Interview: Miller Tabak---Boockvar, Peter---Equity Strategist
>> stocks are having akedgood week, fueling hopes for a strong year-end rally. peter boockvar with miller tabak is joining us live to tell us why he thinks investors should be cautious on stocks heading into 2006. market sentiment shifted with the start of this month. many are dawlg for a fourth-quarter rally but you’re a little cautious. tell me why, fundamentally?
>> i respect the seasonality of november-december where 65% of novembers are up and almost 75% of decembers are up so with that in hand, you still have to focus on the fundamentals. you can’t buy just because the market typically goes up because september is typically a down month and we were up this year. we have to look towards how the beginning of next year going to be. how will the fed rate hikes play out? the economy has weathered it so far, but we’re seeing cracks in the housing market and that, i think, is the main determinant on where the economy and the stock market will go next year.
>> so you’re not more encouraged by the pull back in oil prices this week, the drop in bond yields?
>> well, the drop in oil certainly is a positive but even at $70 a barrel of oil, even at $3 a gallon at the pump, the u.s. economy weathered that, it proved that it weathered that. but the big basis of the entire economic recovery over the last couple of years has been low interest rates feeding a credit explosion. so i’m more concerned about the impact that higher interest rates will have on the housing market . its impact on cash-outs that consumers have taken advantage of more so than higher energy prices and i think that’s what people should worry about.
>> interest rates have been low for one of the longest periods in recent history, historically.
>> right and that’s helped create the dependency on credit and long-term interest rates have remains relatively low but it’s begun to respond to the rise in short-term interest rates.
>> do you see a housing bubble?
>> i think the question is, there is excesses in certain areas. but you don’t need a decline in the housing market to have an impact. if prices just stabilize, that will have an impact and even if prices don’t go down, as long as rates continue to head higher, individuals will be taking less money out of their homes.
>> you sound a little speculative, like, do you really see a softening or bursting with the housing market ?
>> i see a dramatic decrease in the amount of money people will take out of their homes. that has been the key thing in buffering the individual against higher energy prices.
>> let’s switch gears and look toward next week. many investors are talking about the inflation data with consumer prices and producer prices. you must be expecting those numbers to be inflationary?
>> it will be important. the headline number may come in a little bit because of the decline in energy. the key is at the consumer level, are companies able to pass on the price pressures. the fed will not necessarily respond to one c.p.i. or one p.p.i. because they see the trend in inflation, they’re trying to stop the inflationary pressures from becoming too rampant and showing up in consumer prices so with the volatility and long-term interest rates right now, it’s going to be huge for the market .
>> since you are skeptical about the market , where would you advise investors to invest right now? how would you make money in this market .
>> i believe in the long-term story, the basic material commodity long-term bull market . even in the last couple of day, copper is reaching new highs even with the decline in energy so i would focus on basic commodities but on pull backs. if there were pull backs, then i would look at consumer nondurables which would provide a defense against a decline in the economy next year but i would stay away from consumer discretionary, financials and technology.
>> let me ask you whether or not you think gold is in a good place.
>> i’m very bullish on gold also not because i think the world is falling apart. i think there is a supply-demand story with gold also. for 20 years, these companies have been underigating and the demand out of india and china will be enough on the margin to create an upward tick in gold prices and i think the distect, gold staying strong even with the strength in the dollar being at a high against the euro is testament to the bull market that gold is in and will continue on the up side.
>> i want to ask you about microsoft, cisco, evolving into value stocks. what do you think of this evolution?
>> it’s typical for companies of these size. the law of large numbers take over for these guys and i think they will do shareholders a service by continuing the strategy they’ve employed, which is buying back more stock and paying a dividend. i expect cisco to initiate one at some point.
>> thank you very much, peter boockvar with miller tabak joining us. professional hockey is back after last year’s disaster when the season was cancelled. the nhl is winning fans all over again. details in “money & sports.”
