"Market Monitor"-James Grant, Editor of "Grant's Interest Rate Observer."
Thursday, July 03, 2008PAUL KANGAS: My guest "Market Monitor" this week is James Grant, editor of the popular publication "Grant's Interest Rate Observer." Jim, welcome back to NIGHTLY BUSINESS REPORT.
JAMES GRANT, EDITOR, "GRANT'S INTEREST RATE OBSERVER": Thank you, Paul, nice to be here.
KANGAS: During your last visit with us in August, you were decidedly and correctly bearish on the stock market because you saw the economy weakening considerably on a lack of consumer savings. How is the consumer doing now?
GRANT: The consumer is hard-pressed, Paul. He and she have been about the worst short sale in the history of finance. American consumers have spent through thick and through thin, especially it seems thin. These days they are very over extended and I expect them to do much less spending and much more savings.
KANGAS: Well, how bad do you see the economy getting in light of that?
GRANT: For what it is worth, bad. But my deepening conviction with years is that the macroeconomic future is forever impenetrable and one ought to focus on valuations in the here and now. So that is my story.
KANGAS: And you think stocks are getting into that level that they are buys?
GRANT: No. I think the stock -- well, I think the stock market, you know, broadly and generally is still not cheap. The S&P 500 according to Bloomberg is trading, if you please, at 21 times still in this mess of ours. But you know, as the man said it is a market of stocks. And one ought to be on the lookout always for compelling values.
KANGAS: OK. Now aside from the troubled financial sector, skyrocketing oil prices have plagued the economy and Wall Street. Some quick thoughts on oil now.
GRANT: Yes, I can do this very quickly. O-i-l, I can spell it and that's my -- that is my only opinion on the subject. I simply don't know, Paul.
KANGAS: It is a tough one to gauge, isn't it?
GRANT: It is. And everybody else in America has got an opinion. I mean to be the lone exception. I'm agnostic.
KANGAS: OK. During your last visit in August, you gave our viewers buy recommendations on three open-end mutual funds. Let's see how they have done since then. The first one Wintergreen Fund (WGRNX) down just 8 percent, not bad in this market. And Tocqueville Gold Fund (TGLDX) up 4/10 of a percent, not too bad a performance in light of what has happened in the rest of the market.
GRANT: Of course with Tocqueville, you have to add in the distributions and the income and that puts it up 26.4 percent from a year ago.
KANGAS: OK. I'm glad you mentioned that. There was a third recommendation that we'll see and that was (TAVFX), down 22 percent. You still with that?
GRANT: Enjoy the -- yes, I'm still with that. Yes.
KANGAS: How about some new recommendations for us?
GRANT: Good, excellent. I have come prepared. The first is a Fidelity National Finance, FNF, which is America's second largest title insurer. It is in the mortgage business; therefore it is in a world of hurt. But it is priced for that fact. It trades at less than book value and it yields 9.1 percent. It thinks it sees light at the end of the tunnel and actually hired 50 people in the first quarter, first time in a long time it has done that. So if, as and when, surely when Americans get back in the business of buying and selling homes, FNF is likely to prosper.
KANGAS: Do you have a rough time frame when you think things will start to pick up considerably, especially for FNF. No.
GRANT: No, I do not. But what you want, I think, is to look at stocks that are well financed and that can -- they have staying power. You can never know.
KANGAS: All right. How about some other recommendations?
GRANT: Sure. Stick with Tocqueville Gold Funds it is a play on the non-beautification of our celebrity central bank, as it seems to me, central banking as a short sale. And I would add as a third --
KANGAS: Wait a minute now. Let's get that symbol that you can get the price from your broker. That doesn't trade on the big board by TGLDX is the symbol that will get you the closing price each day, right.
GRANT: Right.
KANGAS: And the third one.
GRANT: And finally is Evergreen, I would stick with that, very good value investor runs it and he is going to do well over time.
KANGAS: Wintergreen you meant, not Evergreen.
GRANT: I'm sorry, Wintergreen.
KANGAS: WGRNX, open-end fund, right.
GRANT: Correct.
KANGAS: Do you personally own any of the securities you mentioned, Jim?
GRANT: I have a personal interest in each and every one.
KANGAS: All right. I want to thank you for sharing your insights with us once again.
GRANT: Thank you, Paul. Nice to be here.
KANGAS: My guest, Jim Grant, editor of "Grant's Interest Rate Observer."
