Insights & Advice

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After a big week, markets catch their breath

The market action this week appeared ideal for further upside gains in the week ahead. Although sectors such as technology, commodities, industrials and financials led the markets higher, other sectors are beginning to participate while volume expands as more investors abandon the sidelines and take the equity plunge. I expect this to continue.

I wish I had a solid feel for how high the S&P 500 can carry us but I don’t. Instead, I’ve been taking this rally in 50 point increments. So right now my target is around 1120 versus 1167 today. Most stocks, sectors and indexes are what we call “overbought” and need to pull back but if and when that happens I believe it will simply provide additional opportunities for investors to get in.

This past week, I was in San Diego at a Charles Schwab conference, a once-a-year get together where money mangers such as ourselves meet, greet and listen to the words of some of the leading lights of our industry. As such, I listened to Larry Fink, Chairman and CEO of Blackrock and Mohamed El-Erian, CEO of PIMCO, warn that, although the world’s economies are safer now than they were last year, we still have a ways to go before we’re out of the woods.

They also ruminated on possible changes within the world’s currency markets where the U.S. dollar has reigned supreme as the world’s reserve currency since World War II. Both men saw the advent of a new system where several currencies might share that reserve status along with our dollar in the years to come.

Then there was the stimulating debate between Newt Gingrich, long-time member of the House and author of “Contract with America”, and Robert Reich, former U.S. Secretary of Labor, over the future course of American politics, the deficit and the arrival of China as the new leader of the economic landscape. In future columns, I plan to share many of the insights I gleaned from these captains of industry but in the meantime back to the markets.

This week, Ben Bernanke, Chairman of the Federal Reserve, also joined the chorus of economists who are predicting that the recession “was likely over.” We came to that conclusion back in July but when Ben speaks the markets listen. It gave stocks a boost on Tuesday as did the stream of increasingly positive news on the economy. I have written that economic recoveries are a process. Readers may have noticed that the mixed data of only a month or two ago is now becoming consistently positive. That process is pushing the markets higher. But not everyone is convinced that it is time to buy.

“I am cautiously pessimistic,” says Robert Tepper, President of AEB Corp., a broker-dealer based in Great Barrington, MA.

Rob and I go back to 1982. We first met whenI was straight out of grad school and working for Drexel Burnham, Lambert, during the days when the Junk Bond King Mike Milliken was just getting started there. Rob, a Dutchman, was in Manhattan analyzing American markets for a big Netherlands bank. We have traded ideas and stocks ever since.

“There’s a lot more trouble ahead for us here in the U.S. and I don’t know how we are going to counter it,” he said. “I have my doubts about whether we are really turning around here.”

Rob’s view is common among many financial investors overseas (and many here at home as well) but so far our markets have confounded those fears. My own view, as readers may recall, is that we are in a kind of “V” shaped bounce off the bottom made in March of this year. Clearly, we can pullback at anytime given our overbought conditions but those would be buying opportunnities. Once we reach a high enough level where investors deem the market is at a fair value, I believe we will mark time or “flat line” for a period of months but whether that clearing level is at S&P 1150 or 1200 or even higher remains to be seen.

Finally, I want to invite my readers to become listeners as well. Starting this Friday, September 25th, I am launching a half hour investment show on VOX radio. My wife, Barbara has graciously agreed to co-host the show. This gives me an opportunity to enlarge on the subject matter of my columns, something many readers have asked me to do over the past few years.

We will cover a wide range of topics including investing in world markets, local business trends and financial planning themes that might interest you. My guest will include various mutual fund and exchange traded fund managers from around the nation and overseas as well as local business owners and regional leaders that we hope will give you some added clarity in this complex and confusing world of ours. Below is a schedule of the shows and times.

@theMarket with Bill Schmick
Tune in every Friday, starting September 25th, on VOX Radio

Station  AM   Time
WNAW 1230 Am 8:35am
WSBS 860 AM 9:35am
WBEC 1420AM  11:05am also WSBS 94.1 FM @9:35 A.M.

Posted in A Few Dollars More, At the Market