"Street Critique" -Michael Farr, President, Farr, Miller and Washington
Wednesday, October 29, 2008PAUL KANGAS: Tonight's "Street Critique" guest expects this bear market to be with us for a while, just like some of its predecessors. He's Michael Farr, president of the money management firm Farr, Miller and Washington. Michael, welcome back to NBR.
MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON: Thank you, Paul. Nice to be here.
KANGAS: We saw another rate cut today and the Feds have now pumped billions of dollars in liquidity into the financial system. How long until these moves start helping?
FARR: I think they already have, Paul. We've seen the credit markets trade much better overnight. We're beginning to see bond prices come back up, as spreads between corporate bonds and Treasury bonds tighten a little bit. I think they're beginning to work, but it sort of shows you how broken it really was that it's taking this long to get moving again.
KANGAS: Michael, whether the bear markets of the early 1970s and the one earlier this decade tell you with about our current bear market?
FARR: Paul, you can see from the two charts that they tell you that bear markets take a while. Real heavy bear markets, these drops of 40 percent, close to 48 percent in the previous two bear markets took around 20 months and 36 months really to work their way through. They make bottoms a bunch of different times. So I don't think investors should get too anxious or eager about throwing money too quickly at this one.
KANGAS: When you were last with us on October 8, you said that the selling was not over, correctly so, but that the market was nearing a bottom. How about yesterday's huge run-up? Was that a confirmation of the bottom being processed?
FARR: I don't think so. I think yesterday looked like a great bear market rally. I think that we will see more of those and if you look back to 2000-2003, the first bottom was in July before we ultimately made a final bottom in March of the following year. I expect that given a backdrop of a weakening economy that is continuing to contract and housing prices still dropping, unemployment still going higher, that this could take several months and we'll have more buying opportunities ahead so keep your powder dry.
KANGAS: That's what you're telling your clients now, basically, I guess.
FARR: That is. We have a shopping list together. We have some stocks we would like to buy. We're waiting on better entry points. I think we're going to find cheaper prices. I also will tell them that I'm not inclined at all to sell, that I'm still inclined to be a buyer but I'm a very careful buyer.
KANGAS: In early October you said you were nibbling on some weak financial stocks. Are you still nibbling?
FARR: I nibbled a little bit. Those stocks have come a little bit more my way. I will nibble a little bit more going forward. Yes, but, again, this is still a very uncertain period, so I think the opportunities are still there and they're going to get better.
KANGAS: All right, thank you, once again, Michael for sharing your insights with our viewers. I appreciate it.
FARR: Thank you, Paul, very much for having me.
KANGAS: My guest Michael Farr of Farr, Miller and Washington.
