Will stocks continue to show gains in 2004?
Interview: Wilbanks, Smith & Thomas---Wilbanks, Wayne---Chief Investment Officer
>> welcome back. the benchmark stock indexes are headed for the first gains in in the past four year, but will stocks continue to show gains in 2004? wayne wlibanks from wlibanks, smith, and thomas joins us from virginia beach, virginia w his outlook on equities. thanks for being on the program.
>> good to be here, bob.
>> want to begin by asking about the dow 10k. back in 1998 when we crossed upward through 10,000, it took us several attempt, three or four tries and the market kept going back down at once dow hit 10,000. this time we seem to have crossed through on this friday day of trading. what is your sense? have we crossed through for good, i guess is the first question?
>> well, i think it’s more of a psychological barrier. we may back and fill on monday or tuesday, but the market clearly wants to go higher. what you can tell is the volatility has dropped. i can’t remember the last time the market dropped 200 points in a day. so what you’re seeing, that is the important thing is the breadth is good and so whether we hit 10,000 monday or tuesday and fall below it, we’re definitely ton way to 10,500.
>> yet you are not concerned about some of the economic statistics we heard this week, for example, initial jobless claims were up, although still below 400,000. they were higher than expected and up from the week before and something like the consumer confidence, university of michigan number coming out at a lower consumer confidence number than expected. not a concern for you?
>> not really. i mean you have seen the backing and filling on all the numbers and ting other thing to be care sfl the data. they reset this data every other time they announce it. they reset the old data. i’m not sure you can read a lot into the near-term numbers. a lot of people will be very surprised how power tfl economy is next year and how much better consumers feel and how many more jobs are created. that will be the next year is job wills surprise people on the upside.
>> year to date we have seen the nasdaq up 46%. that is a heck of a run for the nasdaq. a lot of people think stocks are overheated, particularly valuations of tech stocks are too high. is that a concern for you?
>> a little bit in the sense if you are looking for your portfolio and what might be the leaders next year, look, for example, in technology. intel has had a huge year this year. microsoft has actually done almost nothing this year, so what we’re looking at right now is the possibility that maybe microsoft or nokia or some of the names that haven’t moved but are high quality companies, they’ll pick up the leadership. we’re not expecting as big a gain out of the intel or the texas instruments next year because they have already had the big move. it depends on what you own in the nasdaq depending upon how you feel.
>> one stock you like, je, and je having―general electric having four consecutive quarters of lower earnings. tell us why you like g.e.
>> well, i think there is a whole transformation going on at g.e. with jeff immelt. he’s really opened up the transparency of the company. the stock is cheap and he is talking up the numbers a little bit and they are right in the focus of what’s going to happen with the economy next year. exports and lower dollar and they will be a prime beneficiary of that right now. if you can buy a triple a. rated name at $30 with the kind of yield it pays, i think that is a great place to park money.
>> we were talking during the commercial about china. how should we play it?
>> it’s interesting. the manufacturing sector and the falling dollar in rising shipping rates is making chinese exports a little bit less competitive relative to u.s. exports. so we’re looking at names in that area, such as g.e., tyco, anybody who’s shipping overseas to the norfolk southern railroads, anybody that will benefit from the export trade is also going to surprise people over the next 12 months. >> when you say chinese exports less competitive against the u.s., i guess you mean if you are both sending products to europe, for example, right? it―a weaker dollar doesn’t affect chinese exports coming to the united states.
>> exactly. what happens is china buys all the australian coal. therefore, australia doesn’t export to europe their coal. that opens up coal exports in the u.s. to go to europe. it’s a combination of the fact that china is gobbling everything up and the falling dollar makes the prices more competitive. it’s an interesting scenario, and you’re going to see a lot more about this next year.
>> we had some fed statement this is week. i understand you think liquidity is a big story here. tell us how to best take advantage of the liquidity provided that we’re seeing on the monetary basis.
>> i think i have used the term that the economy is on steroids right now. there’s so much liquidity if fed is artificially holding rates down right now. and they have already telegraphed they will hold it down going forward for another three to six months. put on top of that $2 trillion still sitting over in money market funds earning less than half a percent. and you’ve just got all this hitting the economy at a time when the tax cuts and you have productivity improvements, so this liquidity is going to continue to fuel the u.s. equity markets. and you’re seeing wit mutual fund flows. every month you’re getting $10 to $20 billion a month coming in, and yet we still have the $2 trillion sitting there. huge stimulus possibilities for next year.
>> our thanks to wayne wlibanks, chief investment officer at wlibanks, smith, and thomas where he helps manage more than $1 billion. when we come back, the japanese economy is showing signs of further expansion and the bank of japan is set to meet to discuss rates. we’d head to tokyo to find out what is expected from the discussions and also get a look at the week ahead after the commercial.
