"Market Monitor"-Michael Metz, Chief Investment Strategist for Oppenheimer & Co.
Friday, February 02, 2007
PAUL KANGAS: My guest market monitor this week is Michael Metz, chief investment strategist for Oppenheimer and Company. Welcome back to NIGHTLY BUSINESS REPORT, Mike.
MICHAEL METZ, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER & CO.: Thank you, Paul.
KANGAS: What are your thoughts on today's January employment report and do you think it supports all this talk about how we're in the midst of a Goldilocks economy?
METZ: First of all, Paul, you know those figures are notoriously unreliable. They'll probably be revised. But on balance, I think almost all the evidence indicates we're going to have a soft landing and a renewed growth in the second half of next year.
KANGAS: So you're a believer in the Goldilocks theory, is that correct?
METZ: More or less yes. There are problems out there and one of the problems with the market is to a large extent has been discounted but the economic outlook does look OK.
KANGAS: On your last visit with us in early August, you said of the major asset classes, real estate was too expensive. Bonds were not at all attractive, but stocks were about the only thing to own. Have you changed your mind or do you still feel that way?
METZ: I still feel that way. Actually, you're having sort of a bubble in commercial real estate which makes it even more overpriced. Unfortunately, stocks are the only place to go, in my judgment.
KANGAS: What about the housing slump? Do you believe that's over?
METZ: No, I don't, but it looks like it won't really upend the economy. I think it's going to be a little worse than expected, more durable, but it doesn't look like it brings about a recession.
KANGAS: How about the energy situation? Do you think oil is going to stay in the 50s or go higher or lower?
METZ: I think long-term supply-demand is in pretty good balance and there are all sorts of geopolitical risks. I think energy is a great investment here.
KANGAS: The other thing we have to cover of course, is interest rates. You didn't find bonds attractive back in August. How about now?
METZ: If you have to have income by the two-note, I think long rates will be going up. Look, we've had a bull market, that is declining rates for about 25 years. I think that period is over. To me there's no value in the long bond.
KANGAS: OK, you had only one buy recommendation back in August. Let's see how it's done since then. It was an energy stock and that was Anadarko. It's down about 5.5 percent from where it was. It's been over 50. Did you take profits when you were in a profitable position?
METZ: No, I still like it. I think it's a great candidate to be taken over at a very large premium. It has reserves already proven, most in North America. To me it's a real value stock with the chances for considerable upside excitement. I own it and I'd buy it here.
KANGAS: But you think that the major attraction is a takeover candidate, not earnings, the projection there?
METZ: Well, it's the value underlying the stock/ That is proven reserves I think are worth more than the market price of the stock and I think the big integrated companies have no alternative but to buy companies like this one.
KANGAS: We'll keep our eye on that one. Do you have any new recommendations for our viewers?
METZ: Well, DBA, doing business as, it's actually sort of an ETF, which represents four different grains.
KANGAS: Now this, judging by the chart, has not been public for even, what, a half a year or so?
METZ: No, it's a new invention by Wall Street. If you want to play the grains and frankly I think we have a real risk of very serious inflation in food prices, this is soybeans, corn, wheat and sugar. To me, it's a great speculation on rising prices there. I think it's a very good vehicle.
KANGAS: So it's a commodity play, basically, then.
METZ: That's right, without the leverage that you normally get with commodity plays.
KANGAS: OK, let's have another of your recommendations.
METZ: The other one is OEF, which really reflects the 100 biggest capitalization stocks in the S&P. The great paradox today is that the big quality multinationals have been the laggards. They're the real bargains in the market. Everybody is concentrating on small and midcaps. I think it's a great buy.
KANGAS: Quickly now, we have time for one more.
METZ: EWJ, which represents the Japanese market. It's done nothing for a year. I think it's the most attractive of the developed markets. I think it will have a big move upward this year.
KANGAS: Yes, you recommended it on the program about a year and a half ago and it was around 13. So if you still have it, you've got a profit, right?
METZ: Yes, but I think it has a lot of room on the upside for the year.
KANGAS: Mike, do you personally own any of these securities that we've mentioned?
METZ: Yes I do. I own EWJ and I own DBA and Anadarko.
KANGAS: OK, so you're confident of your choices?
METZ: I've been wrong on occasion, Paul, but I think they're very attractive.
KANGAS: OK. My thanks for being with us.
METZ: My pleasure, Paul.
KANGAS: My guest Michael Metz of Oppenheimer and Company.