El-Erian on Sandy’s Economic Impact

Just what impact will Hurricane Sandy end up having on the economy? PIMCO’s Mohamed El-Erian recently tackled that question in a piece for CNBC.com. One of El-Erian’s key points was that the government likely won’t be able to play its usual role in the recovery, with more being required of the private sector. “In more normal times, we would look to federal, state and local governments to increase spending, particularly on reconstruction and rehabilitation of infrastructure,” he writes. “Indeed, government assistance to the uninsured and less well-off sectors — both personal and small business — has proven especially valuable in […]

Icahn Finding Value in Netflix

While Netflix shares have been pummeled over the past year-and-a-half, hedge fund guru Carl Icahn is betting on them to rebound, perhaps due to Netflix’s attractiveness as a takeover target. In a regulatory filing, Icahn announced that he has acquired nearly 10% of the firm. “Netflix may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the internet, mobile and traditional industry,” Icahn reported in the filing, according to The Wall Street Journal. Icahn said in the filing that he thinks Netflix’s shares are […]

What Bogle Sees For Stocks & Bonds In The Next Decade

Vanguard Founder Jack Bogle says he expects stocks to earn real returns of about 4.5% per year for the next decade, and bonds to earn virtually no real return. Bogle divides returns into two categories: investment returns, which are determined by the market’s dividend yield and corporate earnings growth, and speculative returns. Today’s dividend yield is around 2%, and he sees earnings growing at about 5% per year over the coming decade, which would make for a 7% investment return over the next ten years. In terms of the speculative part of the equation, he says price/earnings ratios are around 16 right […]

Grantham Keeping Head Down Amid Headwinds

In an interview with Charlie Rose for Bloomberg BusinessWeek, GMO’s Jeremy Grantham says he’s going to be quite cautious in 2013. “I am going to be careful, particularly for the first half of next year,” Grantham says. “Great brands of blue chips are not so bad in the U.S. Emerging countries are about fair price. Beaten-down European stocks, particularly the so-called value stocks, are probably a little cheap, although risky. And resource stocks, once they reflect the weak economy — and we’ll get another whack-down — will be a wonderful long-term purchase. Farmland and forests, which should be the backbone […]

Cooperman Growing Less Bullish on Stocks, But Sees Few Alternatives

Hedge fund guru Leon Cooperman has become a bit less bullish on stocks, though he thinks they are still the best asset class available for investors. Cooperman tells CNBC’s Larry Kudlow that the market is in “a zone of fair valuation”, and that he isn’t aggressively bullish or bearish. The main reason he’s become more neutral on stocks, he says, is that he thinks the profit cycle is peaking. He says, however, that with the Federal Reserve keeping interest rates so low, there aren’t better options than stocks right now. He also says that with many investors still de-risking and […]

PIMCO Boss: Years of Balance Sheet “Rehabilitation” Ahead

PIMCO Chief Operating Officer Doug Hodge says that monetary easing alone isn’t enough to repair the U.S. economy, and that America is “in for a slow period of balance sheet rehabilitation” that will take years. “What we’ve learned though is that monetary policy alone, it’s necessary but it’s not sufficient,” Hodge tells FOX Business Network. “And that’s why we’re in the third round of quantitative easing. So we’re in for a slow period of balance sheet rehabilitation, and this is going to take years. There is no simple way out, we need a couple of things. We need policy that […]

Oberweis: Follow Ben’s Lead

Newsletter guru Jim Oberweis says that investors can make some nice profits by following the Fed. “Government policies shape markets, turn winners into losers and, unfortunately, can distort the invisible hand of the market,” Oberweis writes in his latest Forbes column. “Only a fool would ignore the moves of Uncle Sam, particularly with government spending higher than ever.” Oberweis says that several companies are “exploding” because of Ben Bernanke and the Federal Reserve’s  easy money policies, which he says don’t appear to be ending anytime soon. And, though he warns that a “day of reckoning seems almost certain” because of the easy […]

