yahoo.businessweek.com/bwdaily/dnflash/jun2005/nf20050628_2860_db006.htm
INVESTING Q&A A Cautious Time for Investors Analyst and author Peter Cohan explains why he prefers a conservative approachin these days of soaring oil and China's growing power The future relationship between the US and China will be at least partl y determined by the outcome of the attempt by China National Offshore Oi l Co.
UCL ), in the view of Peter S Cohan, aut hor, analyst, and president of Peter S Cohan & Associates. Cohan notes the current interdependence of the two economies, with China a source of cheap labor for the US and also of financing for the recor d federal deficit. He predicts that the Unocal deal will become a politi cal issue that "will not get past scrutiny in Washington."
FDX ) indicate companies can no long er pass high energy prices along to customers. And that, in turn, sugges ts a slowing economy, as he sees it. These were a few of the points Cohan made in an investing chat presented June 23 by BusinessWeek Online on America Online.
com/chat): Q: Peter, with oil tipping over $60 per barrel today, how do you think th e market will look as we go on? A: Well, I wonder if the $60 a barrel is really the thing that did it. A few days ago, it went over $60 a barrel, and the market was fine. I thin k it was that combined with the disappointing profits of FedEx. Up until now, investors have been thinking that the price of oil has not had an impact on the general economy, but the FedEx news reflects that the high price of oil acts like a tax that decelerates the pace of economic grow th.
GM ), announced their revenues and earnings were going to be disappointing because of the dec line in demand for SUVs and trucks on account of the high gasoline price s That had the biggest negative impact on highly leveraged parts suppli ers to the automobile companies. So that has been a problem, and then another problem has been a decline i n shipping rates out to China.
FRO ) that has taken a hit on acc ount of declining rates for shipping. These are just some examples of ho w the high prices of oil and gasoline have slowed down the economy. Q: Peter, I've also noticed the last few days some steel companies warnin g about earnings because of lower steel prices. A: Well, I think these commodities -- I mean steel and shipping, which is related to steel -- have a lot to do with Chinese demand and the Chines e economy. I think what's going on is that China is beginning to do its own steel, and I think another part of the steel equation is the decline in the auto business. A drop in demand for steel means a drop in demand for coal and iron ore, which go into the steelmaking process, as well as transportation.... On the other hand, a commodity that's obviously doing well is oil. A: My basic philosophy is maybe 40% in money-market funds or cash, 30% in market-index funds, and the balance in individual stocks. My philosophy is that I don't want to have to lose sleep at night worrying about payi ng my bills. I'm not confident in the stock market in general -- and haven't been sinc e 2000. I don't believe the stock market is the place to invest huge sum s of money. Individual stocks have certainly done well over the last few years, but the market has not. The S&P 500 is down around 13% since ear ly 2001, the Nasdaq down even more. People have been putting their money into real estate recently (which I t hink is also a bubble), but in general my philosophy is that I want to h ave enough in a safe place so I don't have to worry about money, but als o take a little risk in individual stocks.
Plus some auto-part s companies in the US A: I think it really is a very interesting sign of the tremendous amount of interdependence between our economies. What has happened is that we h ave a record federal deficit. We're borrowing more, something on the ord er of $8 trillion. They're financing our indebtedness, so we're heavily dependent on them for that.
WMT ) clothing manufacturers (and others) are based there. China is moving up the value chain into more intellectual-based businesse s The acquisition by Lenovo is based on Chinese ability to manufacture commodities inexpensively in the computer industry. Going after Unocal i s part of an effort to obtain oil for their growing economy. We are very dependent on China, so we can't just blow them off and say, " Hey, you just can't buy our companies" and raise tariffs. Their effort to acquire Unocal is going to be a political issue. It will highlight our relationship with China and define what it's going to be - - it will determine our stance on how we'll let China have access to oil , and how they could control us. I feel that it will not get past scruti ny in Washington.
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