"Market Monitor"-Robert Stovall, Managing Director & Strategist at Wood Asset Management
Friday, September 26, 2008PAUL KANGAS: My guest "Market Monitor" this week is Robert Stovall, managing director and strategist at Wood Asset Management, based in Sarasota, Florida. And, Bob, welcome back to NIGHTLY BUSINESS REPORT.
ROBERT STOVALL, MANAGING DIRECTOR & STRATEGIST, WOOD ASSET MANAGEMENT: Thanks, Paul, good to be with you.
KANGAS: In your 55 years on Wall Street, how would you rate the current economic crisis on a scale of one to 10, with 10 being the worst?
STOVALL: I think it's moving up toward the 10 number. Nothing that terrible has really happened yet, but the fear and trembling is everywhere, Paul.
KANGAS: Well, are you expecting some kind of a concrete plan to come out of this weekend debate in Congress?
STOVALL: I think it may take longer than just the weekend, Paul. I think it may take a week or more for a plan to come out. And I think it's going to be a plan that will do things in fits and starts. And -- but as my mother used to tell me, Robert, don't stand there, do something. So I believe that the leadership has to do something and do it -- start doing it fairly quickly. And if the past is any help to us, Paul, it will straighten itself out in time.
KANGAS: What does Wall Street need to see from this plan?
STOVALL: I think Wall Street needs to see that the government is going to try to participate and give guidance and try to assuage the fears of the general investors who really are worried about the stability of the accounts that they have with brokers, bankers, and everywhere.
KANGAS: Mm-hmm. Will $700 billion be enough to ease the credit crunch and get the U.S. financial system back on track?
STOVALL: It's a shocking number for most people, Paul. They can't really get their arms around $700 billion. If it's fed in gradually and reports given for progress for each step along the way, it might be better if it's done that way. But, of course, we don't know what the leaders will decide to do.
KANGAS: Well, that's just a question of waiting and wanting certain things, and I guess Wall Street is just going to have to accept what comes out of it. Would you agree?
STOVALL: I think so. I think the leadership has shifted from Wall Street down to Washington. Just see who the key players have been these last two or three weeks, and also, the Wall Street people certainly contributed to this. These huge pay packages for failure, which keep happening time and again, that's in the craw of people, and they're now starting to talk about it. And you know, there's a lot of -- a lot of hostility on the part of the public investor.
KANGAS: Back in March, Bob, you told us that we were entering both a recession and a bear market. Where do we stand now?
STOVALL: We're in a recession. I think it's a mild one, and I think it's also global. You see slowdowns just about everywhere, from the Baltic trade data, elsewhere. And it's also in the States here. I think that expectations have been dropped somewhat on a global basis. In terms of a bear market, we're in one. We've dropped from last October to the present time about 22 percent in the S&P and the Dow 30. It's not a severe bear market yet. I think it can continue until we're down about 28, 30 percent maybe. But I believe that if you give enough time, the earnings will come through, and we'll move towards a dis-inflationary mode here and things will start to look better.
KANGAS: Normally we'd review your previous stock picks and get new recommendations, but tonight we really wanted to focus in on your veteran view of Wall Street, so we put our stock picks -- or your stock picks on our Web site, NBR on pbs.org. And, Bob, I want to thank you very much for sharing your veteran thoughts with us. It has been a pleasure.
STOVALL: You're welcome, Paul. You're welcome, Paul. See you in six months, I hope.
KANGAS: There you go. My guest, Robert Stovall of Wood Asset Management.
