We were on CNBC this morning. At the end of the interview, Mark Haines wished me a Happy Birthday, commenting that I didn’t look a day over 50. At just 42, I should hope not!
Joking aside, here is a link to this morning’s interview along with the comments I provided to the show’s producers ahead of time.
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A. Are you more bullish or bearish on the markets and why?
We are more BULLISH than most. Why?
1.) We see employment gains as 2010 progresses, removing a key case for the bears.
2.) Companies will begin spending again, not on just hires and working capital, but on longer term projects. A corporate capex cycle should commence as 2010 progresses. We are seeing some of this already in renewed M&A activities.
3.) Historically speaking, the deeper the recession (and this one was long and deep), the bigger the rebound. Normally, an 8% type GDP number might be expected considering the recent downturn, but most economists expect 4% at most. Expectations appear conservative, with the potential surprise therefore, to the upside.
B. Where are we investing now? Favorite stocks and/or sectors and why we like them.
1.) We still favor CYCLICALS over DEFENSIVES given the fact that we still see the economy in recovery mode and not likely to double dip.
2.) Favor LATER STAGE CYCLICALS like Energy, Industrials and Materials over EARLY STAGE CYCLICALS like Consumer Discretionary at the margin. (Many consumer discretionary stocks have had very large rebounds and
as the recovery matures, money will likely rotate to areas with even greater leverage still ahead of them.)
3.) Focus on INNOVATORS, companies whose success is tied more to their own unique offerings rather than the stage of the economic cycle.
C. What would we be avoiding right now?
1.) We would generally still underweight DEFENSIVE sectors like Staples, Utilities and Telecom. I would put HEALTH CARE in this basket as well, but it may enjoy a continued rebound now that the light at the end of the Health Care Reform tunnel can be seen.
2.) We’re still not making a big bet on FINANCIALS. I think they’ve had a nice recovery but from current levels may now lag for awhile as TECHNOLOGY did following its bubble earlier in the decade.
D. Topic We’d Like to Discuss?
1.) It’s my birthday today!
2.) HOUSING stocks could be a really interesting play in 2010 on the long side. Unlike financials and many other areas of the market, these stocks really haven’t done a thing. So, they are still priced as junk and as a result, could enjoy the greatest gains from here as the economic recovery matures.
