Wednesday, October 05, 2005
Park More Cash: BOA Strategist
The Dallas News reports on some surprising investment advice. "It's common knowledge that cash is hot. It's highly uncommon for a Wall Street equity guru to come out and say so. But that's what the chief investment strategist at Banc of America Securities in New York did."
"To be precise, Tom McManus is recommending a 55 percent allocation to equities and 15 percent to bonds, both lower than his 'normal' weightings. And the remaining 30 percent? Park it in greenbacks. (That stands in stark contrast to the normal weighting of 0 percent for cash.)"
"What is his reasoning? The usual suspects everyone is discounting are, shall we say, more meaningful to Mr. McManus: energy prices, stock valuations, the earnings outlook, housing and, of course, rising interest rates. 'We think people should realize that one year ago, when the Federal Reserve was just starting to tighten, that at first these moves didn't amount to anything.'"
"'Can you imagine what it is like to be earning in the bottom quartile, stuck paying rent in an apartment?' Mr. McManus asked. I'm sure such damage caused by speculation in the housing market has not been lost on Fed officials."
"Regardless of the catalyst, Mr. Greenspan will go out with his guns ablazin'. And that can only mean one thing for investors who have yet to face the reality that meaningfully higher interest rates and a weak consumer sector are not the ideal formula to fatten bottom lines. With some online banks paying upwards of 4 percent on cash deposits, Mr. McManus' logic is all too easy to grasp."
"To be precise, Tom McManus is recommending a 55 percent allocation to equities and 15 percent to bonds, both lower than his 'normal' weightings. And the remaining 30 percent? Park it in greenbacks. (That stands in stark contrast to the normal weighting of 0 percent for cash.)"
"What is his reasoning? The usual suspects everyone is discounting are, shall we say, more meaningful to Mr. McManus: energy prices, stock valuations, the earnings outlook, housing and, of course, rising interest rates. 'We think people should realize that one year ago, when the Federal Reserve was just starting to tighten, that at first these moves didn't amount to anything.'"
"'Can you imagine what it is like to be earning in the bottom quartile, stuck paying rent in an apartment?' Mr. McManus asked. I'm sure such damage caused by speculation in the housing market has not been lost on Fed officials."
"Regardless of the catalyst, Mr. Greenspan will go out with his guns ablazin'. And that can only mean one thing for investors who have yet to face the reality that meaningfully higher interest rates and a weak consumer sector are not the ideal formula to fatten bottom lines. With some online banks paying upwards of 4 percent on cash deposits, Mr. McManus' logic is all too easy to grasp."
# posted by Ben Jones @ 12:30 PM 
