SIVY ON STOCKS from money.com
November 10, 2000

Leader of the free world

Thank goodness Fed chairman Alan Greenspan doesn't have to win in Florida.
Plus: More on Microsoft and John Malone's Liberty Media.

By Michael Sivy

It just keeps getting worse. I've listened to explanations on TV of what
the absentee ballots could mean and what kinds of litigation are possible.
I've read conspiracy theories online about what Jeb Bush did to tilt the
election and how electors could switch sides on December 18. I've heard
scenarios on talk radio about how Strom Thurmond could become president and
how the dolphins saved Elian so that Cuban-Americans would turn out in
numbers large enough to put George W. over the top. I can't bear to listen
to any of it anymore.

Fortunately, I don't have to. We have a president. Come January, we'll have
another president. Congress will be evenly split. And one more thing: Alan
Greenspan will still be the chairman of the Federal Reserve. Thank goodness
he doesn't have to be elected in Florida. What he does over the next six
months will determine how much the economy slows and what kind of stock
market we'll have over the next four years. So let's review the facts (and
the probabilities).

Whichever candidate becomes president, there will be only a moderate tax
cut and limited expansion of government spending. That will mean that the
budget surplus will be bigger than if either candidate had a strong
mandate. A bigger budget surplus means that the volume of Treasury bonds
outstanding will shrink -- and that will encourage long-term interest rates
to fall.

That will give Greenspan room to cut short-term interest rates. He most
likely won't do it at next week's Fed meeting, given the election disarray
and the fact that unemployment is still below 4 percent, a level that's
generally considered inflationary. However, the economy continues to show
signs of slowing, core PPI inflation (excluding food and energy) was
actually down last month, and it looks as though productivity will be quite
strong over the next couple of quarters. So look for rate cuts early next 
year.

That's a great environment for bonds, and for many stock groups. But first,
we have to get through the current slowdown. Tech stocks continue to slide
and could get hit even harder during the next six weeks as overextended
money managers cut back their tech weightings. There are plenty of other
cheap stock groups, but recognize that some may continue to pull back
between now and year-end. Keep your eye on the long-term, though, and
you'll get some great buys.

There are, however, a couple of specific stocks I'd consider right now,
particularly if you're an aggressive investor. The first is Liberty Media
Group [LMG.A], which I recommended in September at $19 a share (see "The
media master is back").
[ http://www.money.com/money/depts/investing/sivy/archive/000927.html ]
The stock price has since fallen to $16.25, dragged down by the company's
intimate connection with AT&T. This week, however, Malone said in an
interview that he would like to sever ties to AT&T. Liberty has great
assets and could thrive on its own -- and it looks as though Malone is
ready to make a move. I'd bet on him.

In addition, I think Microsoft is a good buy, even though it has rebounded
from lows below $49 to $67. I don't pretend to be an expert on computers
and I know that Microsoft's results for the current quarter could be lame.
But the reports I see indicate that Windows 2000 could start boosting
revenues substantially next year. And over the next five years, Microsoft
could turn in earnings growth averaging more than 20 percent annually.
Those earnings alone should propel the stock, and that rapid growth should
lead to some multiple expansion as well. Moreover, as time goes by the
government's case against Microsoft becomes moot. And the next president is
going to be so busy trying to outlaw butterfly ballots, he isn't going to
have a lot of time to beat up on Bill Gates.

###

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