"Street Critique"-Michael Farr of Farr, Miller, and Washington
Wednesday, May 06, 2009PAUL KANGAS: Tonight's "Street Critique" guest says while we've avoided another Great Depression, he's not convinced the worst is over. 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: Nice to see you, Paul. Thanks.
KANGAS: Signs of hope all around. Green shoots, so to speak. But you're still somewhat bearish. Why?
FARR: Paul, the green shoots are things like the rate of decline is slowing. You know, I think that's a great thing but we're still declining. We're moving closer to a bottom. I'm very encouraged by a lot of what I'm seeing, but the numbers are still negative.
KANGAS: What would turn you outright bullish?
FARR: You know, that's a really good question. I would have to see home prices begin to bottom. I'd have to see credit loosen up. And I'd have to see the consumer employment -- I guess employment would have to start going up and the consumer start spending.
KANGAS: We're well into two months in this rally that has been going on. And you think it's still a bull trap?
FARR: Well, it feels like I would call it more of a bear trap, I think. I thought that we were due for a rally at the beginning of March. And we talked about that on your program, of course. I feel like a 35 percent rally in 60 days is a terrific rally, but certainly the fundamentals haven't improved by 35 percent in the past 60 days. So I'd be a little bit cautious to step in and buy here.
KANGAS: What do you think the bank stress tests that will be released tomorrow are going to show? Are you positive or negative?
FARR: Actually, I'm positive, Paul. And I can't believe that I'm saying this, but I actually think the government has done a pretty decent job in sort of bleeding out this news, leaking it over time. We're seen the share prices go higher, the news about the banks, isn't this horrible. And now bank per share prices are high enough where if they have to go to the public markets, they can raise the capital they need. I think this has been a well-managed program.
KANGAS: Do you think investor confidence is turning? It seems it is for you.
FARR: It's turning a little bit for me. And certainly consumer confidence numbers were up too today. That looked very strong. So, yes, we're feeling a little bit better but I think perhaps the exuberance is a bit premature. It took us a long time to get here. I think it's going to be still a long, steady climb out.
KANGAS: We have a minute left. In January you gave us 10 stocks for this year, all of which are on our Web site. Your picks are gaining ground, up almost 4 percent this year to date, versus the Standard & Poor's 500, only about a 2 percent gain. Any changes in your picks or are you staying with all of them?
FARR: No changes in my picks. I'm going to stay with all of them. I think it's still a defensive portfolio. We really outperform by a greater margin as the market was falling. And we're keeping up nicely as it's going up. It's a defensive portfolio and it was designed to be that way.
KANGAS: OK. And you own all of the 10 stocks in that portfolio for the long run, right?
FARR: Own them all for the long run, personally and the company.
KANGAS: OK. Very good. We have about 15 seconds for a quick comment to our viewers as we close.
FARR: I think that there are good signs to be encouraged but if I took a car and marked it up 35 percent in the past 60 days, you'd probably want to wait until the price came down a little.
KANGAS: OK.
FARR: Be patient. Be diligent. But there's money to be made. Just be patient.
KANGAS: Michael, thanks very much for being with us.
FARR: Thank you, Paul.
KANGAS: My guest, Michael Farr of Farr, Miller, and Washington, and author of "A Million Is Not Enough.
