Your investments and the economy
By Mike Comerford
Mike Comerford recently interviewed Don Coxe. Coxe is chairman and chief strategist, Harris Investment Management, Chicago.
You were in St. Louis last week talking to client investors. What were they telling you about their businesses?
"This time I got to talk to a scrap dealer. He said, for a while, China wasn't buying any copper. Then all of a sudden, a couple weeks ago, it was back and he was saying, ‘How much can you send me?' He's been in the business years and years and now he's saying it is being driven by China."
What does that tell you?
"We are seeing improvement across our (Harris Nesbitt) loan book, from A to Z. And our portfolio is heavily weighted toward the upper Midwest. Someone said to me, ‘It's like someone just turned the lights on a couple months ago' … These are real people out there who had some tough times and now you have to feel optimistic hearing them."
What does this optimism mean to investors?
"It means, if small caps (with smaller capitalization) are doing better than we thought, maybe they aren't overvalued. People were saying they already had their run but maybe not … And as far as jobs are concerned, it's far more important that small caps do well because most people are employed by small caps … So I can see jobs added by end of summer. And the Russell 2000 (small cap index) will be up too."
Is there a momentum to the overall investment markets these days?
"I said this to another interviewer (last week), the market is constipated. And it will stay this way until the (Federal Reserve Bank) decision on interest rates … But I think the real institutional investor and the real investor are thinking the real deal is going to be geopolitical … A lot of people consider a Bush defeat to be bad for the market … There is Iraq … There is Saudi Arabia, which has a growing succession problem."
How's the market going to react this week to the Fed decision and sovereignty being handed over in Iraq?
"This is going to be a very big week for the market because both the things it has been waiting for are happening. But I always say, what the market expects the most, moves it the least. The market really moves on things it doesn't expect."
"If we capture Osama bin Laden, that's worth 400 or 500 points right there. We have 20,000 U.S. troops in Afghanistan right now hunting al-Qaida … And if it comes out that the security situation in Saudi Arabia wakes up … that would be enough to knock oil prices down significantly."
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