"Street Critique"-Michael Farr, President of Farr, Miller and Washington
Wednesday, February 04, 2009PAUL KANGAS: My "Street Critique" guest tonight is Michael Farr, president of the money management firm Farr, Miller and Washington and author of "A Million Is Not Enough." And Michael welcome back to NIGHTLY BUSINESS REPORT.
MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON: Thank you, Paul. Nice to be with you.
KANGAS: We had a nice rally going on the opening this morning. And then all of a sudden it just evaporated. What do you think was the cause of that?
FARR: It was great until about noon, Paul. Then we had comments from speaker of the House Pelosi who suggested there might not be another bank bailout fund from the government. That made people nervous. And about the same time, President Obama came on and said that he was going to limit -- the government was going to limit executive compensation for people who took TARP money to a half a million dollars. That made people at Bank of America nervous. Or certainly shareholders nervous about the Merrill Lynch brokers who -- many of whom make a lot more than that might be more inclined to leave. So all of a sudden optimism is kind of fragile in this market right now.
KANGAS: Well, it has been paying more attention to better than expected earnings in the last four or five sessions. That's an encouraging sign, wouldn't you say?
FARR: I would. I'm glad that, you know, expectations seem to be reasonably low. I was glad to see Cisco after the bell tonight with better than expected numbers. I hope that that keeps up. But we're hearing consistent strains from these CEOs about difficult economic times and we're not seeing, you know, a great deal of optimism with the number of lay offs.
KANGAS: What about this bad bank plan? Is it as bad as it sounds?
FARR: When you first hear about it, you think we couldn't possibly need another bad bank.
KANGAS: That's for sure.
FARR: But the idea of creating some sort of government facility to take these bad assets off of the bank, I think is probably a pretty good plan because it creates some transparency and clarity on these bank balance sheets. I don't think the government ultimately is going that way. I think secretary of the Treasury Geithner now is favoring more of something that is going to look a little bit more like insurance.
KANGAS: What's your outlook for corporate earnings here, let's say over the next month or so?
FARR: Corporate earnings I think are probably still going to be pretty muted. I think it's a very difficult operating environment and I go back to those employment cuts. When you hear about these job lay-offs you're hearing corporate management give you their forecast. They're not optimistic about future business demands or trends improving. So they're going to cut their work forces now in anticipation of a continued slowdown.
KANGAS: On your last visit with us in early January, you came out with your 10 stocks for 2009. I understand they're faring better than the Standard & Poor's 500. We'll due an update the next visit, but how are they doing generally?
FARR: Generally they're doing OK. They're down something over 4 percent. The market is down around 8 percent so they're doing better. Down is never really fun but if we can beat the S&P we'll be very happy with that. We'll cross our fingers. It's a long-term list.
KANGAS: In a market like this it's all relative, right?
FARR: It better be because the absolute is really tough.
KANGAS: We got about 15 or 20 seconds for some final thoughts for our viewers. Michael, go ahead.
FARR: You know, Paul, I think it's really important right now if you're going to invest to do your homework, to take a look at companies that have strong balance sheets, that are earning money and experienced management. Do your homework now. You can make money in this sort of an environment.
KANGAS: Very good, very encouraging indeed, Michael. Good to have you with us.
FARR: Thank you, Paul. Great being here.
KANGAS: My guest, Michael Farr, author of "A Million Is Not Enough."
