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PAUL KANGAS: My guest "market monitor" this week is Michael O`Higgins, president of O`Higgins Asset Management, based in Miami Beach, Florida. Welcome back to "NIGHTLY BUSINESS REPORT" Michael.
MICHAEL O`HIGGINS, PRESIDENT, O`HIGGINS ASSET MANAGEMENT: Nice to be here.
KANGAS: After stampeding out of the starting gate with a huge rally on Wednesday, the first day of trading this year, the bulls of Wall Street seem to have vanished in the market, especially the commodity sector has tumbled. What is going on, Michael?
O`HIGGINS: I think it is a reaction to the Fed minutes that came out during the day and the market didn`t like the fact that the Fed seemed a bit cautious and less inclined to lower interest rates than people thought.
KANGAS: And do you think they`ll hold rates steady or perhaps even increase them? O`HIGGINS: Rates are high historically, on the short end. Long rates are about where they should be, so short rates should come down.
KANGAS: OK. Can we expect this kind of volatility as we`ve seen this week to become normal?
O`HIGGINS: Well, I wouldn`t be surprised to see volatility get -- it has been unusually low. So if it went up a bit, it would be actually more normal.
KANGAS: How do you see 2007 unfolding for investors in general?
O`HIGGINS: I think it will be OK. Probably something like last year, you know, in double digit, normal kind of long-term average.
KANGAS: Not a barn burner but --
O`HIGGINS: Stocks are not dirt cheap, but they`re not expensive either. And the economy is growing. So we should muddle through.
KANGAS: All right, now you haven`t been with us since July of 2005, which is all too long. But back then you gave our viewers eight buy recommendations. And let`s see how they`ve done since then. GE has moved up about 7 percent. But Merck a real winner, up 42.3, great call there. I congratulate you on that Merck call. Then Pfizer which just kind of sits there like cold porridge. We`ll get to that a think in a little while. AT&T has done very well. You actually got your AT&T by SBC Communications holding. And there was a share for share basis exchange.
O`HIGGINS: Right.
KANGAS: OK. That did really well. Then Verizon not bad, up 9.4, but that was offset by Turkish investment fund down 9.4. So that was a trade- off on those two.
O`HIGGINS: Broke even.
KANGAS: That`s right, not bad sometimes. And then the South Korea index fund, look at that, up 34 percent almost.
O`HIGGINS: Yeah.
KANGAS: Very nice and the Templeton Russia fund, look at that, 77 percent gain. What is behind that? O`HIGGINS: It`s an oil play. Oil has gone up dramatically. So oil -- Russia has a lot of oil.
KANGAS: And that is the reason why this Russian fund is down sharply.
O`HIGGINS: Exactly, got killed the last few days (INAUDIBLE) .
KANGAS: All right. Well, I know you have some new recommendations and I`m anxious to see what they are. Let`s start off.
O`HIGGINS: The dogs of the Dow we basically are repeating three of the ones from last time.
KANGAS: By the dogs of the Dow you mean...
O`HIGGINS: The cheapest, the Dow stocks with the highest dividend yield and I wrote the book on it and it is a very successful simple strategy that stood the test of time.
KANGAS: So the ones last year that didn`t do so well should do better in the current year.
O`HIGGINS: Right and some of them actually did fairly well. AT&T did very well, but Pfizer and AT&T.
KANGAS: Let`s have a look.
O`HIGGINS: Let`s have those charts.
KANGAS: GE first.
O`HIGGINS: GE.
KANGAS: That one is waking up you might say.
O`HIGGINS: It has been asleep ever since Jack Welch left it seems, since 2000 at $60. Now it is just starting to come to life.
KANGAS: You mentioned Pfizer. Let`s have a look at a chart there. It may have come alive a little bit.
O`HIGGINS: Great company, largest drug company in the world, great research effort. And it`s depressed in (AUDIO GAP) dividend.
KANGAS: And then we get to AT&T. And you still like it here. O`HIGGINS: AT&T is depressed compared to where it was.
KANGAS: That is some dog.
O`HIGGINS: It has had a good run but it`s still very undervalued.
KANGAS: OK. All right. Let`s move along. You have now the dogs of the globe or the world dogs.
O`HIGGINS: Yes. And these are the cheapest markets in the world.
KANGAS: The Netherlands.
O`HIGGINS: Three of them. One of the cheapest markets in the world is Netherlands, Europe in general is actually pretty cheap.
KANGAS: Look at that chart. It`s very strong.
O`HIGGINS: They had a good year last year although half of it was currency.
KANGAS: OK. Let`s look at some others around the globe. We see Taiwan index fund doing rather well.
O`HIGGINS: It looks well. But I mean in terms of the Asian markets, it`s been a real laggard.
KANGAS: And moving right along, we have another one that you like, South Korea, you recommended that before and you still like it.
O`HIGGINS: Again and it`s a laggard also.
KANGAS: We just have 30 seconds. There is one more I think you have.
O`HIGGINS: We had the precious metals fund, the pro funds precious metals.
KANGAS: Gold, silver, platinum.
O`HIGGINS: Gold, very cheap relative to paper. They`re doing well and I think they have a lot further to go.
KANGAS: Do you personally own any of these securities? O`HIGGINS: I own them all.
KANGAS: Every one of them. You like your own cooking don`t you?
O`HIGGINS: I do.
KANGAS: It`s been a pleasure having you again.
O`HIGGINS: Thank you Paul.
KANGAS: My guest, Michael O` Higgins, of O`Higgins Asset Management.