Expect a Half-Decade of Weak Growth - Barron's Interview

Barron's interviews Byron R. Wien, chief investment strategist at Pequot Capital. Wien globtetrots frequently to get first-hand insight into global markets.

Some key comments:

• "Maybe the financials have gone down as far as they are going to go down, but I don't think they are going up with any verve." So if financials are contracting, what's going to expand? Wien says technology and health care, and their ETF proxies HOLDRS Pharmaceutical (PPH) and iShares Dow Jones US Technology Index (IYW).
• The U.S. and Europe will struggle to produce 3%+ GDP growth over the next five years. Expect a slow comeback.
• Two soon-to-emerge aspects of economic weakness: High unemployment and a collapse in consumer credit.
• The market low on July 15 was significant; it may be tested, but won't be severely penetrated.
• Oil will stay in the $100-115 range.
• Natural gas (ETF: UNG), oil (ETF: USO) and oil-service companies (ETF: OIH) will continue to show very good earnings improvement. Coal prices (ETF: KOL) will stay firm, so coal stocks look attractive.
• He's positive on Brazil (ETF: EWZ) but not Japan (ETF: EWJ).

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Of interest: Byron Wien's ten surprises for 2008 and Byron Wien's five sure things for a turbulent market

Comments

[johnthebear:]

You said... "The market low on July 15 was significant; it may be tested, but won't be severely penetrated."

I think you are wrong.

Your analysis fails to consider that the SIV's, CDO's are a thing of the past. Investment banks will no longer be able to create money out of thin air at a 40:1 ratio to capital.

The treasury has taken in 1 TRILLION OF BAD DEBT TO HELP THE BANKS!

World equity markets have already lost 12 TRILLION DOLLARS OF EQUITY CAPITAL!

The Treasury is about to bail out Fannie and Freddie, a $12 trillion obligation... and

Nothing has been said about the huge losses in COMMERCIAL REAL ESTATE THAT ARE COMING AS UNEMPLOYMENT INCREASES!

WHERE IS THE FUNDING COMING FROM TO REBUILD THE WORLDS CAPITAL MARKETS?

The above facts have not been considered by the Bull on the Street, so how can July 15 hold as a bottom? Simply not reasonable in my opinion.

2008 Aug 25 01:57 PM

[gabe borens...:]

You can not discuss U.S and the European economies in the same breath .To put it simply U.S and European economies are about to diverge cyclically .The U.S economy is in the process of consolidation while still addressing and "digesting" some problems.Europe is about to face them .
After the current "turmoil",the U.S economy very well may become the most competitive meam ,lean economic machine in the world.The lessons and adjustments will provide the new dynamics to the U.S economy.
Once the "financial " paranoia is understood within the context of record short open interest,the logic will prevail,the financial sector will lead a major stock market rally ,lead by the shares of the agencies such as FNMA and FRE(established by the act of Congress and guaranteed implicitly by the U.S government).Broad based rally will follow shortly after that .Based on the past history and the current market reality ,3% GDP growth would be quite acceptable. By the first qtr of 2009 ,the U.S economy should be expanding at 5% or faster (GDP).
Europe will be the cyclical laggard and it may be heading for a statistical recession .
This economic outcome of the economic implosion in Europe will accelerate the global "flight" to the dollar assets fuelling unprecedented stock market rally and creating demand in the housing sector(the most undervalued dollar asset).
Where was the investment universe two years ago or even a year
ago,when I have issued serious economic warnings?(as late as September of 2007)......The universe was long the stocks -that was the difference.
With all of the fiscal and the monetary measures in in place ,dynamic recovery is a reality in the period ahead .
In the meantime the market volatility will continue.

2008 Aug 26 06:35 AM

[WEBISKING:]

Blah Blah Blah. My personal portfolio keeps growing every year because I continue to choose stocks that are undervalued and are going WITH the trend and not against it. Many value investors continue to buy financials and hosuing related stocks whose timetable is uncertain and they do not CONTROL THEIR OWN DESTINY.Consumer goods companies and railroads and multi nationals like JNJ have done fine WHEN PURCHASED RIGHT

2008 Aug 26 09:15 AM

[Kunst:]

WEBISKING: Blah Blah Blah. Aren't you wonderful?

2008 Aug 27 02:13 AM