CHICAGO (Reuters) - Remember Dow 14,000?
Some 7,000 Dow points ago, in October 2007, the outlook for U.S. businesses was rosy, earnings were up smartly, banks had money and lent it. People actually bought cars.
Times have changed, as have stock prices. But at half their peak level, do stocks reflect a worst-case scenario, or do they accurately measure the prospects for American business?
Reuters posed that question to executives this week at the Reuters Manufacturing and Transportation Summit in Chicago. Most of them have spent decades in business and lived through many previous recessions and market panics.
None ventured that stocks were a screaming buy, but many said selling was panicky and overdone. Others begged to differ.
Prices reflect an expectation that current levels of economic activity will persist for a long period, said Ed Campbell, who heads Nordson Corp (NDSN.O: Quote, Profile, Research, Stock Buzz), a maker of precision dispensing equipment that sells to a wide cross-section of U.S. industry.
"The $64,000 question is, what's the shape of this recovery?" he said. "I do believe the stock market, again, will lead any recovery, and perhaps it may be wrong before it's right."
Brad Bell, CFO of water treatment and industrial services company Nalco Holding Co (NLC.N: Quote, Profile, Research, Stock Buzz), said stocks were held hostage by credit markets. When credit improves, so will equities.
And Caterpillar Inc (CAT.N: Quote, Profile, Research, Stock Buzz) Group President Ed Rapp said he saw signs of panic and, therefore, bargains.
So is he buying?
Yes. Rapp said he recently bought Caterpillar shares, but leaves the rest of his portfolio to professionals.
Terex Corp (TEX.N: Quote, Profile, Research, Stock Buzz) CEO Ron DeFeo said most of his equity was in shares of his company, which competes with Caterpillar in some markets. Prices reflect diminished prospects, he added.
"I think we lived beyond our means, and now we're going to have to work our way out of that," DeFeo said.
He bought municipal bonds about a year ago, which "has proven to be not too stupid."
FINANCIAL ARMAGEDDON? Continued...
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