"Market Monitor"-Michael Metz, Chief Investment Strategist at Oppenheimer & Co.
Friday, February 01, 2008PAUL KANGAS: My guest market monitor this week is Michael Metz, chief investment strategist at Oppenheimer & Co. Welcome back to NIGHTLY BUSINESS REPORT, Mike, great to see you.
MICHAEL METZ, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER & CO.: Thank you, Paul.
KANGAS: With no end in sight of the wild price swings in stock markets all around the world, really, how does the average investor operate in this volatile environment?
METZ: The first thing he does is turn off the financial television during the day. The second thing is to have a plan and stick to it regardless of random trading noise.
KANGAS: Are you still bullish on the stock market?
METZ: I'll tell you Paul, I'm very nervous about the economy. I think we're going into a deep and long-lasting recession but stocks, compared with real estate or bonds, are relatively cheap. So it's really the only asset class that has any great charm, in my opinion.
KANGAS: And that's what you said last July when you were with us.
METZ: I still believe that.
KANGAS: You were a little off the mark in July because you predicted interest rates were likely to hold steady or even move higher but here we are considerably lower. Explain what your thinking was then and also now.
METZ: Well, real interest rates after inflation are virtually zero now. I think there's been a stampede of people away from the municipals, corporates, into the Treasuries which has pushed long-term rates down. I think they're going to go up from it. I would not buy long treasuries. I would look at munis, possibly, corporate bonds, short-duration, not long- term instruments.
KANGAS: You like municipals maybe because of all the bond insurance problem.
METZ: Exactly. I think a lot of people are afraid of them because the insurance may diminish or maybe you know, be canceled. But that's really not the basis for buying municipals. I think they're a very attractive sector.
KANGAS: OK. Now you correctly predicted in July that the housing problems would get much worse and they certainly did. But are we near a turning point now?
METZ: I do not think so and I think the next shoe to drop will be commercial real estate. That will deflate next in my opinion.
KANGAS: You were also right in forecasting that oil prices would remain high. Any change in your outlook now, Mike?
METZ: I don't think oil prices will go down. I think the Saudis and Russians control a quarter of oil's output. They're not going to let prices drop.
KANGAS: OK. So we'll stay up here in the $$80-$90 range.
METZ: Let's say between 70 and 100 at least.
KANGAS: OK. During the July visit you gave our viewers three buy recommendations. Let's see how they've done since that time. We have Anadarko Petroleum (APC) up 14.5 percent. It's been a long-time favorite of your. Are you still with it?
METZ: Yes, I am, I still like it.
KANGAS: OK. And General Electric (GE) down 8.5 percent although it did get as high as $42 in October. Are you still with it?
METZ: I'm uneasy about it, Paul. I think their exposure to financial services is too great.
KANGAS: Your third recommendation was the I shares (EWJ) of the Japan market, down 13 percent. That particular security can't seem to get out of its own way.
METZ: It been a real disappointment but now Japan is the cheapest developed market in the world.
KANGAS: So do you have any new recommendations?
METZ: I would still buy Anadarko.
KANGAS: OK. Let's get a chart on that. And it's had quite a move up, but just recently it's got hit a little bit, so it's right around the 60 mark.
METZ: And then I would buy Chesapeake (CHK), which is domestic gas producer. I think also very attractive.
KANGAS: OK. That's $37.71 range as of today.
METZ: I would say, Paul, the big integrated oil companies are going to force - will be forced to buy these independent exploration companies.
KANGAS: CHK is the trading symbol on Chesapeake, correct? Any third possibility that you like here?
METZ: I'd still buy Japan. It's a disappointment, but I think it's still very, very attractive value situation.
KANGAS: And then a little over $15 was the one-year high, now around $12.81 and you still like it.
METZ: Yes, I do.
KANGAS: Mike do you personally own any of the securities you've mentioned or have any other disclosure?
METZ: I own all three.
KANGAS: You do own all three?
METZ: Yes.
KANGAS: OK, well that's a vote of confidence in your recommendation.
METZ: Could be wrong.
KANGAS: Well, everybody has that possibility, but you're pretty sharp. I'll say that. Our time has run out but I think to thank you for being with us once again, Mike.
METZ: Thank you for having me, Paul.
KANGAS: My guest Michael Metz of Oppenheimer & Co.
