Tags: Morgan Stanley | Darst | US | Multiyear | Bull Market

Morgan Stanley’s Darst: US in 'Multiyear Bull Market'

Thursday, 11 Nov 2010 08:01 AM

U.S. stocks are in the early stages of a “multiyear bull market,” with the largest companies priced “like Rembrandts laying on the driveway in a tag sale,” according to David Darst, the chief investment strategist at Morgan Stanley Smith Barney.

Darst spoke in New York today at a presentation by the world’s largest brokerage, a joint venture between Morgan Stanley and Citigroup Inc.

On stocks:

“The real laggard of the last 10 years has been your Schlumberger, your Pfizer, your Johnson. AstraZeneca, GlaxoSmithKline, Nestle, Novartis — they’re sitting there paying you 3, 4, 5 percent and trading for 12, 13, 14 times earnings. This is one of the scariest things. These great big companies are sitting there like Rembrandts laying on the driveway in a tag sale.”

“We think we can have a multi-year bull market. We’d be very surprised if we started a new 18-year, Reagan-Thatcher bull market.”

On Latin American stocks:

“America ‘Brazilified’ and Brazil ‘Americafied.’ Their middle class grew and strengthened and ours shrank and weakened. The baby boom generation is in conflict with taking it from our elders who are passing on and we’re not going to give it to our kids. We’re going to tax them to pay for Botox and being stretched out on a yoga mat.”

On Treasury bonds:

“Beware of Treasury bonds at 2.5 percent. Don’t overweight them in your portfolios. People were buying these hand-over-fist today at 2.5 percent. In 1981, it was yielding 16 percent and people shunned them like the plague.”

On China:

“The U.S.-China relationship is the single most important relationship in the world for the prosperity of the planet going forward. Let’s treat this like a small child that’s a year old that we’re being so careful how we handle that little infant. Let’s not throw it around.”

On this year’s best-performing stocks:

“You know what the number one performing stock group in the U.S. is this year? Here’s the hint: This group is up 79 percent. What is the group? Gambling stocks.”

“Las Vegas is in a mess. In 2005, Las Vegas had $6 billion in gambling revenue, Macau had $6 billion. This year, Las Vegas has $6 billion, Macau has $22 billion. We get exposure to it through these companies. Las Vegas Sands. Singapore, five years ago? Zero. This year, the annual rate — because they only opened halfway through this year — but by December, $12 billion. Find your U.S. companies that are really, secretly emerging market exposure headquartered in Cincinnati and Atlanta.”

On gold investing:

“We’re bulls on gold, but we’re nervous bulls. We don’t like when something goes parabolic straight up like a skyrocket, which gold has been doing. We would say be careful, be cautious. Let this thing calm down a little bit.”

“Gold has been talked about a lot. Robert Zoellick, head of the World Bank, said that gold in a modified basis deserves a place in the international monetary system, and the reaction has been wild. Governor Mark Carney, head of the Bank of Canada, said gold has no place in the international monetary system. So you’ve got different things going on.”

On the U.S. dollar:

“We need money to have value, and we need to be careful. If the U.S. can get its act together, the dollar can remain the key primary reserve currency for the next 30 to 50 years.”

On the Federal Reserve’s quantitative easing:

“This was not a recession we had. This was a credit collapse and an asset price meltdown. Therefore, the medicine has to be different, that’s why we’re doing quantitative easing.”

“There’s been a big pushback on QE2 from the international sector. There are risks associated with this QE2, and those risks involve the fact that we’re using the world’s reserve currency for political gain in the U.S. They all see us doing it and they’re making noise in response. You had China, Germany, Brazil, Japan, Russia and even Luxembourg come out very negative on this.”

On the outlook for the U.S.:

“It’s not all over for the United States of America. We think the U.S. is going through a transition, a resetting, a purging, a cleansing, and a catharsis, setting the ground for that next mind-blowing, jaw-dropping generation."

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U.S. stocks are in the early stages of a multiyear bull market, with the largest companies priced like Rembrandts laying on the driveway in a tag sale, according to David Darst, the chief investment strategist at Morgan Stanley Smith Barney.Darst spoke in New York today...
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Thursday, 11 Nov 2010 08:01 AM
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