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Highlights From the Part 1 of the Barron’s Roundtable
By JLP | January 12, 2009
Each year, Barron’s invites various investment experts* to their roundtable, asks them a bunch of questions, and then publishes it in three parts. Here are some highlights from Part 1 of the annual Barron’s Roundtable ($):
Scott Black: A lot of the stock market’s performance will be contingent on public policy. The consumer is dead. There has been a paradigm shift. The savings rate is going up. People are terrified. It’s like my parents’ generation after the Depression. Gross private domestic investment won’t go up, even if you give corporations tax incentives. There is too much idle capacity already. We can’t meaningfully reduce the trade deficit because we don’t manufacture enough goods that the rest of the world wants. That leaves government spending to create final demand for U.S. goods and services. Giving a tax cut to people who spend the money at Wal-Mart on products made in China isn’t going to do it. Infrastructure and defense spending are the best way out of this mess because by law, defense goods must be made in the U.S. and we have depleted our conventional forces, whether it is tanks or helicopters. Also, cement, concrete and structural steel all are made in the U.S. (emphasis mine)
I think one of the fundamental problems that we face in the United States over the long-term is our lack of manufacturing. And no, I’m not talking about forcing companies to manufacture in the U.S. and pay employees extremely high wages that lead to higher prices for goods. There has to be some balance. I think our wages have led to jobs going overseas—that and the EPA and green dunces. I’m not saying that we shouldn’t take care of our environment but let’s not go overboard. Afterall, we were put here to USE the planet’s resources. The planet exists for us, not the other way around.
Marc Faber: Faber: There is no such thing as good public policy, certainly not in the U.S. The current crisis was produced largely by policy measures that led to the formation of Fannie Mae and Freddie Mac, and later the repeal of the Glass-Steagall Act, which had prohibited banks from owning brokers. It all led to increased leverage. Fed policy has been a disaster. Instead of smoothing markets, it has increased volatility. By cutting interest rates the Fed created bubbles — in housing, in commodities. Now that the federal-funds rate has been slashed just about to zero, you’re not getting anything for your money when you deposit it in the banking system and buy Treasury bills. There is no such thing as investment; everybody becomes a trader.
When asked about S&P 500 earnings, Felix Zulauf said this:
Zulauf: …S&P earnings peaked at about $100 or so. This year they could slump to $20 or $40. The consensus estimates are way too optimistic. Much depends on whether the problems in the real economy hit the financial industry, causing it to relapse. The behavior and thinking of corporate executives will change dramatically. Companies will repair their balance sheets instead of spending and expanding, and that’s why the deleveraging process will take years and years and years. Government and central-bank stimulus won’t have the multiplier effects we used to see. Economic growth will be much lower in the next five or six years.
Abbey Joseph Cohen had predicted earnings of $55 for the S&P 500. That’s quite a difference.
Here’s what I took away from Part 1 of the roundup:
The economy’s gonna stink it up for a while but that this is a stock picker’s market.
Are they right? Who knows. They were all way off last year—though they did speak of trouble brewing last year.
I’ll post more from next week’s roundup.
* This year’s experts are (reprinted from Barron’s):
FELIX ZULAUF, founder and president, Zulauf Asset Management, Zug, Switzerland;
MARIO GABELLI, chairman, Gamco Investors, Rye, N.Y.;
ARCHIE MACALLASTER, chairman, MacAllaster, Pitfield, MacKay, New York;
MERYL WITMER, general partner, Eagle Capital Partners, New York;
MARC FABER, managing director, Marc Faber Ltd., Hong Kong;
OSCAR SCHAFER, managing partner, O.S.S. Capital Management, New York;
FRED HICKEY, editor, The High-Tech Strategist, Nashua, N.H.;
SCOTT BLACK, founder and president, Delphi Management, Boston;
BILL GROSS, founder and co-chief investment officer, Pimco, Newport Beach, Calif.;
ABBY JOSEPH COHEN, senior investment strategist and president, Global Markets Institute, Goldman Sachs, New York.
Topics: Investing |
