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Take on the ticker
By Michael Sean Comerford | Daily Herald Staff

Alexander Paris Sr.

 

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Published: 6/28/2008 11:54 PM

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Alexander Paris Sr. is chief economist for Barrington Asset Management.

What caused the 350-point Dow fall last week?

"The market was dropping slowly as investors were marking time for the Fed announcement from their meeting. But (the Federal Reserve Bank) was pretty much on target. It didn't raise or lower rates, as generally accepted.

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They did convince people, who didn't already know, that they don't intend to raise rates anytime soon. But it was mostly oil and credit that dropped the market last week."

Why did record oil prices and the credit crunch move the market so quickly.

"Earlier in the week, there were people saying oil is going to peak. Then it turned around to a new high, and there probably was a lot of short covering in there to make it even worse. There's lots of psychology in the oil prices right now. And with credit markets, nothing new, same players being hurt. (Goldman Sachs) started off the week's big drop by downgrading all the brokerage stocks and downgrading, putting out a sell (recommendation) on General Motors. Which dropped General Motors stock to a 50-year low ... Pretty much the kitchen sink was thrown at the market."

Was there bad economic news too?

"Actually, the economic news wasn't particularly bad. It still reflected a struggling economy. (Gross domestic product figures) for the first quarter were revised upward.

Although people keep talk recession, we still haven't seen a negative GDP yet after two quarters of fairly sluggish growth. Probably we won't see it in the second quarter either, so the recession is kind of running out of time."

In the bear market you describe, what's a good investment?

"I mentioned one sector I like, that is, technology. It is coming off an eight-year correction. Actually, in the second quarter, technology earnings will be the second best, trading just a little behind energy.

On the other hand, the worst for earnings in the second quarter was the financial sector. So there's one to be in and one to avoid. You want to focus a lot on companies that are sensitive to the weak dollar and the overseas commodities. Our agricultural sector continues to do well ... I would wait a bit on manufacturing stocks but I would buy some of those ... like Caterpillar."