"Street Critique"-Michael Farr of Farr, Miller and Washington
Wednesday, November 12, 2008PAUL KANGAS: Tonight's "Street Critique" guest says uncertainty surrounding the Treasury's financial rescue plan is driving the markets lower. He's Michael Farr, president of the money management firm Farr, Miller and Washington. Michael, good to see you again.
MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON: Thank you, Paul. Nice to be here.
KANGAS: Michael, what can Treasury do to allay Wall Street's fears?
FARR: Be consistent. Stick with the program here. We got news today from Secretary Paulson that they were going to change the way they were going to apply this troubled asset relief program. I've heard people calling it the terrible asset relief program as well. They now want to actually make investments directly into financial institutions, whereas before they wanted to swap some of this toxic debt, some of these really bad investments for cash or for Treasuries. They're now going to change it. It's going to be fine. I think it's a fine approach but, folks, we've got to be consistent here. There's plenty of uncertainty and Wall Street doesn't like uncertainty.
KANGAS: You think in the new form it has a better chance of succeeding?
FARR: I think it has probably a better chance of succeeding because by investing into those financial institutions directly, they're going to be able to gain some leverage and perhaps heal more problems. That's the intention anyway and I think it stands a shot.
KANGAS: Understood. Worries about the health of the consumer have also been weighing on Wall Street. In light of today's news on Intel, are these fears overblown?
FARR: I don't think that you could possibly say that they're overblown given today's news on Intel. That was kind of a shocking number after the close that they may miss fourth quarter revenues by a $1 billion to $2 billion. That's really significant and it shows significant pressure where there's just the demand is drying up around the world. Intel is a big, of course, international company. So that's worldwide demand that's going to be affecting those numbers by as much as 20 percent.
KANGAS: With all this on our plate, the markets appear to be retesting their October lows. Where do stocks go from here?
FARR: Well, I think clearly, Paul, we're going to retest those lows. The hue and cry, the great chorus is calling for a retest of those lows. The expectation is out there. And so therefore, we've seen a buyers' strike today. Buyers who would otherwise come in are saying I'm going to hold off. I'm going to wait until we see those lows again. So, I think we're going to go ahead and test them. Will they hold? We need to see this double bottom. We've seen it historically since 1900, about 86 percent of the time in bear markets. It will happen so I hope from those lows we'll be able to build, but I still expect this recovery to take a good deal of time. I think we could be doing this through the spring.
KANGAS: What are you telling your clients in this ugly environment?
FARR: I'm really telling them that we need to stay the course. If you're going to buy low and sell high, we're down some 6,000 points in the past 13 months. So down 6,000 doesn't mean that we're high. Buying it in here is going to take some patience, I think, but I think that that's probably the right move. I don't think you have to be too fast to buy and you really need to do your homework. You have to be very careful and buy balance sheets that are very strong and for companies that don't need access to the capital markets.
KANGAS: No specific recommendations yet, Michael?
FARR: No specific recommendations yet, Paul. I've got a couple of buy lists in my pocket, a couple of tickets written in the tech area and the prices are coming my way.
KANGAS: Thanks for sharing your insights with our viewers, Michael.
FARR: Thank you, Paul very much. It's great to be with you.
KANGAS: My guest, Michael Farr of Farr, Miller and Washington.
