"Street Critique"-Hilary Kramer, Chief Market Analyst at Greentech Research
Wednesday, July 29, 2009PAUL KANGAS: Tonight's "Street Critique" guest says being careful and conservative is still the way to go. She's Hilary Kramer, chief market analyst at Greentech Research and author of "Ahead of the Curve." And Hilary, welcome back to NIGHTLY BUSINESS REPORT.
HILARY KRAMER, CHIEF MARKET STRATEGIST, GREENTECH RESEARCH Thank you, Paul, a pleasure to be here.
KANGAS: You've been saying that cash is king for months now. So with stocks up some 40 percent from their March lows, do you still like the sidelines and if so, why?
KRAMER: Paul, I think it's important, more than ever, to be very, very careful when it comes to your money. The reason is that we have these negative influences that will eventually bring down the market. I mean, we will have a recovery five to 10 years down the road, but you have unemployment which is very serious. It's much higher than 9.4 percent. It's in the 15 percent range because we're not even including those who have -- are no longer eligible for unemployment benefits. And then the bigger problem, even besides consumers not being able to spend because they don't have jobs, is that there's no available credit out there -- not for consumers and not for small business and even big companies are finding very egregious terms on Wall Street when they want to go for a loan.
KANGAS: So you feel the market is far too high considering what the economy is doing.
KRAMER: That's absolutely right because we have a jobless recovery -- if, indeed, we do have a recovery.
KANGAS: What are earnings telling you? We have seen pretty decent earnings, have we not?
KRAMER: No, we haven't. To me those earnings were a farce. They were an absolute joke and the reason is that it was all about cutting costs. In many ways, it was really earnings that had to do with unemployment. People were laid off, companies cut the fat out and in some ways that was good. It was effective and many corporations needed to do that, but at the end of the day, only 22 percent of all companies that had reported really had sales that were the same or up. The top line wasn't there.
KANGAS: Interesting observation. The Fed's latest beige book out today shows the recession is becoming less severe in most regions of the country. So are you seeing any signs of recovery?
KRAMER: Well, the only recovery I'm seeing has to do with the fact that there's no longer fear in the streets. The banks have stabilized. The banks aren't going under. We're not fearing global implosion anymore and quite frankly, the financial institutions are doing quite well. But the fear is gone.
KANGAS: OK. Now what sectors do you like for the upcoming recovery?
KRAMER: Well, we've been talking about the banks. Now, again the banks are printing money. They get to borrow at 0 percent and lend out at whatever terms and to whom they want at 7 percent. So I think the financial institutions, especially the big investment houses that may see a recurrence in mergers and acquisition, initial public offerings and that no longer have competition from Lehman Brothers, from Bear Sterns and Wachovia. They will do very, very well. Now the other sector that I think might really benefit as we do eventually come out of this recession will be technology, because technology can be very nimble. It's about efficiencies. It's not expensive the way for a company it might be to buy new plants and equipment, to try to have financing and the technology companies themselves don't have to go to a bank and borrow in the same way, let's say, a utility has to.
KANGAS: So the tech stocks not cash intensive, in other words.
KRAMER: Absolutely. So that's a nice area to go for and I really think it's important to be careful of the energy sector, energy services and even health care, where a lot of my expert friends are saying, oh, that is where you need to be.
KANGAS: All right, very good. Hilary thanks for joining us again.
KRAMER: Paul, thank you so KANGAS: My guest Hilary Kramer of Greentech Research.
KANGAS: My guest Hilary Kramer of Greentech Research.
