But I was particularly thrilled to see Don Straszheim-one of the brightest financial minds around-as a recent Market Monitor guest.

Paul Kangas: My guest market monitor this week is Donald Straszheim, formerly of Merrill Lynch, and now founder and principal of Straszheim Global Advisors, an independent research firm focusing on the United States, China, and the global economy. Welcome to Nightly Business Report Don, given the current state of the US economy, do you feel the stock market is overvalued, undervalued, or fairly valued?

Donald Straszheim: I think it's pretty fairly valued here. It`s going to be a stock picker`s market. It's going to be pretty much, I think, a sideways market. If you're a good stock picker, you can make some money. But you better be a good stock picker.

Kangas: What about the surging oil prices? How important is this?

Straszheim: Paul, this is a big deal, and quite frankly, I am very much concerned. I think Saudi Arabia is a failed economy and a failed society. They've squandered 30 years of oil revenue, since the first oil shock in 1974. It has not trickled down to the average citizen in Saudi Arabia. The unemployment rate is 20%-plus. It's headed to meltdown sometime with important negative consequences for the economy and the markets.

Kangas: Much higher oil prices, in other words?

Straszheim: I think much higher, but the real factor is going to be the disruption and it's going to be a big plus for secure sources of oil and other energy sources, including a bunch of new alternatives.

Kangas: You said it's a stock picker`s market. Pick us a few stocks, would you?

Straszheim: Let me give you two, Paul. The first one would be American International Group (AIG NYSE, the best insurance company in the world. The stock is between 57 and 77 for the last year, trading about 70 now, big position in China, founded in Shanghai in the 1920s. I like that company a lot especially because of the China factor.

Kangas: OK.

Straszheim: The second one would be Fairchild Semiconductor (FCS NYSE). The stock has been hammered down with all of the tech stocks. I think it's poised for a recovery. It also has a significant China component. And by the way, I have no conflicts of interest on either one of these. I don't own them.

Kangas: OK, now, you and your firm specialize in China. How far along is that nation in developing a market economy?

Straszheim: Well, they have got a long way to go, Paul, but there's no turning back. The people are extraordinarily entrepreneurial and energetic and aggressive. I think the concerns in the markets earlier about this slowdown becoming a stall or whatever are overdone. I think the economy is going to continue to grow at a very nice base and American company after American company is there.

Kangas: Don, how does one invest in order to take advantage of China's growing economy?

Straszheim:Well, there's two ways. The first is you want to simply look for those great American companies who are in China, either as a market or as a place to source from. And the second area, which I would mention, is an exchange traded fund iShares MSCI Taiwan (EWT ASE), which follows the Taiwan market. It is down a long ways because of the tech decline, but Taiwan is, to me, along with Hong Kong, primary beneficiary of the economic advance that's occurring in China. It`s a safe way to play the China opportunity.

Kangas: Very good. Don, I can`t thank you enough for being with us and look forward to your next visit.

Straszheim: Good, Paul, thanks very much.

Kangas: My guest, market monitor, Donald Straszheim, founder and principal of Straszheim Global Advisors."

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