Vol. 12, No. 3,009 - The American Reporter - October 19, 2006

by Mark Scheinbaum
American Reporter Correspondent
Boca Raton, Fla.

Printable version of this story

BOCA RATON, Fla., March 28, 2002 -- Two top market experts basically forecast a lackluster final three quarters for 2002, which might not be all bad.

After looking at January's dismal numbers we had forecast a flat year in the S&P 100 and Dow Jones Industrial Average, with a down year for the Nasdaq. We thought interest rates would drift up slightly. PIMCO market gurus Bill Gross and John Schneider seem to have refined our thinking, but we're all on the same page. At a South Florida educational conference for 30 investment professionals this week, U.S.Allianz (the U.S. arm of the German-based, No. 2 global insurance-banking giant) reviewed asset allocation strategies and presented some well-thought forward views. In an effort to become as recognized a player in the U.S. as they are overseas, Allianz has bought 100 per cent of the venerable Oppenheimer investment family, and 30 per cent of PIMCO. The remainder of PIMCO is still controlled by Pacific Life. A review of well-known bond analyst and PIMCO portfolio manager Bill Gross' views runs like this:

  • Bond investors should think short and medium term, but mostly short-term;
  • convertible bonds this year could provide little downside risk and excellent returns;
  • the spread between investment-grade and lower-rated corporate bonds is still too large, so there are some slightly lower-rated bonds which are good values;
  • government and other bonds linked to variable or adjustable rates should outperformed the totally fixed-rate instruments;
  • the Fed should give back 100 basis points (1 per cent) in cuts since September 11, but probably not much more. In the equity market, the information came from John Schneider, whose multibillion dollar Renaissance Fund will soon be "capped" after growing too bigfor its own good. He feels that the S&P 500 will finish the year with only a high-single-digit gain. Fuller recoveries will not become evident until later in 2003. Personally, I can live with both forecasts, but hope that we don't see 15-year fixed mortgages above 8 percent any time soon. The "engine" of new home purchasing, refinancing, home furnishings, construction, building trades employment, etc., is too critical to the economy to kill this golden goose. Having missed the boat during the Presidential election campaign and long recount in 2000, the Fed acted too late with too much, and should not over-correct on the other swing of the economic pendulum. The efficient markets seem to have drifted mortgage rates slightly upward without any Fed intervention in recent weeks. As for the stock market, the two-tiered divergence between NASDAQ and penny stock wannabes versus long-term conservative investing has never been clearer. Few, if any, over-the-counter stocks have regained their price and prestige of late 1990s. Historically, the cyclical nature of markets is quite clear. Entering 2003 with a climax of three or four down years in quality stocks -- or at best two or three "flat" years -- is a clear "accumulation" signal for the next major upside explosion. Folks with money on the sidelines, and folks scrimping and saving to put money on the sidelines might well use the final three quarters of the year to stash away quality short-term bonds and undervalued investment-grade stocks.

    Mark Scheinbaum is chief investment strategist for Boca Raton-based Kaplan & Co. Securities, BSE, NASD, SIPC. His daily business commentaries are heard nationally in 200 cities.

    Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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