Martha Stewart---Alan (slow)
Expectations
Interview: Wells Capital Mgmt.---Paulsen, James---Equity Strategist
>> at the martha stewart trial today, the star witness, douglas faneuil, took the stand. and bloomberg’s allan dodds frank was there with the latest.
>> doug faneuil, star witness, former assistant to merrill lynch stockbroker, peter bacanovic, martha stewart’s co-defendant, took the stand today and one of the first things he said under questioning was “i told one client about what another client was doing and then i lied about it to cover it up. “ that was the simple presentation of the essence of the prosecution’s case right off the bat from doug faneuil. as the day progressed and karen sea mor elicited more testimony from him, she talked about sam waksal, president of imclone systems at the time. doug faneuil talked about the waksals and waksal’s accountant calling on the morning in question and both of the daughters calling, wanting to sell all of the imclone stock , in total more than $7 million worth. in the middle of this confusion and calls from the waksals, doug faneuil called his boss in florida on vacation, peter bacanovic and told him what was going on. in the middle of that conversation, bacanovic had a flash, he said, oh, my god, you must tell martha, get her on the phone. they called martha stewart and left a message and during that conversation doug faneuil asked bacanovic, can i tell them about the waksals and bacanovic said, of course, you must, that’s the whole point. those are the last words the jury heard and here comes martha out of the courtroom.
>> thank you very much, obviously up-to-the-second reporting from lower manhattan at the federal courthouse from our own “world financial report.” our next guest says the markets are heading higher but investors are too worried about take advantage. james paulsen with wells capital management in minneapolis is joining us. talk to me about how people are too worried to take advantage of the markets, on a day like today, ricin tuesday, with stocks , bonds and currencies all affected by the discovery of ricin in the senate building.
>> over the whole, here, it’s a successful stock market over the better part of the year here and there still seems to be a good deal of cautiousness about it. we’ve been waiting for this correction we’re suppose to get and there’s a sense this thing has come too far too fast as opposed to people worried about missing out on another upside run so i think when markets peak, there will be less cautiousness and more bullishness.
>> you think the market will hit 1250 by the middle of the year? another 100 points up in the s&p 500?
>> i think so. it may be a little bit higher. i am impressed by the amount of liquidity on the sidelines in money market funds yet and i think before this is over some of that will be drained out and put into stocks .
>> is that a number you following closely? dodo you have a handle on how much liquidity is out there?
>> i don’t have that on my fingertips but i’ve seen the amount sitting in money market funds or savings accounts, very liquid investments and in relation to the g.d.p., that’s a very high number that could provide a lot of buying power for stocks .
>> many investors are saying they like the so-called defensive groups and the economy should chug along at 3% to 5% and they like those defensive groups. is it going to be difficult to make money in defensive stocks , for example, if everyone is thinking and saying the same thing?
>> yes. i’m not sure we’re there yet for defensive stocks . i think defensive stocks have done real well since the fed’s announcement last week but i think it’s led by and large by cyclical stocks and small cap areas and i still like those through mid year. i think a change in leadership will take place this year that will probably come at the time when the bond market and federal reserve starts raising or tightening interest rates and that’s probably more like the summer than it is now. i think maybe people are talking about defensive stocks but it might be premature.
>> don’t you need to move ahead of the actual event happening?
>> yeah. i mean, i think the leadership will shift prior to the fed tightening but we haven’t even had the bond yields back up yet and bond yields will back up prior to when the fed intervenes and that may take three to five months before that occurs and in the meantime i think cyclicals will lead.
>> jim paulsen, appreciate it, chief investment strategist with wells capital management. another initial public offering in china will boost the bottom line at merrill lynch and we’ll head to tokyo for the details next.
