Good News, Soft Markets: A Buying Opportunity
The market is the ultimate discounter, looking months down the road -- sometimes presciently, sometimes not -- to anticipate events that will affect stocks.
The future must look pretty gloomy given what's been going on on Wall Street, where stocks have drifted lower even as upbeat news about the economy and earnings showers investors like a splash of so much bright confetti. Does this "good news is bad news" environment -- when a booming economy only sparks talk of interest-rate increases -- mean investors should keep steering clear of the market? Not necessarily.
A number of outside pressures are keeping the bulls in their pen, namely trouble in Iraq and the upcoming elections. Meanwhile, oil prices, up about 20% this year, have stayed high longer than anyone imagined. Demand is high, supply is tight and refineries are working at near capacity as the summer driving season approaches. Higher gas prices are already putting a strain on consumer spending. Interest rates are beginning to rise as well.
But investors who are less near-sighted see buying opportunities coming up. Many of the dark clouds that have shadowed Wall Street are about to part, and investors should be looking ahead, not at all the current troubles.
"At a certain point, the Fed will raise [interest rates] and that uncertainty will go away. The Iraq handover is going to occur, so that will be out of the way. Corporate profits in the second quarter will be strong, and as we get closer to the election, some of that uncertainty will dissipate," says Christopher Zook, Chairman and Chief Investment Officer of CAZ Investments in Houston.
Summer's not usually a dynamic time on Wall Street, but investors worrying about losing their shirt in the next few months can breathe easy. Recent technical indicators point to a bottom in the market, with declining stocks outnumbering advancers by huge margins during a few recent selloffs.
"The market's always anticipating problems, and the negatives were being discounted coming into summer. You tend to see market bottoms in May," says Marc Pado, U.S. market strategist with Cantor Fitzgerald in New York, adding that election years typically equal gains on Wall Street.
Since stocks are down now, indexes may be doing a lot of catch-up later this year -- especially after one of the biggest question marks of all is cleared up in the November election. Better to get in ahead of this expected late-year upturn, is the theory.
The election is an especially huge weight on the market right now given the intense focus on geopolitical concerns, with Attorney General John Ashcroft issuing new warnings about summer terrorist attacks last week and continued fighting in Iraq. Suddenly, the presidential race is looking much tighter than it did just a few months ago.
"Roughly until the fall of 2003, voters' high regard for Bush's handling of the terrorism challenge pulled up their assessment of the handling of the economy despite low levels of consumer confidence. Since then, their negative assessment of his handling of Iraq has tainted their approval of his handling of the economy despite an improvement in their view on the economy," says Tom Gallagher, an analyst at economic-research firm International Strategy & Investment in Washington, D.C.
This confluence serves to create great uncertainty about Mr. Bush's shot at a second term. After all, it's a lot easier to push through a tax cut than to control geopolitical events. And again, the market hates uncertainty -- especially about a president who's given the market so much juice. But, that'll all be over in November.
EXAMINING THE ELECTION CYCLE
See an interactive graphic examining the stock market's performance in the run-up to some recent presidential elections, and how it fared after Election Day.
Fears about rising interest-rates are also scaring some folks off, but they shouldn't be. Some think the central bank will opt for quarter-point increases at its meetings throughout the rest of the year, bringing the fed-funds rate to 2.25% by the end of the year. Others think the Fed will have to be more aggressive to ward off inflation, though that's a less common view.
Neither scenario necessarily means the market will take a hit, as stock performance has been both better and worse during past periods of rate tightening. And, many strategists think interest-rate increases are already baked into the market, so that's not really an excuse anymore to shun stocks.
One tip as rates start to rise: avoid buying stock in companies that are deeply in hock.
"Investors should be focusing on companies with very strong balance sheets; a rising-interest-rate environment hurts companies that have lots of debt on their books -- the more predictable the cash flow, the better the investment it is," says Mr. Zook, who adds that he's been plugging more money into the market after the recent pullback and that stocks are a much better value than they were late last year after the big market runup.
He recommends looking for companies like Microsoft, which he recently bought more stock in, adding that it is trading at the "close to its lowest valuation since it went public," at 11 times cash flow. Its balance sheet is extremely strong, with around $50 billion in cash. Many speculate that the software giant will do a big stock buyback, issue a one-time dividend or raise its dividend to share the wealth with investors.
The focus on cash flow will also help investors sidestep all the accounting chicanery that has plagued the market recently. Earnings can be manipulated, legally, even under GAAP regulations. Cash flow is either just there -- or it isn't.
In general, Mr. Zook says he's been eager to buy stock in good companies trading at newly reasonable valuations that were perhaps unfairly beat down in the recent selloff amid all the pervasive worries.
"Unequivocally, people should buy great companies at great prices," he says. "They should not wait for the smoke to clear to buy those stocks, because then those prices are no longer available."
