Bull

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Roger Engemann views the market’s summer plunge and subsequent gyrations as a buying opportunity.

“I continue to be bullish,” says Engemann, president of Pasadena-based money management firm Roger Engemann and Associates Inc. “When we look back at this drop five years from now, you’ll have a hard time finding it on the chart.”

Even the meltdown in overseas markets and associated global problems, which many analysts think will drag down the U.S. economy, contain the seeds of opportunity, not disaster, in Engemann’s view.

Many of today’s staunch bulls are described by their critics as young and na & #271;ve, not having seen a bear market during their professional careers. Not so Engemann, who founded his firm in 1969 at the age of 29. The firm manages an investment portfolio of about $7 billion.

Engemann notes that real bear markets have tended to occur only at times when investment money is hard to find either because interest rates are heading higher, or for other reasons. Such is not now the case.

“Liquidity in our financial system is astronomical,” he says. “If you want money, you can get it. Not only is it loose and available, it’s not needed for economic activity because we’re not growing that fast. And with the global slowdown we will be growing even slower, meaning there’s a lot of money sloshing around available to invest in stocks and bonds. I just don’t see any sign of tight money, and so as a result I think stocks are free to go up again.”

Engemann expects the Federal Reserve to reduce interest rates at its Sept. 29 meeting, and predicts that will kick the stock markets upward again.

If the Fed doesn’t act this month, he predicts the market will plunge another 500 to 1,000 points and that will force the Fed to act later in the year anyway.

While Engemann concedes that global problems may have some adverse effects on U.S. markets, he believes that the turmoil is creating opportunities. “This stuff is affecting the (domestic) economy, there’s no doubt about it,” he says, “but I’m still bullish on the stock market because I think all that’s going to do in any short-run period is keep the lid on inflation.”

Subdued inflation, in turn, would tend to keep investment money more available. “Whether we go into a recession or not, I don’t know and I don’t really care, because either way it’s good for stocks.”

How is a recession good for stocks? Again, the answer is a loosening of the supply of investment funds. Engemann argues that at some point in any recession, investment money loosens up, and stocks “take off.”

He points to his own firm’s experience of 1991, when “pretty much the whole year was recession.” In the face of that, the S & P; 500 was up about 34 percent. Returns for Engemann’s firm for that year were in excess of 50 percent.

Then, as now, Engemann and Associates sticks with the familiar names: Pfizer Inc., Intel Corp., McDonald’s Corp., Johnson & Johnson, WorldCom Inc., Gillette Co., Phillip Morris Cos., Merck & Co. and General Electric Co. among them. That’s not to say Engemann is batting a thousand, nor that there are some areas he wouldn’t avoid.

Earlier in the year, his firm bought shares in the oil-services firm Schlumberger Ltd., reasoning that crude oil prices, low at the time, would rise later this year.

“But then, the Asian thing got much worse, and sure enough the price of oil stayed down,” Engemann says, and his firm sold its position. “So I would kind of be careful about owning cyclical companies in general right now, because they will be hurt now in a weakening economy.”

Yet another silver lining in the Dow’s current decline is to bring down investor expectations, which have become unrealistic, Engemann says.

“This is just me, but I hate it when the stock market just goes straight up, I really do. It isn’t real. Earnings don’t go straight up like that. Investors get overconfident, saying, ‘If you’re not making 25 percent a year, don’t talk to me.’ Give me a break. That’s just not real.”

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