Thursday, July 30, 2009

"When the technicians get excited, I get excited"

transcript from a TV program*:

On Wall Street today, we can tell you some good news. A powerful rally in the markets on this first day of March, a stronger than expected manufacturing report the catalyst. A number of bulls now feel vindicated after calling this rally for the past few weeks here on this broadcast.

(BEGIN VIDEO CLIP)

HARVEY EISEN, BEDFORD OAKS ADVISORS: The economy has bottomed. It will take the experts six months to realize -- I mean, last time I was on the show, we had some economists saying we're in a recession. That's the good news. Bad news is, hey, pal, we knew that a year ago. Now the recession's over. So that's the good news about the market.

MIKE HOLLAND, HOLLAND & CO.: We're in the middle of a turn. The recession is over. Cash flow's starting to get a little bit better. We've got a huge amount of money supply in the system. Demand hasn't started. It will start. It always does, as the night follows the day.

UNIDENTIFIED MALE: We believe the economy's improving, we believe earnings are rising sharply. We believe multiples will not increase, but there's less risk in the system because of these dynamics of earnings. Very powerful increases.

(END VIDEO CLIP)

DOBBS: Very powerful increase today indeed. The Dow tonight at its highest level in six months, up 262 points today, a gain of more than 2.5 percent for the session. The Nasdaq shot up 4 percent, breaking through 1,800. The broader market also participating in the rally, the S&P 500 up more than 2 percent today. We'll have of course a lot more on Wall Street later here in the broadcast.

DOBBS: Today's manufacturing reports show that for the first time in a year and a half manufacturing picked up. New orders for raw materials also the strongest in eight years. This is the latest in a series of reports showing the economy pulling out of recession. Kathleen Hays has the report.


BRUCE KASMAN, MERRILL LYNCH: The growth is going to come as firms shift from being enormously pessimistic, cutting back on production, cutting back on capital spending plans, bringing them to a more normal level. That will get you a lift on growth, which may not feel like it's a major movement up in terms of final demand.

(END VIDEO CLIP)

HAYS: The National Association of Manufacturers is looking for 2 percent growth in output this year, half of '91 when manufacturing grew 4 percent, and past recessions, when it grew 6 percent. Very important sector, Lou. Manufacturing is less than 15 percent of the labor force, but 80 percent of the job losses came from there, 1.6 million jobs. As this turns, this is going to be so important, the economists are hoping, in terms of getting the jobs going again and get the recovery rolling.

DOBBS: We need good news across the board.

HAYS: Well, you know, this was very surprising to people to see it not just turn up, but turn up as much as it did. It really feels to a lot of people like something's starting to happen.

DOBBS: Good. Good. Kathleen Hays, as always, thank you.

Well, my next guest says that rebound in manufacturing helped to set a positive tone for the markets. And for some insight, we're joined now by Hugh Johnson, the chief investment officer at First Albany. Hugh, good to have you here.

HUGH JOHNSON, FIRST ALBANY: Nice to be with you, Lou.

DOBBS: That rally felt pretty good, didn't it?

JOHNSON: This was a great rally. It's not just the stock market went up, but the bond market went down, which is what happens when investors start to get more confident. And also, you know, you saw investors migrating to the so-called bull market sectors. They were buying technology, telecommunications, consumer cyclicals and sort of staying away from the bear market sectors like utilities, health care and consumer staples. So there were real strong messages from this market today that the bull market has resumed.

DOBBS: And this bull market has resumed, and what will it look like in quantitative terms? How much can we expect the Dow Jones Industrials and the Nasdaq then in this bull market this year to rise in percentage terms?

JOHNSON: Well, I think, you know, overall, whether we're looking at this year or the next couple of years, we're talking about very modest returns from the markets, say, maybe in 8 percent to 10 percent. And that's true whether we're looking at the broader market, the S&P or even at Nasdaq.

But if you're pretty good on your timing, that is if the market becomes as undervalued as I believe it did, say, at the beginning of this week or last week, you actually can enhance your return. So you've got to make a lot of good decisions, one of them being entry points. When the market gets undervalued, you have to take advantage of it, and I think it's still a little bit on the undervalued side.

DOBBS: So you would recommend investors to go in now and buy, overall talking broadly about the market. What specifically would you recommend they buy?

JOHNSON: Well, I think you buy the bull market sectors. You start with consumer cyclicals, companies like Target, Harley Davidson and Home Depot. The industrial sector is one that does well in the initial stages of a bull market, companies like United Technologies. And technology itself is always a leader in a bull market. You worry a little bit about the priciness of that sector, but companies like IBM and Microsoft, make sure you diversify, but buy those bull market sectors. They're likely to do well.


DOBBS: When the technicians get excited, I get excited.

(LAUGHTER)

HOPKINS: If you look at the charts, it looks good.

DOBBS: Terrific. Christine Romans, Jan Hopkins, thanks very much. And your forecast that the market will be up how much over the next year?


*LOU DOBBS MONEYLINE
Aired March 1, 2002 - 18:00 ET