Expert: ‘Most Dangerous’ Place for Investors Now Is on the Sidelines

Tuesday, 10 Jul 2012 11:13 AM

By Nancy Stanley

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U.S. companies’ second-quarter earnings will exceed Wall Street’s estimates, Jack Bouroudjian, chief executive officer of Bull and Bear Partners, told CNBC, adding that not being invested in equities is one of the “most dangerous” things.

Because of lower oil prices, consumers have more disposable cash, he noted, and corporate America is “richer than ever before.” This extra cash will increase earnings and will be a boon for equities in the next several years.

“There are a few times in history, the 30s and 40s were one of those few times also, when not being invested (was) one of the most dangerous things to your portfolio,” Bouroudjian said. “I call this the period of accumulation. I think the next few years are going to be when you see the run in the markets.”

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

He predicts that U.S. technology firms are going “to come alive” as they invest in new technologies. Bouroudjian recommends Intel Corp., Microsoft Corp. and Oracle Corp.

“Tech spending is almost like a medical bill, it’s hard to plan for it,” he stated. “It’s really one of those things where it no longer is a luxury item. It’s becoming a necessity and (part of) survival.”

Regarding the global economy, Bouroudjian is optimistic.

“The reality is this: The global growth story is not going to go away,” Bouroudjian said. “The 100 million plus people who are living around Shanghai are not going to move back out into the countryside. You and I know that. So all of that has got to be factored in.”

This thinking contrasts with the beliefs of noted bears.

For instance, New York University economist Nouriel Roubini stated that a “perfect storm” of economic events forecast to strike the global economy in 2013 is gathering steam earlier than expected, and the world is beginning to feel its effects now.

Earlier this year, Roubini predicted a confluence of four events to merge into an economic hurricane and derail the global economy next year. Those four elements — stalling U.S. growth rates, Europe's debt crisis, cooling emerging markets (China namely) and military conflict in the Middle East — are happening now.

In addition, King Lip, chief investment officer of Baker Avenue Asset Management, told CNBC that he is advising investors to stay defensive because of slowing growth and weak earnings. Lip recommends utilities and consumer staples.

“It seems that finally Europe’s woes are showing up in earnings and China‘s slowdown is also showing up in earnings forecasts,” Lip told CNBC. “So it appears that despite how strong balance sheets are for corporate America, generally speaking, forecasts are not bullish at all. We saw that from companies like Nike Inc., Procter & Gamble Co., FedEx Corp. We think it’s going to be a tough slog for the earnings season.”

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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