Saturday, October 31, 2009

Barron's Big Money Poll

The soundbites from the bears:

John Williams
of Shadow  Government Statistics:

Thus, the estimable John Williams, proprietor of Shadow Government Statistics, reckons that a full 92% of the apparent 3.5% growth in the third quarter's GDP came from one-time stimulants, mostly courtesy, directly or indirectly, of Uncle Sam. Here's how he breaks down those nonrecurring contributions: 1.7% from auto sales (goosed by "cash for clunkers"); 0.6% from new residential construction (the rush of first-time home buyers to get in under the fast-approaching deadline on the $8,000 tax credit) and a 0.9% gain from a largely involuntary inventory buildup.

David Rosenberg:

AS A KIND OF POSTSCRIPT TO THE ABOVE are some to-the-point comments by David Rosenberg, of Gluskin Sheff. Like John Williams, Dave observes that if it weren't for the government's generosity via its stimulus exertions, real GDP in the September quarter would have gone nowhere. But he also fingers the housing and auto subsidies as causing the personal savings rate to fall precipitously, to 3.3% from 4.9% in the previous three months.

In the past quarter-century, there have been only four other instances when savings have fallen so much in a single quarter. Except for that plunge, he says, "real GDP would have contracted fractionally." Put another way, all of the quarterly gain in GDP "was funded by a rundown in the savings rate that occurs less than 5% of the time."

Which leads him to the contradiction between what might be dubbed Wall Street's frenetic take on the supposed economic rebound versus the considerably more tepid view of the men and women who run America's business. If companies, both financial and non-financial, are big believers in this new post-recession V-shaped recovery that seems to have the hedge funds and most strategists so excited, Dave asks, why are they still cutting back on capital expenditures (which declined, for the fifth straight quarter) and continuing to slice inventories ($130 billion worth), and why are banks still so tight-fisted about lending, which has been contracting at an unprecedented 15% annual rate?

Here's the poll and the soundbites from the Big Money Managers:

The stock market:

  • POLL PARTICIPANTS EXPECT three industry sectors to outperform in the next six to 12 months: technology, energy and health care

  • Nearly 60% of the professional investment managers responding to Barron's fall Big Money poll say they are bullish or very bullish

  •  Today's bullish investors see the major stock indexes making steady progress through next June, amid signs the U.S. economy is on the mend after a searing recession.

  • Thirteen percent of those responding to our fall poll say they are bearish about the stock market's prospects through next June, while 28% say they're on the fence.

  • As for the poorest performers, the managers finger financials and consumer-cyclical shares. 

  • "Companies have cut expenses much faster and much deeper than in the past. That means any increase in revenue will drop to the bottom line faster than in the past. What's going to make this drive come alive is a return of the consumer."

  • Our correspondents aren't thrilled with the government's actions either; 65% say they disapprove of the administration's moves to date.