Fisher: I actually believe this is a relatively normal correction that’s building the base for the next move up, which I think will be a nice big move up.
Maria: …What are you doing with your money now?
Fisher: … energy, industrials, materials, the investment banker, broker/dealer part of finance, but not the rest of finance.
The other thing that I think happens in the next leg is another huge wave of takeovers. I think that takeover phenomena that we’ve seen growing in the last couple of years has another big push ahead.
What we’re hearing all around us is that loud clucking sound of a chicken correction market. When you really have a credit crunch, quality spreads between something like the Merrill Lynch intermediates and 7-10 year and govies goes up by 3, 4 percent. This has gone up by 1% and stalled. Normally when that’s happened before, like in 2000 or 1998, you get these huge expansions in the spreads before the market buckles. This time we’re getting the buckling first after a little movement. I think this is just the stuff of nothing.
Maria: Having said that, are you going to buy brokerages here?
Fisher: Oh – broker/dealer investment banks, money managers, the whole world that benefits from the upside. Absolutely.
Maria: What do you know about the market that I don’t?
Fisher: That even at higher corporate borrowing rates, even at higher BBB rates today, takeovers are still tremendously profitable on average, which is why we’ll have another big wave of ‘em.
Maria: Do you think we’re going to see the wave coming from strategic buyers…?
Fisher: Absolutely, absolutely. Absolutely, the strategic buyers are going to be there. They’re the ones the private equity people are teaching to play the game. That is, the private equity guys figured it out first. The strategic guys on average aren’t that smart; they’re slower learners. They’re learning to play the game later, but they’re coming on.
~ Ken Fisher, as appeared on CNBC, August 1, 2007