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Sunday, March 24, 2013

Dow Jones 25,000 by 2017? Bullish Call ?

Click text to jump within video. . times to be there. and watching our markets making a comeback after the major indexes posted their biggest losses in more than three weeks at yesterday's close. right noe dow is up 64 points and let's bring in arthur lance and chairman of thunderstorm capital and portfolio manager of the dorfman value fund and the thunder storm value fund and following that live shot, john. it's apropos, the name of your fund. what are you doing here? a week of corporate crosscurrents and a lot of earnings stories out there week and what michelle was just reporting on over in europe. you know, i like the volatility. we just had volatility in one direction on the upside and this week, you know, i think it's healthy to have a correction and some sell-offs. we're still finding bargains and they're just not the area you would think of. the consumer staples are overvalued, you know, and we're taking profits there like the procter & gambles and the kimberly-clarks and there are some areas that are trading at depressionlike levels, and some energy. it's good in a strong market like this we're still able to find markets and investors should use this volatility to their advantage. you're selling into any of the strength that you see? we're selling quite a bit. just like six months ago we recommend selling apple at 700. now we're buying, but these other companies that are hitting new highs, we're taking some profits off the table and there's a lot of companies and industries that are still trading low so, you know, we feel fortunate that it's not like 2007 where with mark and erin we were talking about everything was overvalued to get out and we're still finding some bargains and the investors have to be selective. john, i'd call you a bull, but that wouldn't be doing it justice. you're looking for 25,000 on the dow by 2017 and you say in term of cyprus that any effect on the market is negligible at this point. aren't you underestimating what's happening over there? i don't think so. i think u.s. investors tend to overemphasize europe and underemphasize asia and canada and latin america. you have to go to our fifth biggest trading partner to find a european country. canada is bigger, mexico, china, japan. those are our four biggest trading partners and those are 49%. germany which is fifth is only 4% and cyprus isn't even on the map. so from the standpoint of u.s. investors it's the tempest in the tea pot. let me put this question another way. are you overestimated what's going on here in the united states to underpin such a bullish forecast for the dow. i'm just wondering are you anticipating corporate profits to be and whether or not you think the sequester which should see the effect of if that's a big deal at all. well, there will have to be budget cuts behind the sequester. the sequester will not be the end of it, but the economy is recovering. i wouldn't say in spite of what thement has done. the economy is recovering of its own natural forces now. we've had 12 years of subpar growth. we've had 12 years of up and down with little net progress in the markets and people have forgotten what a strong economy and what a bull market -- a secular bull market looks like, and i think that's generally where we're headed for the next four years, so i'm predicting, as you said, 25,000 on the dow which implies a 15% compound rate of return for the next four years. john, can i just come back on the important points that you're making about europe. i' sure it's a question of what america trades with whom. it's a question of where the companies are quoted on this market make their profits and in technology, for example, 40% of those profits are made in europe and therefore europe arguably is more significant than you might think on the trade argument having said that. this is a very interesting week because cyprus has hit headlines in a scary way and yet the u.s. market has continued to trade relatively unscathed. do you think we can now say that the european crisis is not relevant to this market? i remember talking to a lot of clients and other individuals a few months ago when the european crisis was in the thick of things and what i said was that crises have a way of turning into problems and problems have a way of getting resolved imperfectly and gradually, and i think that's exactly what has been the course and will be the course. europe is not out of the woods, but the united states is further along than europe. you study times when europe was in recession and we weren't, our markets have done pretty well. but, allen, europe clearly scares you more than it obviously does john, right? yeah, cyprus is small and nobody can argue about that, but what it really shows is that, you know, europe is not resolved and, you know, they're not recapitalizing their banks like we did four years ago so they pushed the can down the road and they're hoping that nothing develops and snowballs beyond cyprus and that's not an area we feel comfortable with especially when we have a procter & gamble trading at 20 times earnings. so i think it will get resolved, john's right, but it will be a tedious and laborious process that will affect our economy much more so than he thinks and many investors. all right, gentlemen. enjoy the weekend. we'll talk to you again soon. allen lance and john dorfman.
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