Is Paul about to put Babe on the block ?
Enviado: 11/6/2003 15:06Stocks have rallied sharply since March, and some investors have showed new interest in equities. But the slow economy and weakening dollar still worry many professional stock-pickers, who don't expect anything like a long bull market.
On Friday the Standard & Poor's index of 500 big U.S. stocks briefly traded above 1,000 for the first time in a year.
Since stock prices hit a pothole on March 11, just before the United States attacked Iraq, the S&P has jumped 24 percent and the Dow Jones average of 30 key industrial and service companies is up 20 percent to 9,062.79.
Indexes of stocks favored by small investors rose even more. The Nasdaq composite, which measures a grab-bag of big tech stocks such as Microsoft Corp., communications companies such as Comcast Corp., plus dozens of midsize banks that happen to trade on the Nasdaq exchange, is up 28 percent in that period, and the long-battered Russell 2000 list of small-company stocks has risen 31 percent.
But can President Bush's tax cut and cheaper-than-expected oil help the market maintain or boost those prices, if indebted consumers are worried about their jobs and companies are having a hard time boosting sales and profits?
Or is it time to book quick profits before the post-Iraq attack euphoria evaporates - following the notorious advice of Napoleonic-era banker Nathan Rothschild to "buy to the sounds of cannons, sell to the sound of trumpets"?
According to Standard & Poor's Corp., its benchmark index is now trading above 32 times its members' aggregate earnings - more than double its long-term price-to-earnings average.
By that measure, stocks are now even more expensive than at the market's inflated peak in 1999 and 2000.
"Equities are too risky" at current prices, says Andrew Sterge, chairman and chief executive officer of one of the nation's biggest stock-trading firms, Cooper Neff in King of Prussia.
Although "people's attitudes are better and sentiment has improved,there isn't a lot of liquidity in the market," partly because speculative traders see little chance for profit at current trading margins of as little as a penny per share, Sterge said.
"Who knows how long this mini-bubble will last? But for many people it will not end well," said Peter Doyle, chief strategist of $1 billion-asset Kinetic Mutual Funds in White Plains, N.Y. "It's all based on the belief the market will rebound in the second half of 2003, and I don't think it's possible."
Why not? Doyle cited rising consumer and mortgage debt and the dollar's fall against foreign currencies, which discourages foreigners from investing in the United States; that, in turn, worsens the nation's trade imbalance.
Doyle urged investors to consider commodities - even gold - but he also said traditional bond funds are relatively safe, compared to high-yield bonds or stocks: "You aren't going to get big returns, but you won't get killed."
"Even in a bear market you get rallies," pointed out Michael Dever, chairman of Brandywine Asset Management, a Thornton-based diversified-investments manager. "Even Japan in 1992 and 1993 had a huge rally - much bigger than this market" but quickly slipped back into a downward spiral.
"People buy because everyone else is buying, and that makes them feel good." But it doesn't last, Dever concluded, unless companies are really worth more.
Indeed, net purchases of stock mutual funds tumbled to just $9 million in the first four months of the year, down from $67 million over the same period last year, according to Financial Research Corp. in Boston. Instead, fund investors are buying corporate, junk-bond and government-backed funds.
But at the nation's biggest mutual fund company, Vanguard Group in Malvern, that trend reversed last month as stock values rose. Vanguard investors spent $2 on stock founds for every dollar's worth of bond funds they bought in May; by contrast, a year ago they were buying $4 in bonds for every $1 in stock, according to spokesman John Demming.
By: Phili Enquirer
On Friday the Standard & Poor's index of 500 big U.S. stocks briefly traded above 1,000 for the first time in a year.
Since stock prices hit a pothole on March 11, just before the United States attacked Iraq, the S&P has jumped 24 percent and the Dow Jones average of 30 key industrial and service companies is up 20 percent to 9,062.79.
Indexes of stocks favored by small investors rose even more. The Nasdaq composite, which measures a grab-bag of big tech stocks such as Microsoft Corp., communications companies such as Comcast Corp., plus dozens of midsize banks that happen to trade on the Nasdaq exchange, is up 28 percent in that period, and the long-battered Russell 2000 list of small-company stocks has risen 31 percent.
But can President Bush's tax cut and cheaper-than-expected oil help the market maintain or boost those prices, if indebted consumers are worried about their jobs and companies are having a hard time boosting sales and profits?
Or is it time to book quick profits before the post-Iraq attack euphoria evaporates - following the notorious advice of Napoleonic-era banker Nathan Rothschild to "buy to the sounds of cannons, sell to the sound of trumpets"?
According to Standard & Poor's Corp., its benchmark index is now trading above 32 times its members' aggregate earnings - more than double its long-term price-to-earnings average.
By that measure, stocks are now even more expensive than at the market's inflated peak in 1999 and 2000.
"Equities are too risky" at current prices, says Andrew Sterge, chairman and chief executive officer of one of the nation's biggest stock-trading firms, Cooper Neff in King of Prussia.
Although "people's attitudes are better and sentiment has improved,there isn't a lot of liquidity in the market," partly because speculative traders see little chance for profit at current trading margins of as little as a penny per share, Sterge said.
"Who knows how long this mini-bubble will last? But for many people it will not end well," said Peter Doyle, chief strategist of $1 billion-asset Kinetic Mutual Funds in White Plains, N.Y. "It's all based on the belief the market will rebound in the second half of 2003, and I don't think it's possible."
Why not? Doyle cited rising consumer and mortgage debt and the dollar's fall against foreign currencies, which discourages foreigners from investing in the United States; that, in turn, worsens the nation's trade imbalance.
Doyle urged investors to consider commodities - even gold - but he also said traditional bond funds are relatively safe, compared to high-yield bonds or stocks: "You aren't going to get big returns, but you won't get killed."
"Even in a bear market you get rallies," pointed out Michael Dever, chairman of Brandywine Asset Management, a Thornton-based diversified-investments manager. "Even Japan in 1992 and 1993 had a huge rally - much bigger than this market" but quickly slipped back into a downward spiral.
"People buy because everyone else is buying, and that makes them feel good." But it doesn't last, Dever concluded, unless companies are really worth more.
Indeed, net purchases of stock mutual funds tumbled to just $9 million in the first four months of the year, down from $67 million over the same period last year, according to Financial Research Corp. in Boston. Instead, fund investors are buying corporate, junk-bond and government-backed funds.
But at the nation's biggest mutual fund company, Vanguard Group in Malvern, that trend reversed last month as stock values rose. Vanguard investors spent $2 on stock founds for every dollar's worth of bond funds they bought in May; by contrast, a year ago they were buying $4 in bonds for every $1 in stock, according to spokesman John Demming.
By: Phili Enquirer