"Market Monitor"-Elaine Garzarelli, President of Garzarelli Capital
Friday, April 20, 2007PAUL KANGAS: My guest "market monitor" this week is Elaine Garzarelli, president of Garzarelli Capital and welcome back to NIGHTLY BUSINESS REPORT, Elaine.
ELAINE GARZARELLI, PRESIDENT, GARZARELLI CAPITAL: Nice to be here Paul.
KANGAS: During our last several visits, you've been decidedly bullish on the U.S. stock market and given these recent new highs, including today, correctly so. You told us the U.S. economy had rarely been in such good shape as in recent times. Any change in your position? Is the stock market getting ahead of reality?
GARZARELLI: No, no. Actually, the stock market is catching up to where it should have been last year and we think it has a lot further to go.
KANGAS: Where do your widely followed 14 marker indicators standard now?
GARZARELLI: Well, a bullish reading at 65 and they're at 67 percent; 30 percent would be a major sell signal and 42 percent would be a correction greater than 4 to 7 percent.
KANGAS: You're still quite bullish?
GARZARELLI: Definitely, best economy I've ever seen.
KANGAS: When you were here last in October, you said the housing slump was basically over, but it has gotten a bit worse hasn't it and has it bottomed finally?
GARZARELLI: Well, the mortgage rates are down, 30-year mortgage rates down 100 basis points and I think housing now is flattening out and it should start to turn up later this year in 2008, modestly.
KANGAS: How about oil prices?
GARZARELLI: Oil prices would be bearish from my indicators if they went to $100 a barrel or if the 10-year bond yield currently is 4.7 percent and went up another 300 basis points.
KANGAS: You took away from question. I was going to ask you what would turn you bearish, and apparently that's it. GARZARELLI: Yes.
KANGAS: Now in that visit in October, you recommended four stocks. Let's see how they've done since then. We see Dow Chemical, up 16.1 percent, good call, Intel even moved up 7.4 percent. So you're ahead of the game there. There were two others, Hovnanian, the home builder down 15 percent, that is understandable. Are you still with it?
GARZARELLI: Hovnanian we sold at the end of December for a 25 percent gain. Now you're getting close to a point where you might want to buy it back.
KANGAS: And Altria Group indicates an 11.5 percent loss, but that doesn't take into account the spin off of Kraft, which would put you in a profitable position correct.
GARZARELLI: It would be up 17 percent and I think what we're recommending now is to keep Phillip Morris and sell Kraft because Kraft is overvalued we believe.
KANGAS: OK. That's clear enough. How about some new recommendations, Elaine?
GARZARELLI: I've got some. Now I think the strongest areas in the economy will be capital spending, exports and I think the dollar will continue weak. So the first stock I like is Caterpillar tractor, 50 percent foreign sales. I also like in the capital spending area --
KANGAS: Wait a minute. Let's get the next one up on the chart here. Caterpillar just had a good day today, too. OK, now we see the I-shares of Goldman Sachs in the semiconductor industry.
GARZARELLI: Right, 80 percent of sales are foreign and that includes Texas Instruments, Motorola and Intel, plus some other semiconductor stocks as well.
KANGAS: This is an exchange traded fund, ETF?
GARZARELLI: This is an exchange traded fund right and you can buy and sell it all day long. The next one is Pharmacy Holders and that's also an exchange traded fund.
KANGAS: It's had a sharp rise recently. You're not afraid of that recent -- GARZARELLI: No, because it is down 27 percent from its all-time high in '01. So it is still an excellent, excellent value and also would be a beneficiary of a weakening dollar.
KANGAS: That's your theme here, a weakening dollar is good for exporters.
GARZARELLI: It is. People are worried about a weakening dollar. I like it. Just don't crash. Just be weak.
KANGAS: Do we have another one?
GARZARELLI: Moderately weak. And the last one would be Lehman Brothers and I'm very familiar with that particular stock. And it is down 10 percent just recently. And it is definitely lean and mean and one of the best banking companies.
KANGAS: OK.
GARZARELLI: So with a bullish stock market outlook, the brokerage stocks should be wonderful, wonderful performers.
KANGAS: Do you personally own any of these stocks?
GARZARELLI: I own them all.
KANGAS: KANGAS: And the ETFs included?
GARZARELLI: Yes.
KANGAS: Elaine, I want to thank you for being with us once again.
GARZARELLI: My pleasure on such a nice day.
KANGAS: You like that 153 point gain.
GARZARELLI: I love it have a good weekend. It will make everybody happy.
KANGAS: Thanks Elaine, my guest, Elaine Garzarelli of Garzarelli Capital.
