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Buy Byron’s bullish view

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by Peter Switzer

Volatility was again the name of the game on Wall Street with the Dow up more than 250 points early, then down more than 100 points while the closing bell loomed on the New York Stock Exchange before closing up 143.08 points to 11,153.98.

This came as Germany voted to support reforms to the EFSF, which will bankroll the bailout of the likes of Greece. However, this happened as doubts rose about the Chinese economic future with the Shanghai Composite hitting a 15-month low suggesting that the world’s best growing economy is heading for a harder-than-expected landing!

One thing is for certain — no one is certain about what will happen in Europe, the US and China, which explains why the VIX or fear index is at 40 or thereabout. Until August, it was hovering between around 15 and 20-ish, which meant investors were confident about shares but now they’re really toey. That said, one of America’s famous investors — Byron Wien — is bullish and he told CNBC why this morning.

By the way, this more positive story comes as the Yanks got a better-than-expected jobless claims report and the demand for capital goods also came in on the positive side for the economy this week. By the way, 30-year fixed rate mortgages from Freddie Mac hit a historic low of 4.01 per cent in the US and all of these development I reckon are green shoots for a run of better economic data later this year for the States.

Wien’s view

Anyway, this is what Byron, who is Blackstone’s Advisory Partners’ vice chairman and former Morgan Stanley chief investment strategist for 21 years, has to say:

He doesn’t think the US is in a recession and will avoid it.
He knows company earnings will be strong.
Housing can’t get worse and so up is becoming more likely especially where interest rates are.
The auto industry is on the bottom.
It’s not like we’re looking at a host of bubbles ready to burst.
In summary, he argues that what we’re seeing is the bottoming process before stocks move up again.

So, what’s his strategy? Buy quality dividend paying stocks, have some exposure to energy and technology, but make sure you have household name companies.

Looking at history of low interest rates and low P/Es for companies and the index, it tells the long-term investor that we’re in a buy situation, even if we do go lower for a short time.

He doesn’t expect a booming bull market this year but he does expect stocks to be higher later this year, which coincides with just about everything I have been telling my clients and readers of this column for quite a long time.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Friday, September 30, 2011

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