Market briefing---Bob (fast)
NYSE---Deb (fast)
Interview:
Comstock Funds---Minter, Charles---Fund Manager
welcome to “world financial report.” i’m bob bowden. a paris court ruled morgan stanley gave investors biased advice on luxury goods company lvmh, luis viton. as a result, morgan stanley will be required to pay at least $38 million in damages to the company. lvmh alleged that the research on the company was tainted by the firm’s banking relationship with rival gucci group. the suit is the first in europe to charge that equity analysts are influenced by work carried out by their firm’s investment bankers. let’s get to the numbers as they finished on this monday afternoon. all the big indices up today. the dow jones industrial average up .25%. s&p 500 up .5% and the nasdaq composite index up the most of the three, up 1.2%. checking the shorter end of the curve, unchanged and unchanged, the three-year and two-year notes. in currencies, the euro down. right now the euro at $1 -- 1.2748. now the euro unchanged and the japanese yen at 106.63 yen equalling one dollar. equities posted a winning session but tech stocks were the biggest winners today. deborah kostroun, as usual, is at the big board with a wrap-up of the action there.
>> obviously, the outperformance we saw on the nasdaq very evident, especially year to date now. the nasdaq up 5%. the dow jones industrial average really struggling to gain so far this year, up .3%. it was technology in the leadership position once again in today’s session. optimism as we are getting underway with the fourth-quarter earnings season that will likely see positive earnings from tech companies so we saw it in many areas of technology, from semiconductor to telecom equipment makers, as well. you see l.s.i. logic performing as well and the gambit, gateway and avaya, as well, putting in good performances. telecom has been in the spotlight with at&t a little bit lower but telecom in the spotlight last week as verizon saying they would increase their infrastructure by $3 billion and upgrade their infrastructure. however, we did see downgrades late last week. saw downgrades on s.b.c., at least one downgrade, but didn’t seem to hurt the stock . drug stocks was the talk in today’s session as mercks are the biggest drag in the dow jones industrial average. merck was downgraded with concerns over their pipeline and bristol-myers upgraded and performing well. we also saw alcoa getting a downgrade, after reporting its earnings last thursday. it was a big drag on friday and then today prudential downgrading it, saying aluminum prices likely not to rise. back to you in the studio.
>> thank you. the fourth-quarter earnings season has just begun. over the next few weeks, investors will learn if the 4.2% economic growth that economists predicted for the fourth quarter will translate into corporate profits. profits at the largest u.s. corporations will have grown at the fastest pace in more than 10 years, according to thomson financial. analysts estimate fourth-quarter profit growing at 22.1%. the thomson financial says the real figures are almost always higher than the analysts’ best guess and they say the final number will come in at 26% earnings growth for the fourth quarter, which would would be the fastest profit growth since the third quarter of 1993. part of the optimism stems from the low level of so-called negative earnings revisions or instances of companies reducing their forecasts compared to the number of companies increasing their forecasts. in the fourth quarter, we’ve only seen 1.3 downward revision per upward revision. john caldwell says his firm has begun analyzing the quality of earnings and the quality of the revenue numbers.
>> actually that’s something we’ve been doing in the second half of last year. we’re seeing great earnings reports from the third quarter and you see a company reporting a 10% gain in revenues, 8 percentage points of that from acquisitions and currency exchange. 2% revenue growth. so we think, great, they grew at the rate of inflation. that’s not the kind of heating up corporate market that would drive stock prices substantially higher from here.% we need to to change as we get deeper into 2004.
>> looking past the fourth-quarter numbers, analysts predict double-digit earnings growth for three of the four following quarters as the third quarter is predicted to grow at almost 10%. it’s the prospects for the 2004 numbers that concerns laszlo birinyi of birinyi and associates.
>> i’m worried about the second and third quarters when you have more difficult comparisons. you’re still looking at an opportunity in terms of good comparisons but when we start to compare the second, third and first quarter, that’s the real test. the market will react this time but in the long term, the test will come later.
>> only one dow jones industrial stock , alcoa has reported e eeearnings and that was on friday. right now, 36 of the 500 s&p 500 companies have reported earnings, 34 of them last week and two this morning. 30 more of the s&p 500 companies will offer numbers later this week. while many wall street strategists expect the s&p 500 index to close higher at 2004 than it is now there are a few investors who remain bearish on the stock market. joining us is one of them. from our princeton bureau, charles minter, founder, chairman and c.e.o. of comstock partners in yardly, pennsylvania, and co-manages the comstock strategy fund and value funds and charles, welcome to the program. you remain bearish on stocks for this year. i wanted to ask you about the numbers i just read. wall street analysts predicting at least 10% growth for all four quarters next year. did you not get the memo on this?
>> well, we did get the memo on this. we don’t think that predicting earnings has been a very fruitful thing to do in the past. who would have thought that after earning $50 in the year 2000 that the standard & poor’s reported earnings would come in below $25 in 2001? so what we do is we try and look at the numbers―you also mentioned earlier, i heard, that the fourth quarter would be up approximately 26%. and we’ve got that built into our numbers, also. they’ll probably wind up with $45 of earnings in the year 2003. however, we don’t think that you could predict the earnings that well in 2004 and we don’t think that the reported earnings of the standard & poor’s 500 will come in too much higher than the $45 per share that they achieved in 2003.
>> we’re short on time. but tell me about valuations and what you think how expensive the market is now?
>> just take that $45 number, for an example. we would have thought that after the financial mania that we went through throughout 1996 through 1999 and the first quarter of 2000 that there would be an unbelievable correction in the market. now, you did see the correction of about 50% to 70% in the various indices. but you’d think you’d also get a correction in the price-to-earnings mult peles and if you think about it --
>> i’m sorry to interrupt. we’ll hold you over the break. we have a commercial break coming and we’ll have you stay right there and we’ll return with more after this.
