"Street Critique" -Kevin Depew, Executive Editor, minyanville.com
Wednesday, September 26, 2007PAUL KANGAS: Tonight's "Street Critique" guest says not much has really changed since the Federal Reserve launched its dramatic rate cut last week. He's Kevin Depew, executive editor at the financial education web site, minyanville.com. Kevin, welcome back to NIGHTLY BUSINESS REPORT.
KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: Thank you, Paul.
KANGAS: Last week's half point rate cut in short-term rates was lauded by Wall Street. But you say the move really didn't change the picture for the financial sector. Why's that?
DEPEW: I think all we have to do is look at the charts. If you're talking about the housing sector index or banks specifically, a lot of those stocks are back down to levels where they were prior to the rate cut or getting close to that. In the case of housing stocks, they're actually lower than where they were before the rate cut.
KANGAS: And the longer term bond rates, the yields are a little bit higher, right?
DEPEW: I think that's the -- that's the proof. The Fed cut the Federal funds rate and the discount rate by 50 basis points, but you still have government bonds, 10-year Treasury, 30-year Treasury yield. Those are actually higher than where they were before the Fed cut rates.
KANGAS: Last year, you thought the dollar would rise. Maybe that was one of the reasons, but where do you stand on the greenback now that it's hitting new lows?
DEPEW: Certainly, I was wrong about the dollar last year. I did expect it to rise throughout 2007. However, the reason I expected that, those issues are still in play. The consumer is cutting back. Target reported just on Monday evening that they're expecting September sales to be much worse than they had previously forecast. Consumer in cutback mode. We have credit issues that still have not been worked out. Those combine to make risk aversion and you have to pay down your debts with dollars. That kind of balance repair we're still going to see.
KANGAS: So you think the worst is over for the dollar?
DEPEW: I don't know. That's the tricky part about it. I think that certainly now it's oversold and it's due for a rally, but the Fed is continuing to cut rates. That's going to pressure it and that's why interest rates are higher for the governmental bonds.
KANGAS: Kevin with all these factors in mind, there are still some stocks where you're seeing opportunity. Give us your first pick.
DEPEW: Well, the first stock is called Dyncorp (DCP). We've talked a lot about the government expansion on the times I've been on the program. Dyncorp directly benefits from that. They provide security solutions to governments. In addition, they propose providing immigration support and private border protection. So it's a stock that definitely stands to benefit from government expansion.
KANGAS: We just have a minute left. How about another choice?
DEPEW: Trimble Navigation (TRMB). This is also - this is a company that provides optical solutions, navigational solutions for businesses, but also for farmers. We've seen corn and wheat prices very high. Farmers are doing very well. And I think that this is a stock that's going to provide a gadget play for farmers.
KANGAS: OK, 30 seconds. You're in the health care sector with your third choice, correct?
DEPEW: Absolutely, Hologic (HOLX) is a company that provides specialized imaging and diagnostic solutions for women's health care specifically. On minyanville, we've written quite a bit about specialization in health care and this is a stock that benefits from that.
KANGAS: Kevin, do you own any of these stocks or have other disclosures to make?
DEPEW: No, I don't, Paul.
KANGAS: I'm afraid our time is up, but thanks very much for being with us again.
DEPEW: My pleasure.
KANGAS: My guest, Kevin Depew, executive editor at minyanville.com.
