"Street Critique"-Michael Farr, President, Farr, Miller and Washington
Wednesday, June 03, 2009PAUL KANGAS: Tonight's "Street Critique" guest says he's getting worried of those so-called green shoots. He's Michael Farr, president of the money management firm Farr, Miller and Washington and author of "A Million Is Not Enough." And Michael, good to see you again.
MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON: Thank you, Paul and greetings from the world financial capital.
KANGAS: That's for sure. You know, this market actually has been giving a pretty good accounting of itself even though you've been rather suspicious of the up move. What do you think?
FARR: Paul, I think that we're up 38 percent from the lows and that certainly feels very good. But Secretary Geithner was suggesting that we were more concerned about our budget deficits than anyone else. He made that suggestion in China and he was laughed at. Bernanke today said that budget deficits are a growing and significant problem, that we were going to have to raise taxes and cut spending and he was concerned about the stability of the overall financial system given the growing deficits. This year's deficit should be like 4 X last year's and that's a high number.
KANGAS: The economy, however, is coming alive. A lot of the green shoots have been showing up recently. Do you think they're for real? Are they going to stay?
FARR: I think that it's early and I think that the comps are easy and we're seeing some positive signs. I don't mean to say that. I just don't think we're seeing signs that support a 40 percent rally in stocks and I don't think that we're out of the economic woods yet. We're seeing an increase in home sales when you have rates drop below 5 percent and you see a 30 percent drop in prices makes all the sense in the world to me, but that doesn't get me excited that everything is hunky dory nor does it indicate that housing prices might not go lower.
KANGAS: So the housing market is really the key to it all, is that what you're saying?
FARR: Housing market and credit market are the two keys. Credit's feeling a little bit better. Housing continues to decline.
KANGAS: Uh-huh, uh-huh. In January, you gave our viewers 10 stocks for 2009, all of which are listed on our web site. Your picks are doing very well averaging an 8.5 percent gain year to date versus the Standard & Poor's 500 3.2 percent gain. Any changes to the portfolio? Are you with them for the whole year?
FARR: We're going to stick with this portfolio. I think it's a defensive portfolio that outperformed when things were doing very poorly. (Review the performance of Michael's 10 Stocks.) It's held up very nicely, continuing to outperform during good times. I was sort of struck that the only name on the list, Johnson & Johnson is my only name under water right now. I think that that really reflects policy risk in the administration and the large part of the discussion we're hearing about health care.
KANGAS: Is there any favorite that you have right now out of the 10?
FARR: I wouldn't actually say that I've got a favorite, but when I looked through my list, Cisco is 18.8 percent, whichever one goes up most, Paul, is always my favorite.
KANGAS: Well of course, it'll be going into the Dow Industrial Average. That'll help with index fund buying, of course.
FARR: It does, indeed. But we really don't have much financial exposure at all. I think will leave us in very good stead. Health care, some industrials, IT and some consumer staples are really giving us a very protected and well-performing portfolio.
KANGAS: Michael, you own all of these 10 stocks, do you personally?
FARR: Personally and the company.
KANGAS: All right, very good. Good to see you, once again.
FARR: Thank you, Paul, very much and be careful out there.
KANGAS: I will. My guest is Michael Farr of Farr Miller and Washington, author of "A Million Is Not Enough."
