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» SteveT - Market Monitor NBR March 03, 2006

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Market Monitor -Elaine Garzarelli, President of Garzarelli Capital
Friday, March 03, 2006

PAUL KANGAS: My guest market monitor this week is Elaine Garzarelli, president of Garzarelli Capital and welcome back to NIGHTLY BUSINESS REPORT, Elaine.

ELAINE GARZARELLI, PRESIDENT, GARZARELLI CAPITAL: Nice to be here, thanks.

KANGAS: Does the recent pickup in stock market volatility suggest we`re in for a major change in direction in this market?

GARZARELLI: Well, I think we`re in a major bull market that -- cyclical bull market that started three and a half years ago and it`s likely to continue as far as I`m concerned until my indicators turn negative and they`re still bullish. And I think the reason is that corporate profits, as a share of GDP, are at an all-time high. Even if they slow down a little bit, the margins are still going to be very high compared to this stage of the business cycle.

KANGAS: So you don`t believe we`re in a short-term bull market and a long-term bear market? You believe it`s (INAUDIBLE) all the way.

GARZARELLI: Absolutely. I think we`re in a secular bull market and a cyclical bull market. And I think the Dow and the S&P 500 the next six to 12 months will reach new all time highs. Now seven indices already have, including the Amex, the small stocks.

KANGAS: So your question is how can we be in a secular bear market with all these index hitting new highs?

GARZARELLI: Exactly, not the NASDAQ but the S&P and the Dow. The Dow`s only 6 percent away from an all-time high.

KANGAS: And a new one this year right?

GARZARELLI: That`s right. I think so.

KANGAS: So your 14 market indicators probably are fairly bullish, are they not?

GARZARELLI: They are. They`re still bullish. They`re at 46 percent, higher than they were six months ago. I think the Fed is near an ending, maybe another two, possibly three hikes, but they`re closer to the end than the beginning and that`s always bullish for stocks three to six months before they stop. The economy looks fabulous as far as I`m concerned. It`s likely to slow but that`s what we want.

KANGAS: Fair enough. The question is now what do you think of the new Fed chief Mr. Bernanke?

GARZARELLI: I love him. I think he`s a prince.

KANGAS: And Greenspan was a good friend of yours, wasn`t he?

GARZARELLI: He was great. Yes. We went to school together. And Bernanke actually got almost a perfect score on his college boards. Can you imagine? He`s not just genius, he`s a super genius. He`s fabulous, I love him.

KANGAS: All right, fair enough, so you`re very bullish on the economy and corporate profits. Now I want to go back and ask you about the five recommendations. You were here late September. You gave us five recommendations. Let`s see how they fared, up 3 percent on Energy Select spider, the Technology Select sector spider up 3 percent on energy select, the technology select sector spied up 7 percent. You`re batting a thousand so far. Let`s have a look at some of the others you recommended back then. Caterpillar up 26.6 percent. That`s a winner. And Carolina Group, that`s the Lowe`s tobacco company up over 30 percent. You`re really doing well here. How about the fifth one? We had one more that you recommended. Eastman Chemical and that`s up 7.4 percent. One thousand percent batting. That`s a great record Elaine. Congratulations.

GARZARELLI: Thanks.

KANGAS: Now, do you have some new recommendations?

GARZARELLI: I do. I think the strongest area of the economy this year will be capital spending and that should actually last through late 2007. And so I like the XLI. It`s an exchange traded fund and that`s for the industrial sector in the economy and that`s where the strength will be.

KANGAS: All right, moving right along.

GARZARELLI: The next one would be Motorola. There we`ve got China spending billions on wireless network for the Olympics in `08. Motorola is going to be a benefactor there. The stock`s down 60 percent from it all time high.

KANGAS: OK. We have a minute left for one or two more, perhaps.

GARZARELLI: OK. Another one is Oracle, down 70 percent from its all time high. Earnings growth at 20 percent, software company. And the last one is Dupont which hasn`t done anything.

KANGAS: An old industrial. There we go.

GARZARELLI: Excellent, excellent value at a 3.6 percent dividend yield and down 50 percent from its all-time high. I think they should all outperform the S&P over the next six to 12 months.

KANGAS: Do you personally own any of these securities you`ve mentioned?

GARZARELLI: I think I own all of them.

KANGAS: OK. Fair enough.

GARZARELLI: I`m sure I do.

KANGAS: All right. Excellent, so you are really very bullish. New high on the Dow this year and the NASDAQ will keep pace with the Dow, do you think there? Not a new high but...

GARZARELLI: Yeah, I think the NASDAQ will outperform the S&P and the S&P should hit a new high because the financials, when the Fed stops tightening, will move quite nicely.

KANGAS: Got to run, Elaine but thanks for sharing your expertise with us once again.

GARZARELLI: My pleasure, thank you.

KANGAS: My guest, Elaine Garzarelli of Garzarelli Capital.

-- posted by SteveT