"Market Monitor"-Richard Steinberg, President of Steinberg Global Asset Management
Friday, January 02, 2009SUSIE GHARIB: My "Market Monitor" guest tonight says 2009 will be another tough year for the stock market. Joining us now with his forecast, Richard Steinberg, president of Steinberg Global Asset Management. Hi, Rich, happy New Year to you.
RICHARD STEINBERG, PRES., STEINBERG GLOBAL ASSET MANAGEMENT: You too, Susie.
GHARIB: So nice rally today. Is this as good as it gets for 2009?
STEINBERG: I don't know. I think there's so many challenges that we're going to have to get through, unemployment is quite bad. It's going to get worse. The economy is still going to show negative GDP growth but stocks are cheap. If estimates are still too high at $81 and you take 20 percent off, you could see the S&P at 1,000 to 1050, but it's going to be up and down all year long. It's going to be a little bit of a trader's market, at least for the first half.
GHARIB: Investors were really shell shocked in 2008. What advice can you give them for the New Year?
STEINBERG: The key is to really understand what risk is. I think last year was a defining moment for investors with risk and they need to realize how much volatility they can take because the volatility isn't going to go away.
GHARIB: Rich, lot of the stock recommendations that you gave us in January of 2008, almost exactly a year ago, were - were -- suffered quite a bit. Let's go down the list and you tell you where you stand with them now. Bucyrus (BUCY) and Sterlite (SLT). Do you still own them?
STEINBERG: No, we sold them down about 10 percent. Bucyrus we stopped ourselves under the 80s and about 18 on Sterlite. We missed the rally back up, but we're out of those names.
GHARIB: What about Western Union (WU)?
STEINBERG: We still own it. The stock's very cheap. It throws off great cash flow. If you're an investor for a couple of years, it's a cheap name.
GHARIB: And then you told us about an ETF called preferred shares (PFF). It was heavily invested into financials and it got hit hard. What's your view on PFF?
STEINBERG: We still own it. We were really wrong on the whole credit crunch, especially after the Lehman debacle. But I think if you need cash flow and you can ride out the storm in the credit crunch, you will continue to get good dividend yield there.
GHARIB: Let's go down your new list of recommendations for 2009. At the top of your list is Transocean, the offshore driller, ticker symbol RIG, R-I-G. What's the attraction there.
STEINBERG: We think that with the Obama administration that we are going to have offshore drilling. The key to this is we think oil is too cheap down here. Anything above $60, earnings start to get better and money will flow back to the drillers.
GHARIB: This stock was as high as $160 before the financial crisis hit this summer. What's your target on something like this?
STEINBERG: I think you could see probably 40 to 50 percent upside over the next 18 months but it's going to be driven by oil, Susie, so it depends what happens in the global economy.
GHARIB: Your next recommendation CRH is an Irish cement company with a ticker symbol CRH. What's the attraction there?
STEINBERG: The Irish call CRH and we met with people from Ireland recently. It is one of the top aggregate cement names and I think it's a great long-term and short-term Obama infrastructure play. They have a great global distribution so it's not just a U.S. story.
GHARIB: And Teva Pharmaceuticals (TEVA) on the NASDAQ, a big generic drug maker. Why are you recommending this company?
STEINBERG: Another Obama theme that you're going to have to continue to have price pressure from the large pharma names. They (INAUDIBLE) stock is very cheap, fantastic management, and it really doesn't have the distraction because it's mostly U.S. in terms of worrying about what's going on short term in Israel.
GHARIB: You have another ETF that you're recommending, its short 20-year Treasuries, ProShares Ultrashort Lehman 20-year Treasury index-- that's a mouthful. Ticker symbol TBT. What's the story here?
STEINBERG: Investors have to use this with caution. Really it's a hedge against their bond portfolio. The Fed is printing money. They're going to continue to keep it in ease mode and we don't think over the next two years that Treasury can stay in the 2 plus percent range on the 20-year level. It says the opposite of what happens to bond prices. If bond prices start to fall, you'll make money there. It's a good way to hedge your bond portfolio. It should not be used as a speculative vehicle.
GHARIB: So it's a long-term investment. Now do you own any of these stocks or do you have any other disclosures you have to report?
STEINBERG: We own them all but I don't own any of them personally.
GHARIB: Real quickly, let's talk about General Electric because it is one of your core holdings and it got hit very hard in 2008. For investors who own it, should they hold on to it?
STEINBERG: I do think so. It's been a disastrous name, one of the largest names in the index. Jeff Immelt said he's going to keep the dividends steady so you get paid a huge dividend for next year. The key is what happened in GE finance. I think if you're patient, you'll be good.
GHARIB: All right, we're going to have to leave it there. Richard, happy New Year, thanks so much for coming on the program. STEINBERG: Take care, Susie.
GHARIB: My guest tonight, Richard Steinberg, president of Steinberg Global Asset Management.
