"Market Monitor"-Al Goldman, Chief Market Strategist for Wachovia Securities
Friday, May 09, 2008PAUL KANGAS: My "Market Monitor" guest this week is Al Goldman, chief market strategist for Wachovia Securities. Welcome back to NIGHTLY BUSINESS REPORT Al.
ALFRED GOLDMAN, CHIEF MARKET STRATEGIST, WACHOVIA SECURITIES: Thank you, Paul. Always a pleasure.
KANGAS: When you were with us last in late December, and you were not your usual bullish self and that call turned out to be correct since stocks have had a rough ride this year. How do you stand on the outlook for the market now? Improving?
GOLDMAN: It is improving, Paul, I think we have been in a bear market that probably started in October when we made the market highs, but I think we saw the lows January the 22nd and I think we are in the bottoming process, we are transitioning from a bear to a bull.
KANGAS: It seems like oil is one of the most influential things on this market. What is your outlook for oil?
GOLDMAN: Well, you don't fight an 800 pound gorilla and you have to assume that the price of oil is going higher. I can't justify it on the supply, demand basis, but emotionally and speculators are helping to push it up and world problems so you have to assume that we haven't seen the highs yet in oil. Let's hope we see it very soon, though.
KANGAS: It would be nice if we could figure out a way to stop the ascent of the oil. Do you have any ideas along that line?
GOLDMAN: Yeah, everybody stop driving across the country.
KANGAS: All right.
GOLDMAN: No. I, unfortunately, have no ideas and we are going to be living with high gasoline prices.
KANGAS: OK. How about interest rates? Where are they headed?
GOLDMAN: Well, the Fed, I don't think is going to lower again, nor are they going to rise quickly. So I think Fed funds are going to stay at two percent probably the rest of this year. My guess is the Fed will probably be lifting interest rates next year, but no time sooner. I know a lot of people are afraid that they might, but I don't think that is in the cards. They are more concerned about the economy than they are about inflationary pressures.
KANGAS: What is your forecast for corporate profit for the second half of this year?
GOLDMAN: Not real good. I think profits for the year primarily due to the financial problem and the general recession which I believe we are in, will be down about five percent from last year. So I think that those who have been looking for 10, 12, 15 percent increase in earnings have been making a mistake, but I think the market has gotten around and has already cranked this into the general market mood.
KANGAS: So you see stocks higher at the end of the year than they are now?
GOLDMAN: Yeah. Something like seven percent from here, I think. You know, if the recession hits its trough in the fall as I think it will, we could start a new bull market and go modestly higher. Typically the market starts up about four months before the economy hits its stride which means maybe late spring, early summer we start a new bull.
KANGAS: So you have made a change. Now you are slightly bullish, we could call it, cautiously bullish?
GOLDMAN: Well, I think we saw the loss January 22nd. Those were the lows and I don't think we are going to retest them.
KANGAS: OK.
GOLDMAN: And I like the way the market has been acting since the first of March.
KANGAS: Well, in December, you gave our viewers three buy recommendations. Let's see how they have done. And at the top of the list is a real clinker, some stock that has really disappointed lot of people, American International Group (AIG) down almost 31 percent. What is your take on what is going to go on with that stock?
GOLDMAN: Yes, of course at the moment that was a terrible recommendation. At the time, I said only buy it if you a strong heart.
KANGAS: Yes, you did.
GOLDMAN: But I didn't think it was going to give us a heart attack but very disappointing. Let's hope that the worst is out of the way today.
KANGAS: OK. And you had two other recommendations. One was Costco (COST) which is up on that time, up nearly two percent.
GOLDMAN: Pleased with the action of Costco. The discounters, I think, in demand and are going to stay in demand because the consumer is strapped and I think that's going to continue.
KANGAS: And Intel (INTC) was your other one. It is down a bit, 13 percent. Do you stay with it?
GOLDMAN: I think so. I am optimistic on the economy. By year end, I think Intel will do fine.
KANGAS: Al we have less than a minute left. How about a couple of new recommendations?
GOLDMAN: OK. Well, I think economy is going to turn around, so I like Deere and Company (DE). It has been doing nothing for five months but the record is good and it is economy sensitive. I like Illinois Tool Works (ITW). It has been acting well, a good company, economy sensitive and I think it can be bought here. And then Oneok (OKE), a natural gas company, which has been acting quite well and offers an above average yield of 3.1 percent.
KANGAS: OK. We will be watching them. Al do you personally own any of those stocks or have other disclosures to make?
GOLDMAN: No, I do not and no other disclosures necessary.
KANGAS: All right. I want to thank you for being with us once again.
GOLDMAN: My pleasure, good to be with you, Paul.
KANGAS: My guest, Al Goldman of Wachovia Securities.
