HUDSON: It is a tug of war over outlooks. The S&P 500 as we
mentioned at its highest level tonight since July suggesting earnings
optimism. Government bond interest rates are nearing their lows of last
fall, high prices suggesting economic pessimism. Tonight`s “Street
Critique” guest says investors need to watch profits, not politicians.
He`s Michael Farr. He`s author of “The Arrogance Cycle,” always great to
see you Michael and happy New Year to you.
MICHAEL FARR, AUTHOR, PRESIDENT, FARR, MILLER & WASHINGTON: Thank you
Tom, great to be with you, happy New Year to you.
HUDSON: A bit of a strange convergence, both stocks and bonds
rallying. What do you think we take away from that?
FARR: Well, a little bit of optimism, a little bit of fear, I think.
When you consider everything going on around the world, the U.S. still
seems to be a pretty good safe haven, but I think with sources of
government money coming still into the markets from around the world, there
are 40 elections around the world this year, which means that those
governments are probably going to be throwing some money at things, making
sure everybody is happy during the election period. Probably not a good
idea for long-term economics, but will work for the stock market near term.
HUDSON: With that kind of environment you like Danaher (NYSE:DHR),
DHR, the ticker symbol on this medical industrial manufacturer. What do you
expect out of this one this year?
FARR: I think this is a global company and market has pretty good
demand, reasonable valuations, I think this could be a 10 percent stock
this year, 15 times this year`s estimates and I think this stock is growing
15, 16, 17 percent this year. Good acquisitions, very solid management
team. I`m crossing my fingers with Danaher (NYSE:DHR), but it makes sense
HUDSON: A fundamental play there. We`ve got a viewer question we
want to put to you. It comes to us from Tony. He writes in, I currently
hold 10,000 shares of Alcoa (NYSE:AA). I`m debating if I should buy
another 10,000, double A the ticker symbol on Alcoa (NYSE:AA). It`s talked
about how China really is where the Alcoa (NYSE:AA) market and aluminum
market is going to be told next year. What do you think about Alcoa
FARR: I`d be cautious actually. I like the price and you certainly
want to buy when people are fearful, but I`d be a little bit patient I
think with Alcoa (NYSE:AA). We`ve seen that the energy stocks had a tough
time today. We know that China is concerned about their growth and more
leaning towards easing. So as things slow there I think we`re seeing some
of that evidence in Alcoa (NYSE:AA). You can still get a burst on the
commodity side, but I`d be a little bit cautious.
HUDSON: OK, fair enough. Back in October you had a trio of stocks
we want to update on, Pepsi (NYSE:PEP) and Johnson & Johnson (NYSE:JNJ), a couple of big blue chips. Those are up 5 percent and 1 percent, respectively and then you also liked technology back last fall, Qualcomm (NASDAQ:QCOM) up 8
percent. Nice moves here Michael. Would you put any money to work?
FARR: They worked pretty well. Yes, I would put new money to work in
those names where I don`t own them. I`m always a little cautious after a
stock has gone up a lot, but yes I would, and I own all those stocks. Where
I don`t own them, I`d buy them.
HUDSON: There we go and the disclosures to boot. You can e-mail us
your questions. The address is email@example.com. Our guest this
evening on “Street Critique,” Michael Farr, always great to see him. He`s
author of “The Arrogance Cycle.” Thanks Michael.
FARR: Now available on audio book, thank you Tom.