好消息：买入股票的时机到了
股市就像是预言家，预测几个月之后什么事件会影响市场走向，有时这种预测是未卜先知的，有时则不是。
以华尔街当前走势来看，其未来前景一定是布满阴云。眼下股市持续走低，就连有关经济和企业收益的乐观消息对投资者来说也只像是过眼烟云而已。这种“好消息也是坏消息”（欣欣向荣的经济只是引发了人们对加息的传言）的环境是不是意味著投资者应当离场观望呢？不一定如此。
诸多外部压力使看涨人士不敢轻举妄动，如伊拉克紧张局势和即将到来的美国大选等。与此同时，今年飙升20%的油价在高位上停留的时间远远超过任何人的想像。而且随著夏季驾车高峰的临近，需求仍居高不下，但眼下供应却十分紧张，炼油厂正在几乎满负荷生产。汽油价格的上涨已经给消费者支出造成压力，而利率又将开始上调。
但是，眼光更远一些的投资者从中看到了买入机会。许多笼罩在华尔街上空的阴云将要散去，投资者应该放眼未来，而不是盯住目前的重重困难。
休斯顿CAZ Investments董事长兼首席投资长祖克(Christopher Zook)说，Fed肯定要提高利率，这种不确定性将会消除。而伊拉克政权移交工作将要进行，届时问题将会化解。此外，第二季度的企业利润将十分强劲。而随著大选日期越来越近，这方面的不确定性也会消逝。
夏季通常不是华尔街比较活跃的时期，但是那些担心会在今后几个月血本无归的投资者可以放宽心了。最近的技术指标均指向市场触底，在最近几轮下跌行情中，下跌股数量明显超过上涨股。
Cantor Fitzgerald驻纽约的美国市场策略师巴杜(Marc Pado)说，“市场总是在预测问题，那些负面因素在夏季到来前已经被市场消化，你往往会在5月份见到市场底部。”他补充说，大选年通常都会带来股市的上涨。
既然目前股市在下跌，主要股指在今年晚些时候可能会出现大量的补涨行情，尤其是在11月大选使得困扰市场的最大问题之一迎刃而解之后。理论上讲，在预期的年末反弹之前进场是更好的选择。
目前，在地缘政治担忧备受关注的情况下，美国大选对股市的影响尤为重大。美国司法部长约翰?阿什克拉夫特(John Ashcroft)上周对夏季恐怖袭击发出新的警告。另外，大选局势较几个月之前骤然扑朔迷离起来。
经济研究公司International Strategy & Investment分析师汤姆?格拉赫(Tom Gallagher)说，大约在2003年秋季之前，选民们对布什应对恐怖主义威胁的能力推崇有加，从而推高了他们对其在经济治理方面的评价，尽管消费者信心还十分低迷。但此后，人们对布什处理伊拉克问题的态度转为负面，也殃及他们对布什经济治理能力的评估，虽然他们都认为经济状况有所好转。
这使得布什能否连任蕴含变数。毕竟，推进减税要比控制地缘政治局势容易得多。股市很不喜欢这种不确定性，尤其是这是关于一个曾给市场注入如此强劲活力的总统的。不过，这一切都将在11月份结束。
对加息的恐慌也吓跑一些投资者，但是他们不应该这样。一些人认为，Fed将在年内的政策会议上选择加息25个基点，到年底前将联邦基金利率提高至2.25%。其他人则认为，为了抵御通货膨胀威胁，Fed的加息幅度会更大，不过这种看法不太普遍。
无论哪种预期兑现都不一定意味著股市将遭受打击，因为在以往加息期间股市表现有好有坏。而且，许多策略师认为，加息因素已经在市场中有所体现，因此没有理由再规避股市。
利率上升时切记：避免介入那些债务缠身公司的股票。
祖克说，投资者应当关注那些资产负债表非常强劲的公司；利率上升会损害负债累累的公司。公司的现金流可预见性越强，投资价值就越高。他补充说，在最近股市回落之后，他一直在积极买进，因为现在的股价比去年末市场在经历了大幅上扬行情之后要合理得多。
他建议买入诸如微软(Microsoft)之类的股票。他最近增持了该股，称其股价接近上市以来的最低值，是现金流的11倍。其资产负债状况极其强劲，拥有现金约500亿美元。许多人猜测，这家软件巨头将进行大规模的股票回购，发放一次性股息或提高派息，与投资者分享收益。
对现金流的关注还将帮助投资者规避近来困扰市场的所有会计欺诈问题。从法律上来讲，即使在美国公认会计准则(GAAP)规定之下，公司也是可以操纵收益的，但却不能操控现金流。
总的说来，祖克表示他一直热衷于购买本益比较为合理的绩优股，这些股票在最近抛压下因为整个行业的问题而遭受了不公正的打击。
他说，显而易见，人们应该买进价格合理、状况良好的公司股票，而不应该等待阴云散尽后再采取行动，到那时这些诱人的价格已经不复存在了。
