Beating the Bear

Our panel of experts offers thebest strategiesto protect your wealth in today's market

In the not so distant past, investors used to ask, “How high the bull?” Today, after months of witnessing an erratic market and reviewing less than stellar 401(k) statements, legions are now wondering just how low the market will go.

The sentiment is not without merit: Over the past year, the tech-laden Nasdaq composite index has fallen below the bellwether 2,000 mark more than once. Moreover, quarterly corporate earnings in sectors ranging from technology to consumer products have continued to head south, and Alan Greenspan & Co.’s magic bullet–cutting the interest rate–no longer seems to have the same immediate, uplifting effect on the broad market.

Looking at the current investment landscape, you’re probably trying to figure out if this is the best time to accumulate stocks or stay on the sidelines. To help you figure out your best investment maneuvers, we assembled our roundtable of market mavens for our semiannual meeting. This time, the participants were James E. Francis of Paradigm Asset Management Co. L.L.C., a firm that specializes in domestic equity portfolios and was ranked No. 8 on the BE ASSET MANAGERS list; Michael Ray, head equity trader for Baltimore-based Legg Mason Funds Management’s in-house mutual fund group, including the $13 billion Legg Mason Value Trust; Rahimah Lateef, head of the Convertible Group/Securities Investment department for New York Life Investment Management L.L.C.; and Mark D. Lay, head of MDL Capital Management Inc., which manages more than $3 billion in fixed-income and equity investments and was ranked No. 7 on the BE ASSET MANAGERS list.

BLACK ENTERPRISE: What is your outlook and, based on your investment strategy, how do you think you will perform for the remainder of 2001 and the beginning of 2002?

JAMES E. FRANCIS: Well, I think that [the economy is] going to continue to grow at a fairly slow pace. I think businesses have to continue to work through their issues, which are inventory, head count, and sales. I think that this is all going to lead to further reductions in earnings so I don’t see a great deal changing for the rest of 2001 and through the early part of 2002. So, the bad news is that capital expenditures by businesses are down dramatically. The good news is that consumers don’t seem to be clamping down on their spending. I think the real question is will they be able to continue to hold up the economy? I think that the interest rate cuts, and the tax rebates could help fuel their ability to continue to spend and, hopefully, that will coincide with the rebound of business spending. We need to see a return of capital expenditures, for earnings to just start to accelerate. Right now, I think consumer spending, in different areas, is allowing the market not to go into a spiral; but, if we don’t get either a continuation of the spending or a rebound in business spending, then things could go down.

Our approach to investing is not going to be reactive. We use more of a

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