Market Monitor - Robert Drach of Drach's Weekly Research Report
Friday, January 16, 2009PAUL KANGAS: My guest "Market Monitor" this week is Robert Drach, publisher of the "Drach Weekly Research Report" based in Tallahassee, Florida. Welcome back to NIGHTLY BUSINESS REPORT, Bob, good to see you.
ROBERT DRACH, PUBLISHER, DRACH WEEKLY RESEARCH REPORT: Good to see you again, Paul.
KANGAS: Wall Street has now given back most of what it gained during the Santa Claus rally. What's been behind all the selling?
DRACH: I think that the perception that it's just political bickering with the TARP not being allocated and the delays in the stimulus package. It kind of gives a perception of indecisiveness and it weighs on the market (INAUDIBLE) need a lot of confidence. I think that's been a problem.
KANGAS: How do you see the stimulus plan playing out?
DRACH: The money is just massive. The amount of money from the Federal Reserve, what they've done and what they're continuing to do, the central banks around the world, governments, our legislatures. Inept as they might be in getting the money into the economy, it's massive. It's historic. That's additional money supply. That comes into the economy, sooner or later, either with inflation or productivity. There's no way around it. It has to come out some way or be a combination.
KANGAS: What is the time frame when it'll happen?
DRACH: That is the question and the Obama question is what leadership he's going to give to infuse it into the economy. It's going to show up. It's a matter of when and it's been delayed all along.
KANGAS: Now, on your last visit just about a year ago, you were somewhat bullish on stocks because you said the Fed was very accommodative and we were in an election year, which is historically positive for stocks. What happened? The blue chips were favored by you and it didn't perform.
DRACH: The blue chips actually did worse, the worst year since 1931. But I think it was the delays in the infusion and the incompetence surrounding the infusion process. That's still coming. It doesn't stop it. And now you have the higher quality stocks more discounted than ever. So I'm very bullish on the outlook. But how rapid? You have to ask that.
KANGAS: OK. Last January you also recommend buying four stocks. Let's see how they've fared since then. First two, SunTrust (STI) in that group, what did do well? Nothing. SunTrust doing almost a 66 percent drop. Are you still with it?
DRACH: Yes, I'm still with anything quality. And (INAUDIBLE) as we've mentioned are still quality.
KANGAS: Family Dollar Stores (FDO) really did a magnificent job of bucking the trend, up 60 percent. You still like it?
DRACH: Yeah, sure.
KANGAS: OK, let's have a look at the other two recommendations. Johnson Controls (JCI) down almost 50 percent. United Tech (UTX), a true blue chip off 25 percent.
DRACH: These are all A-plus companies and that's typical of what happened last year.
KANGAS: You would buy these stocks at this point?
DRACH: I would buy (INAUDIBLE) of anything in that group. I would not go lower quality because when these infusion cycles progress, higher quality outperforms dramatically.
KANGAS: You also run the NIGHTLY BUSINESS REPORT model stock portfolio, which is a teaching tool on our web site. How has it performed relative to the Standard & Poor's 500 since its inception?
DRACH: There we are. We want to say, we're basically against the Standard & Poor's because that's the universe of stocks we use. And last year, just to hold our gains is what we were trying to do.
KANGAS: You look like you're ahead of the NASDAQ and the S&P 500. OK, good job.
DRACH: Well, so far, so good.
KANGAS: Do you have some new individual recommendations in stocks?
DRACH: Yeah, but I want to emphasize I'm staying with quality. We brought three of them along. Matthews International (MATW), if you can --
KANGAS: We have a chart on that. Let's have a look at the chart. What do they do?
DRACH: They're in the burial business. I bring that up since nobody is going to buy any cars or buy anything else. At least they'll still die, so that's good.
KANGAS: OK, number two?
DRACH: I wanted to put an oil up to stress the inflationary implications of the infusion cycle, an A-plus oil company.
KANGAS: PCZ on the big aboard, right?
DRACH: Petro-Canada (PCZ)
KANGAS: OK and time for one more?
DRACH: Let's pick out something everybody hates is General Electric (GE).
KANGAS: There it is.
DRACH: It's about as depressed as I've ever seen it. But it's still one of the cheap companies that has AAA paper.
KANGAS: And the yield is - do you personally own any of these stocks mentioned tonight?
DRACH: No, we're talking about the model here. It's just mechanical.
KANGAS: So educational-- Bob, we've run out of time, but I want to thank you for sharing your views with us once again.
DRACH: Good to see you, Paul.
KANGAS: My guest Robert Drach of the "Drach Weekly Research Report."