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Listen Market briefing --- Lori (medium)
Interview: Greece---alogoskoufis, george---Greek Minister of Economy and Fin
“after the bell,” i’m lori rothman. recapping the day on wall street, all three major averages closed higher with the dow up 45 points -- indexes led higher by banks, energy stocks and crude oil lower today. things are looking up in greece. gross domestic product rose more than expected in the third quarter, part of it had to do with the olympic games in august, since government and business spending accelerated. joining us with a closer look at the state of the greece economy is george alogoskoufis, finance minister of greece, joining us live from the new york stock exchange where he rang the closing bell. welcome.
>> thank you very much for having me.
>> it’s our pleasure. the greek statistics agency today announced that greek g.d.p. grew at an annual pace of 3.7%, better than most economists expected. what’s driving your growth?
>> i think a lot of it is driven by the private sector now because we are in the post-olympic year and public investment has been reduced but private investment is doing very well. private consumption is doing well. experts and tourism, of course. and tourism did very well this year on the back of the successful olympic games last year.
>> when you say private investment, can you give me more detail?
>> in housing, there is a lot of private investment going on and also business investment. the greek government has embarked on a three-year program of cutting corporate taxes and this has helped corporations step up their investments.
>> to what extent will these investments offset the gains you had leading up to the olympics?
>> some of it has do with the olympics but the olympics are over now so essentially we are looking at other sectors. we are looking at, as i said, private housing and corporate investment in various sectors which are related to tourism mainly.
>> right now, your full-year growth target is 3.6% with today’s figure coming in higher, again, 3.7%. will you upgrade that figure?
>> no. our forecast for the whole year is 3.6% and we have a slightly higher estimate for 2006, we expect growth to go up to 3.8%. but, of course, for next year, we have to wait and see.
>> with the growing european economy, let me ask you, do you have concerns as we do in the u.s., of rising inflation?
>> there is concern with rising inflation throughout europe and greece has had higher inflation than the euro zone average so there are concerns about inflation but the greek economy has been doing very well partly also on the basis of very high growth in the region, in the balkans, in southeastern europe in general, economists are emerging and have very high growth rates and very good growth potential and this certainly helps greece.
>> do you believe the e.c.b. should raise its benchmark?
>> well, i cannot tell. i hope they exercise caution but of course it’s up to them to decide what is the best course for interest rates.
>> if they do indeed decide to raise interest rates, do you have an outlook?
>> there is a worry throughout the european union and the euro zone that this may make the recovery slower or less robust than it would have been otherwise but forinous greece, rising interest rates are mainly a concern because we have a relatively high public debt to g.d.p. ratio and this will affect our servicing the debt.
>> the bird flu pandemic is a threat to the global economy but greece is taking a proactive approach. can you tell me about that?
>> we are very vigilant and we take all measures to make sure that there will be no spread out of the disease but of course no matter how much you take, you take precautions, sometimes things may strike you. but we haven’t had any problems really so up to now, so far, so good, i would have to say.
>> i appreciate that. the euro, may i ask you a little bit about the currency valuations, down 13.7% versus the dollar in the last year. does that concern you?
>> well, i mean, the euro has been very, very strong in the last few years. no, we’re being weaker a little bit will not be very bad for the european economy. what worries us mostly is oil prices and global imbalances and those global imbalances are what will determine the cost of exchange rates in years to come.
>> a news item for you, greek civil servants went on a 24-hour strike yesterday demanding better wages and more benefits. you said the government will cut spending to reduce the budget deficit below 3% next year as required by the e.u. how will you manage to do both?
>> this is what we are trying to do, reduce the deficit in the runup to the olympics, the deficit went above 6% of g.d.p. we have to reduce it below 3% by 2006 and this requires some measures to cut expenditures and some of those measures provoke responses and strikes. i’m afraid we have to go the course and make sure that the deficit is below 3% by 2006.
>> we’ll have to leave it there. thank you very much for joining us. >> thank you very much.
>> that was george alogoskoufis, finance minister of greece. there’s still much more ahead tonight on “after the bell.” he appears to be in the minority, at least, if you look at the sentiment gauges. peter boockvar of miller tabak and company not looking for a big fourth-quarter rally and is concerned about next year. we’ll look at the potential market headwinds coming up.
