Barron's interviews Loews' (LTR) chief investment strategist and market maven Joe Rosenberg. Rosenberg says government bonds are worthless at current rates, but is bullish on equities. He thinks the U.S. goverment should sell debt at 3-4% and buy the S&P 500 which has an earnings yield of 7%.
Rosenberg thinks it's a terrible idea for Microsoft (NASDAQ:MSFT) to acquire Yahoo! (YHOO), noting it stands no chance of earning a reasonable rate of return, on top of deluting its own earnings. He says Ballmer should take heed to the market's negativity (shares are down more than $4 and its market cap is off almost $40B since the offer), because it's only a matter of time before disgruntled shareholding employees are put off and jump ship. Having said that, he still thinks Microsoft (MSFT) is a buy at 14x earings of about $2. Street estimates for 2012 are $3.60/share, while he sees $4. Shares ($28) could hit $80 in a few years, especially if Yahoo falls through.
Comcast (NASDAQ:CMCSA) is focused on cash generation. Thursday's announced $6.9B buyback may demonstrate the company is becoming more shareholder friendly.
Banks will benefit most from Fed rate cuts. Rosenberg likes the broad streetTRACKS KBW Bank ETF (NYSEARCA:KBE), and also names Citigroup (NYSE:C). Fannie Mae (FNM) will earn $7-9/share at some point, but even at $4-5/share the stock would climb a lot.
Allstate (NYSE:ALL) trades at 7x 2008 earnings, and is focused on personal insurance, particularly auto.
Retailers are down on worries of reduced spending. Rosenberg says the American ability to spend money is not going away. He likes Target (NYSE:TGT), "the finest retailer in America."