One on One with Hugh Johnson, Chairman of Johnson Illington Advisors
Monday, March 05, 2007
|
|
|
|
SUSIE GHARIB: Our guest tonight does not believe Wall Street is headed for a bear market, but he says investor confidence is down and the mood is edgy. Joining us now, Hugh Johnson, chairman of Johnson Illington Advisors. Hi, Hugh.
HUGH JOHNSON, CHAIRMAN, JOHNSON ILLINGTON ADVISORS: Hi, Susie.
GHARIB: All right, so you don't believe in a bear market, but do you believe in a correction, and if so, how steep?
JOHNSON: Well, from time to time, you get corrections in bull markets and this will be no exception. You know, I like to say that bull markets are not wrinkle-free. They always have big ups. We get overvalued, big downs. But it's very quite frankly very difficult to forecast how long this one is going to last or how deep it's going to be. If I were to take a guess, Susie, I think the longest this is going to last is say two to four months, something in that neighborhood. And the depth of the decline would be no more than 10 percent. But that's a guess.
GHARIB: Now as you just reported not only with the U.S. markets down today but also all over in the major markets overseas, is there something fundamentally different now in these global markets compared to a week ago?
JOHNSON: Well, no, I don't think there's anything fundamental that's driving the market that's any different. Obviously we're a lot concerned about credit conditions, not only here but throughout the world. But whether there's going to be a contraction of credit conditions or lending in the U.S. and that's going to lead to a recession. That's kind of a new perception. But quite frankly, I think the fundamentals today are the same as they were a week ago. Obviously the markets have declined very sharply and that's clearly scared investors or reduced investor confidence. And that's going to take some time to rebuild.
GHARIB: Have you changed your investment strategy since last week?
JOHNSON: No. You know about a month ago, we started to inject a little defensiveness into our portfolio, but our overall strategy is still on balance positive or consistent with the view that the bull market has further to go. And that means we're keeping our allocation to equities at a fairly meaningful or high allocation to equities. But we put some defensiveness in the portfolio by adding really only large capitalization companies which are safer. They're safer, they're less volatile and also buying sectors of the market that have good dividends or tend to be safer in a down market like utilities, consumer staples and health care stocks.
GHARIB: We saw last week that a lot of people started putting their money into bonds as a safety measure. What is your view on the bond market?
JOHNSON: You know, I'm still of the view that the stock market's going to move higher. And obviously that view could change in a week or two if we get further sharp declines. But that the stock market is going to move higher and then interest rates are going to rise. So what I would do is have a more of an allocation to stocks, less of an allocation to bonds, and in the bond portfolio you want to keep your maturities short. That makes the bond portfolio essentially a little less sensitive to rising interest rates. But right now I'm simply saying, Susie, we have further to go in this cycle until proven differently, and in a week, maybe I'll be proven differently, but right now that's the way it looks.
GHARIB: So for investors who are long-term in their horizon and they've got the courage to invest now, you mentioned a couple of sectors you like. Can you name a few stocks that you think would be good opportunities?
JOHNSON: Sure, I mentioned large capitalization companies. I mentioned the importance of dividend yields. The consumer staples are non- cyclical. You can buy a company like Colgate. In the telecommunications area, I think you can buy AT&T or telephone, whatever you want to call it. And finally, in the area of utilities, utilities offer great dividend yields. A stock that I own and we own in all our portfolios is Duke, so Duke Energy.
GHARIB: And how about AT&T, do you own that? Can you give us your disclosure on that?
JOHNSON: No, don't own AT&T but I do own as well as our clients own Colgate, so that's one we do own.
GHARIB: All right, Hugh, thank you so much for coming on tonight.
JOHNSON: My pleasure.
GHARIB: We've been speaking with Hugh Johnson, chairman of Johnson Illington Advisors.
