Stock bears see new lows, even as others bullish
NEW YORK (Reuters) - Think stocks have gone as low as they're going to go? Not so fast, two fund managers said on Tuesday.
John Taylor, chairman of hedge fund FX Concepts, and Tom Atteberry, fixed income fund manager at First Pacific Advisors, told the Reuters Investment Outlook Summit that stocks in 2009 will likely retest their 11-year lows hit last month.
That puts them askance with a growing number of high profile equity fund managers, including James O'Shaughnessy and BlackRock's Bob Doll, who say stocks hit their worst levels in late November, but in line with the grim tale fixed-income markets have been telling.
O'Shaughnessy said that while it's a fool's errand to call a market bottom, he thinks it is a good time to buy.
"Price alone would lead us to conclude that now is a fantastic time for investors with cash to move that cash into the stock market," said O'Shaughnessy, author of the best-seller "What Works on Wall Street."
However, Taylor, an outspoken, veteran investor who runs the largest currency hedge fund in the world, with $14 billion in assets, believes the bear market will hold for some time.
"I don't think there is value in the equity market at all at this level," he said.
Taylor said the Standard and Poor's 500 index .SPX could sink to 500 points by next July. That would be more than 40 percent below the 888.67 level at which the S&P 500 closed on Tuesday and 32 percent below the 11-year low of 741.02 hit on November 21.
"We need to go to a place where it's cheap, and it's not cheap," Taylor said.
Perhaps at the heart of diverging views on the market's direction are conflicting perspectives on the U.S. economy.
O'Shaughnessy, in buttressing his bullish view, noted that economic conditions now are not nearly as bad during the Great Depression, when unemployment was 25 percent, gross domestic product was down 30 percent, land values were cut in half and money supply contracted by 80 percent, he said.
"We're seeing none of that today," he said. "Much of the damage is out of the way."
Taylor, however, said he doesn't expect the U.S. economy to stabilize until the end of 2009, adding that the consumer-driven economy was in the early stages of a structural shift that could take two years or more.
"I don't see fast growth in the United States for several years," he said. "People need to get their finances in order."
That said, Taylor said that after a brief year-end sell-off, he expects equity markets to rally until shortly after the inauguration of President-elect Barack Obama, and then plunge again.
"We're going into one of these periods were everybody is in la-la land. They think Obama's going to help them out," Taylor said.
Atteberry agreed. Once the euphoria of a new administration and a likely stimulus package wears off in the spring, he said, Americans will wake up to a harsh economic reality.
Year-end retail sales will be ugly and come the spring, consumer spending on cars and homes will be anemic due to fears about the economy, said Atteberry. His firm foresaw a housing crisis loom a couple of years before it touched off the financial maelstrom that has pushed the United States into a recession.
"The reality of it is, come spring time, this economy is not going to perk up the way we thought it was," said Atteberry. "That is going to be the time you touch the (stock market's) low."
(For summit blog: summitnotebook.reuters.com/)
(Additional reporting by Herbert Lash; Editing by Leslie Adler)
