Will today's investors be able to put more money in pickets?
Interview: The Kelmoore Funds---Kelmon, Matt---Fund Manager (slow)
>> will today’s investors be able to put more money in pocks. interest rates and equity mutual funds will keep the market higher for the rest of the year. matt kelmore’s strategy fund is up 33% in the last 12 months he’s joining us now from the san francisco bureau. welcome, matt.
>> how are you, mikele ?
>> it was a good day for the markets. it was a good day for people trying to be employed. is it going to continue to be a good day? i mean if―i mean the question comes up because we’ve had seven months until this one of declining job growth. we didn’t get a whole lot of new jobs. and we’re heading to a period of the year when stocks traditionally decline. >> yes, it’s become a bit of a cliche. but the labor market employment is a lagging indicator. people lay off in droves and they hire back slowly. they feel better. i think the market that has the rally that started a few months back, it’s liquidity driven. it will continue as the flows come in to equity mutual funds and we’ve got to put money to work.
>> where do you put money to work in this kind of situation? we have cyclical recovery economists say under way. is it cyclical that is we want to look at, or something else?
>> well, i think after a great year that we’re―it’s coming together here and we’ve had three very bad years in a row, managers are going to want to lock in their game. semiconductor index which is set up greatly. i look to see some profit taking out of there. and some names that have lagged a little. i like some of the name that is are being hurt―helped by the weak dollar oversea, such as the procter & gamble or a gillette.
>> we saw a lot of money flow into funds in the third quarter. is that going to continue―do you think this is the kind of news that spurs people to believe in the markets?
>> i think it is. the combination of seeing equities do better. seeing it relating to the game. i saw that in the late 1990’s went out. the rallies went on for longer than expected. it’s going to happen here. no great alternatives to equities.
>> what drives equities going forward. it continued improvement in the economy? is it earnings, is it both?
>> a little of both. earnings going to be good here in the fourth quarter. the warnings season is coming to a close here. and we haven’t seen the warning that is weave seen in the last couple of years. that means that earnings are going to be better, liquidities rising in this market. and some of the laggards that have not moved yet are moving in the fourth quarter and a nice rotation will help to move the market higher.
>> but people had a chance to price in a lot of the good earnings news because we’ve had a lot of reports about that. is there going to be any real surprises?
>> i don’t think, like you said, the market is kind of priced for perfection unless earnings come in dramatically higher. i think that you’ll see expectations seed across the board. if you don’t match expectations here in the fourth quart we are the markets being priced the way it is, you can get hung out to dry. a lot of the top names in the s&p, a lot of the top names in the s&p 500 will meet or beat it higher.
>> what happen ifs they don’t. do they drag the broader market down? or do individual stocks get punished?
>> i think individual stocks . you saw eastman kodak cut their dividend. something they should have done maybe three or four years ago. they’ve really gotten clobbered. that will show that this market is not going to listen to someone’s story for too long. either you meet and you’re on your way to greater profits or you may get hung out to dry here.
>> well, we talked a little bit about ago the stock that is you think are in position to do well. what about funds? what kind of funds are we looking for growth in―growth funds? value funds. who’s going to do well?
>> growth funds have done phenomenally well so far this year. dividends―we’ve been harping on it all year. dividends are going to be a good portion of what’s going to make up a return in the coming years. say the next four or five years. but i would look for something with a decent yield. something you’re rewarded even if the market doesn’t move higher just for having your capital at risk in the market. you want a nice yielding type of fund or individual name that you enter.
>> and what about bonds? any point of putting money into bond funds at this point?
>> i really don’t think so. bonds had their hay day the last few years. of course, you want to have something allocated there just in case. but i really think that if you look four or five years out, rates have nowhere to go but higher. if you’re going to hold a bond to maturity, that’s one thing. a bond fund could experience a flow that could really hurt you when it wasn’t your goal to be in it for the short term anyway. equities are the way to go. higher-yielding equities.
>> the dow closes at 9572. where are we say at the end of the month, the end of the year.
>> the end of the year? maybe 5% higher. if earnings are dramatically better. otherwise, i think we may have seen the highs for the year. and i think we may drift sideways. sector rotation keeping the market where it is for the rest of the year.
>> thank you, matt.
>> thank you.
>> matt kelvin, president and fundraiser at the kelmore funds. the cholesterol-lowering drug is beating expectations in the united states. when we return, we’ll hear from the company’s chief executive.
