"Market Monitor" -Ernie Ankrim, Chief Investment Strategist for Russell Investments
Friday, December 19, 2008PAUL KANGAS: My guest "Market Monitor" this week is Ernie Ankrim, the chief investment strategist for Russell Investments based in Tacoma, Washington. Ernie, welcome back to NIGHTLY BUSINESS REPORT.
ERNIE ANKRIM, CHIEF INVESTMENT STRATEGIST, RUSSELL INVESTMENTS: Thank you Paul. It's my pleasure.
KANGAS: Wall Street's early rally today triggered by the auto bailout fizzled rather badly. Give us your thoughts on the market's reaction?
ANKRIM: Well, I was pleasantly surprised by its early reaction. Actually, I thought this was nothing more than buying the incoming president some time. I don't really believe that our sitting president was doing anything more than buying us a little time and I thought that was good. It's not a break (ph). It's not the final outcome here, but it does prevent what would have been, I think, a really bad start to President Obama's term.
KANGAS: Well, the loss of a million jobs would be serious to any economy, wouldn't it, if this had gone under?
ANKRIM: Absolutely. And, honestly it may be that we see a substantial reduction in the size of those companies before we're done. But I think that the sitting president allowed the president-elect to actually start on his own clock rather than be inheriting a really serious difficulty.
KANGAS: Right. Now on your last visit with us in late June, oil was nearing $150 per barrel and you said if it keeps rising, we're going to see a really bad recession. Well oil is now around $34 a barrel and we're in an ugly recession. What gives here? Are we going to see some improvement because of the drop of oil?
ANKRIM: I would have had loved to have seen some economic improvement if in fact the oil price had been speculatively high and then came off those highs. I think what we're seeing right now is weakness in oil driven mostly by very weak economic experiences around the globe and that's reducing demand. And that's the bad news of this. This is a case where we're get some relief as consumers, but that oil price is low for good reason and it's a scary reason.
KANGAS: Is this bear market getting a little bit long in the tooth? Can we expect it to -- to go away any time soon?
ANKRIM: I hope so. I believe we're close, Paul. This has actually been an amazing run. We had a sell-off from a peak in October and then we had the Lehman failure in September, which I think really brought a new leg down to this market. But I believe the market has discounted about as much bad news as we're going to see in the next 12 months. I think the economy over the next couple of months is actually going to be very bad and people might even interpret this as, well, the stimulus isn't working, liquidity isn't driving the economy. I think actually given enough time, we'll see this responding midyear next year but I think the markets will move before that.
KANGAS: I'm glad to hear that. On your last visit with us you gave our viewers three stocks to buy. Let's see how they've done since then. The first one was Devon Energy (DVN) and strangely enough, you said I hope it goes down because that means oil will go down. You got your wish.
ANKRIM: Sort of. It's a bad outcome. But you couldn't not be in energy some place. I was happy to see that that was my loser.
KANGAS: I understand your logic there. McDonald's (MCD) actually has a gain of 6.8 percent. Are you staying with that one?
ANKRIM: Our managers still have that as well as Devon, but McDonald's has been astonishing considering the market since that time is off about 35 percent.
KANGAS: And you had one other choice back then and that was Hewlett- Packard (HPQ), the bluest of blue chips and yet it's down 20 percent. Are you staying with it?
ANKRIM: We haven't over weighted Hewlett-Packard and actually, 20 percent looks good in a market that's down 30.
KANGAS: I agree. How about some new recommendations earnings?
ANKRIM: Paul, I've got a pharmaceutical, Wyeth (WYE). Like most pharmaceuticals it faces challenges where drugs go off and face generic competition, but they've got a really good pipeline and currently its P/E is about 50 percent lower than normally is and it's got a fairly good dividend at about 3 percent.
KANGAS: WYE on the big board, correct?
ANKRIM: That's right.
KANGAS: OK. How about a second choice?
ANKRIM: Wells Fargo (WFC). Our managers like financials and they understand that there's risk in some of these companies, but this one's going to be around for a while. Again it's got a fairly aggressive dividend yield of 4.5 and really doesn't have nearly the problems a number of financial institutions are facing.
KANGAS: And that's WFC on the big board. One more Ernie.
ANKRIM: That's right. The last one is Qualcomm (QCOM). It's again been taken down by the market. They're a leader in 3G cell phone technology. They design the chips that run almost all the cell phones out there. I think this is one that has been beaten up remarkably. It's got a 2 percent dividend yield itself and its P/E is about half what it has normally been historically.
KANGAS: QCOM on the NASDAQ. Ernie, do you personally own any of the stocks mentioned here or have other disclosures to make?
ANKRIM: They're all in mutual funds run by Russell that are in my retirement account but I don't own individual stocks Paul.
KANGAS: So you own them indirectly?
ANKRIM: That's correct.
KANGAS: Ernie, I want to thank you for being with us once again.
ANKRIM: My great pleasure Paul, thanks.
KANGAS: My guest, Ernie Ankrim of Russell Investments.