Stocks For An Obama — Or Romney — Presidency

In his latest article for Nasdaq.com, Validea CEO John Reese says that investors shouldn’t let speculation about who is going to win the Presidential election affect their investment decisions. “So many factors go into the economy and market that extend far beyond the reach of the Commander-in-Chief,” writes Reese. “For example, the stock market thrived during President Clinton’s tenure before tanking during President Bush’s first year-and-a-half. But had Clinton been able to serve a third term, would the tech bubble’s bursting not have continued to drag markets downward in 2001 and 2002? I find it hard to believe it wouldn’t […]

Top Fund Manager: Flight to Safety Overdone

Oakmark’s Clyde McGregor, who manages several funds with strong long-term track records, says his equity/income fund is tilted strongly toward equities, with fixed income offering few good opportunities.  McGregor says his Oakmark Equity & Income Fund is 70% invested in stocks right now, near its maximum of 75%. “It’s very difficult to do anything creative today on the fixed-income side, in our opinion, that does not increase risk materially,” he says. He thinks people are “overpaying for income” and thinks the “flight to safety is meaningfully overdone. We don’t think that the conditions in the world are as grim as these […]

Buffett Talks Economy, Fiscal Cliff, and Berkshire’s Portfolio

Appearing today on CNBC’s Squawk Box, Warren Buffett said the global economy is slowing but that the U.S. is doing better than Europe, and said he’s on the hunt for a big acquisition. Buffett says the U.S. economy is still inching ahead and “is not tanking”. He said he thinks there’s a “pretty fair chance” the U.S. goes off the fiscal cliff for a short period, but says policymakers know what needs to be done to resolve the situation. Buffett also talked about his own role within Berkshire Hathaway, saying that he manages four positions — Wells Fargo, IBM, Coca-Cola, […]

Forester Cautious and Defensive

Fund manager Tom Forester released his third quarter commentary earlier this month, and his message was one of caution. “As risks have increased, we have increased our protection,” Forester wrote. “If risks subside or are priced in, we will gladly reduce our protection. But until the market more fully reflects these risks, we will remain cautious.” According to Forester Value’s site, the Forester Value Fund had 23.5% of its portfolio in cash as of the end of the third quarter. Consumer staples (20.2%) and healthcare (14.3%) were its biggest sector holdings. Forester expressed concern that the Federal Reserve’s quantitative easing […]

Where Arnott Sees Value

Rob Arnott of Research Affiliates and PIMCO is finding value in emerging market stocks and high-yield bonds. Arnott tells Brett Arends of The Wall Street Journal that emerging-market stocks have lagged those in the U.S. over the past five years, and are now considerably more attractive than U.S. stocks. And, while high-yield bond yields have fallen to record lows recently, they are still attractive, Arnott says. On average, high-yield bonds yield about 5.3 percentage points more than comparable Treasury bonds, Arends reports, which is in line with the median difference since 1996 of 5.5 points. Arends looks at a variety […]

Hussman: Don’t Believe the Valuation Numbers

Fund manager John Hussman remains quite bearish on the market, saying that stocks are showing signs of being in the “exhaustion” part of a bull market. “We presently have an overvalued, overbought (intermediate-term), overbullish market featuring a variety of syndromes that have typically appeared in the ‘exhaustion’ part of the market cycle: elevated valuation multiples on normalized earnings, emerging divergences in market internals, an increasingly tepid economic backdrop, market prices near the upper Bollinger bands at monthly and weekly resolutions, and other factors that — taken in aggregate — have historically been associated with very weak average market outcomes,” Hussman […]

Herro: Value Is In Stocks

Oakmark’s David Herro says global equities remain a “good asset class”, and thinks that a Mitt Romney presidency would mean good things for the U.S. economy. Herro tells Bloomberg that a decrease in regulation would mean less uncertainty for Corporate America under Romney, which would boost the economy. He also says valuations of equities are more attractive than valuations of fixed-income assets.

Eveillard: Gold Still Looks Good

Top value investor Jean-Marie Eveillard says that despite its big gains in recent years, gold “cannot be overvalued” in the current environment. “We have, so far, a minor correction,” Eveillard tells King World News. “Had gold become too popular at close to $1,800? I don’t think so, but the thing about gold, you always have the short-term players, usually with leverage, in the futures market.” Eveillard goes on to say that many haven’t jumped on the gold train — a good sign. “You’ve had the hedge funds over the past few years (in gold) because it had been going up,” […]