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Minyans In Manhattan Recap


Some of the brightest minds on Wall Street...


Comments from Jeff Saut, Chief Market Strategist for Raymond James:

  • The past few months have seen some extraordinary stock market activity, but I am definitely not a conspiracy theorist.
  • Rally in stocks is due to in large part to the "silent crash" in gasoline prices,
  • SPX has not had a 2% down day since May 19, 2003, a six-standard deviation event,
  • The rally has caused participants to take on more risk.
  • When investor risk appetites increase, asset prices increase.
  • Declines in residential fixed investment as a percentage of GDP has foretold every recession and we are now breaking down from unheard of levels,
  • Is this time for real estate different? Don't know.
  • Real estate has historically been an effect and not a cause.
  • Has real estate become so entwined in the economic fabric of this country that it is now a cause and not an effect?
  • We'll probably not know for sure for another year.
  • Puzzled about how we can eat at the same table and all disagree about what is being served.
  • By that, I mean, anybody who has read Ben Graham's "The Intelligent Investor" must admit that by any... any measure used by Ben Graham, U.S. stocks are optimistically priced and not cheap.
  • That doesn't mean they can't get more optimistically priced. But I am cautious right here,
  • However, it is difficult to break the equity markets down in December.
  • Not impossible, just rare.
  • So my themes for investing:
    - China: Within 10 years hundreds of millions of people will join the global marketplace
    - But avoid things that China sells.
    - Buy things China needs.
    - Leaning toward large cap growth in U.S. stocks.
    - Water.
    - GPS
    - Teleconferencing/Videoconferencing
    - Post Secondary Education. Ford buyout as an example. Those folks need to be retrained,
    - Financial Services
    - RFID The medium that is the best antenna for RFID products is silver.
  • Above all, manage the risk.

Panel Discussion One

  • Phil Erlanger: Short intensity has actually been decreasing the past few months. I'm short-term bullish, but believe we remain in a secular bear market, which may reassert itself next year.

  • Jeff Bernstein, Keel Capital: Can't remember any period since the industrial revolution where you can have two massive economies the size of China and India with their growth rate that is not positive for global profit growth.

    Also, our feedback so far suggests this is going to be a surprisingly good retail season, especially in the hard lines and personal consumer electronics,

  • Jeff Macke: When you see poor stocks do well when they shouldn't, due to private equity possibilities, or for whatever reason, you remove a layer of balance from the market where it is impossible to be short certain stocks. That imbalance will come home to roost eventually, and that worries me for 2007.

  • Stephanie Pomboy: The equity market has done a better job pricing in risk than the credit market, The credit market is where things have gotten out of control in my view. From a macro standpoint, I would look for a serious widening in credit spreads.

  • Greg Weldon: Consensus and reality is very far apart in my view. There are many ways for things to play out, whether it is debt deflation or hyperinflation,but these outcomes are so far removed from the consensus that the disconnect is disturbing and frightening.

Panel One Q&A:

  • David Keel: This bout of profit growth has been not the result of leveraged growth, but a de-levering. So where is the bear argument there? I don't see it.

  • Jeff Macke: If I'm going to survive, the best way to do that is to not worry about what happens to credit spreads next year, but figure out earnings tomorrow.

  • Question: What about the activity with the exchanges; NYSE, CME, etc.? What do you make of that?

    David Keel
    : I think these are great examples of disruptive technologies. Technology allows you to get rid of the people, replace them with machines, increase the throughput of the machines and therefore increase the profitability.

  • Is the secular trend in materials and energy still intact?

    Greg Weldon: I think we are seeing a rotation back into the energy, metals areas. When we got back from Vail these secular trends paused as gasoline collapsed. But now look at where crude is while oil shares are moving back to new highs. Look at the CRB equal-weighted index, 20% above the 1980 high.

  • What is the take on gold?

    Phil Erlanger: I think gold is benefiting largely from petrodollars. But if crude breaks $55 I would be more wary of gold as an asset class.

Click here to see Minyans in Manhattan Recap: Part 2.

No positions in stocks mentioned.

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