One on One with Mike Holland of Holland and Co.
Thursday, November 08, 2007
|
|
|
|
SUSIE GHARIB: Joining us now for more analysis of Ben Bernanke and the market sell-off, is Mike Holland of Holland and Company. Hi, Mike.
MIKE HOLLAND, CHAIRMAN, HOLLAND & COMPANY: Hi, Susie.
GHARIB: So Mike, what do you make of a market like this? Crazy day.
HOLLAND: Yeah, it shows just how nervous this market is, Susie. We had over 550 points top to bottom the last two days of a decline through midday as Paul Kangas was just reporting. And the news from Cisco which he referred to, if I listen carefully to what Mr. Chambers, who runs Cisco said, he said business around the world, particularly coming out of Asia and parts of Europe including Germany were exceptionally strong. No surprise some of the financial companies in the U.S. are weaker. But overall he said his businesses with very good. And yet the market sold down his stock and the technology stocks generally as a result of his comments.
GHARIB: Actually, he was on our program last night and that is what he said. He gave a pretty upbeat outlook. But as an investor, what do you make of -- how do you interpret information like that? He gives an upbeat comment. Then there's a sell-off. Is this a time to buy or a time to sell technology stocks?
HOLLAND: Well, generally when the market is very nervous about something, there is usually opportunity. When the market is very buoyant and very confident, that is when things usually are frothy and that's when you can lose money so usually for veteran investors, when they see nervousness, they are comforted by the nervousness rather than scared by it.
GHARIB: You know, Mike, last week you were on the program and it was right after the Fed meeting. And you said that the policymakers could go either way in terms of a cut of interest rates or a pause at their December meeting. I'm just wondering, based on what you heard Ben Bernanke say today, did he give you conviction one way or the other?
HOLLAND: I think he said in his comments today what I said last week, that they could go either way. And that was part of the problem for the market as Paul Kangas said a second ago. The market sold off on his comments. The bond market went up in price, down in yield and the stock market had a dramatic sell-off. And I believe that the market is looking - - the market's actually trade the futures which is an indication of what they think the Fed should do in December. They are saying 90 percent certainty that they will cut. But that's not what Bernanke said so I think if we move forward and things don't change and he doesn't cut, the markets will have a problem with the inaction by the Fed.
GHARIB: Ben Bernanke also talked a little bit today about sovereign wealth funds and he said they are having an increasingly powerful pull on the market, more than hedge funds. I know you do a lot of business in China and you talk to the Chinese a lot. Are you getting any indication from the managers of these Chinese funds that they are interested in withdrawing their dollar denominated funds?
HOLLAND: No, no. I think that as smart asset managers, they will diversify in the future. I think they would be cutting their nose off to spite their face if they sold dollar holdings because they have huge holdings already. If they did anything to hurt their dollar holdings, they would be among the worst hurt investors. Therefore, I think in the future, they will diversify. But the euro market versus the dollar market is one that would make sense for them. But they can't do all of their stuff in euros. They have to do dollars. So the simple answer is no, I think they will continue to be dollar investors.
GHARIB: Looking at the overall market, going back to where we started the questioning, is this the beginning or the end of this downward spiral?
HOLLAND: Well, I saw some very smart people the last couple of days looking for opportunities, people who have been successful in cycles in the past. One smart investor today I know was buying the exchange-traded funds in financial services. Not saying that this is the bottom. The old saw about buy low and sell high, as one smart investor a long time ago said, doesn't mean buy lowest and sell highest. If you can buy these financial service companies as a package, a lot of them are going to be higher sometime in the future. Some of them if you buy individual companies will be hurt. But overall, there is opportunity when there panic. And there was some panic selling. We've had six months of a bear market Susie in some of these financial stocks and some of the financial service companies are being traded down when they have very little to do with the mortgage problems or the sub-prime debt problems.
GHARIB: So quick forecast between now and the end of the year, do you see the Dow, the NASDAQ closing at new highs?
HOLLAND: I wouldn't be surprised if the path of least resistance, once again going into the end of the year was up. I believe it will be up. And one of the reasons for that, I'm comforted by the jobs numbers that came out in the last couple of days. More people working today in the United States than ever before. It means that all the dire predictions about a bad retail season for the holidays coming up are probably going to be once again wrong. We'll probably have an OK, not a great season, but OK. And I think the Dow and the S&P and even the NASDAQ probably could move higher coming out of this once again, panic like we had last August.
OK. Mike, thank you very much. And I want to apologize to you and all of your viewers for this background music, but there a party going on on the floor here at the New York Stock Exchange. But I'm sure they heard everything you said.
HOLLAND: It was very festive, thank you so much for the background.
GHARIB: My guest tonight, Mike Holland of Holland & Company.
