Strategist Offers Investing Tips

By C.R. Roberts, The News Tribune, Tacoma, Wash.

Nov. 3--Readers of The News Tribune first met Bruce McCain a year ago when he visited Tacoma to speak with a group of selected high-net-worth clients of Key Private Bank -- where McCain serves as chief investment strategist.

A senior vice president of KeyBank, McCain, 55, graduated with degrees in both accounting and psychology from Boise State University. He has earned a doctorate in business administration from the University of California, Berkeley, and is a Certified Financial Analyst.

Alongside speaking with clients and managing portfolios, McCain also appears regularly both in print and broadcast media.

He was in Tacoma recently to again speak with private and commercial clients.

When last we spoke, the topic was the depth of the recession. Let's talk about how it ends.

Clearly it's been a good year to believe in the recovery early, and we did. One of the hallmarks of a recovery -- the public at large doesn't believe it's a recovery. They haven't been totally convinced. In the most recent report, about 90 percent of the money in retail investing is going into bonds.

Last time, you said that the market would be the harbinger of a sustained turnaround.

Most of our clients don't believe that. They'd look at me across the table. We'd say we need to invest aggressively. I'd hear them say, "I'm too scared." And they're still waiting for the recovery.

But a lot of people have made some good money this year. Assuming that we are in a recovery, is there still money to be made?

What we watch for is everybody becoming exuberant. Then you don't have much more upside. By the time they finally come back, I'd say we've accomplished 70 to 80 percent of the recovery. The additional is real money, and we do want to play for that.

You've had two groups that have been smart: The supply-side economists, they saw the market. More astute were those who keep track of the economic side, and who follow the psychology of the market.

Any examples?

Marty Zweig and Ned Davis Research. (Visit: www.martinzweig.org and www.ndr.com.)

When did you see the turn?

We started moving back to neutral in December. You had to sense it was losing downward momentum.

There's been a large run in gold. Where do you see it going?

There are two different functions, both reassurance for the investor. One, it's a safe way to protect against collapse. Two, it's an inflation hedge. I think that's what's driving gold at this point. Large federal deficits suggest we're going to see big inflation numbers. (But) we've been recommending oil over gold.

I think oil easily goes back to the $110-$120 range when the global economy finally recovers, possibly to $150.

For gold, I think it will go higher. I think there is still upward potential.

We're also recommending commodity baskets that include oil. Especially if the dollar gets hammered.

You did well on the recommendations you offered a year ago. Any tips today?

Yes, two. First, TIPS, Treasury Inflation Protected Securities. Second, foreign stocks. When you get outside the dollar, you get out of the inflation risks. Before, we were recommending 10 percent (of a portfolio in foreign stocks). Now, we're saying 30 percent developed and 10 percent emerging.

That's quite a shift.

I think we need to look overseas like never before. The real growth may be overseas.

Are you recommending any particular equities or funds?

Noble Corp. (NE), Schlumberger (SBG), KBR Inc. (KBR), BHP, Genzyme Corp. (GENZ).

Tech tends to lag as the recession ends. We'd de-emphasize that. Health care is not going to do well. Financials -- smaller regional banks. Bank of Nova Scotia (BNS). But the trends look so miserable, we'd be reluctant to offer those.

International, look for the funds -- index-based exchange-traded funds. Asian markets have a huge advantage.

I'd look at EFA (iShares MSCI EAFE Index) and EEM (iShares MSCI Emerging Markets Index). You still have to do your due diligence.

We are in a much more turbulent time than we had over the last expansion. That's the challenge this time.

In health care, we're at the wrong end of the cycle. If you own those companies, like Johnson & Johnson, it's not too late to take some money from that. Moving to other prospects is the best thing you can do.

Bonds -- that was a good play earlier this year. It's time to move on.

Is there anything else you'd like to offer?

Probably the most important message is how the overall game has shifted.

In previous recoveries -- in 1991, we were notably slow to restart job growth. In 2001, the recovery was even slower. We're seeing how much foreign competition is changing the game.

Do you have any short-term predictions on the economy?

We need to be patient. It's probably going to be a few unpleasant years. This is our chance to get back to a more reasonable global perspective.

Finally, you travel around the country speaking with clients and investors. Is there anything particular about the people you met in the Northwest?

A lot of the wealth is newer, and in general there is more of a willingness to look to new types of investments. There is certainly more of a risk-taking environment.

C.R. Roberts: 253-597-8535

c.r.roberts@thenewstribune.com

Smart picks, a year later

Nearly a year ago, The News Tribune asked Bruce McCain to make a few stock picks. The chief investment strategist at Key Private Bank did just that. Here are the results.

CompanyTickerPercent change

SchlumbergerSLB+39.97%

CiscoCSCO+43.54%

OracleORCL+33.52%

NobleNE+73.52%

CovanceCVD+47.15%

Thermo Fisher ScientificTMO+37.67%

GoogleGOOG+108.93%

DirecTVDTV+16.59

PepsiPBG+117.19

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