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Letter to the editor

Analyst: Slide isn't done yet

He predicts a rough time for at least six months.

By Helen Huntley, Personal Finance Editor
Published August 18, 2007

ADVERTISEMENT Richard Bove is gaining some national attention for downgrading stocks, saving clients a lot of money.

As market calls go, you can't get much better than this one. Tampa stock analyst Richard Bove cut ratings on the stocks he follows July 18, one day before the Dow Jones Industrial Average peaked. Clients who followed his advice saved a bundle.

The Dow lost 8 percent of its value over the next four weeks, and Bove predicts the slide isn't finished. He attributed Friday's 233.30-point rebound to misplaced investor euphoria.

"There's a lot of bad debt out there and it's got to be cleansed out of the system," he said in an interview Friday. "I think we're going to have a relatively tough time for the next six months, maybe longer. The market has to correct 20 to 25 percent."

Bove, 66, follows financial stocks for the boutique investment firm Punk Ziegel from his home in Lutz. He said he has been researching and writing about debt for the past five to six months.

"For the last five years we have increased debt in the U.S. economy three times faster than the growth in income," he said. "Now we're not generating enough income to pay the interest on the debt."

Bove said he decided to downgrade stocks when Bear Stearns warned investors in two of its hedge funds that they would be getting little, if any, of their money back.

"The worst sin a financial entity can commit is not giving people back their money," he said.

Bove told investors to sell shares in Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley. In addition, he downgraded his ratings on three big banks, Citigroup, Bank of America and JPMorgan Chase to "market perform."

"The only thing I'm willing to buy in this market is high yields that I think are very protected; dividends are critical," Bove said.

Bear Stearns, Goldman Sachs, Lehman Brothers and Morgan Stanley have fallen 12 to 19 percent since July 18, while Merrill Lynch is down 9 percent.

Bove is starting to receive some national recognition and kudos for his timely call last month.

Has that nabbed him more devotees among investors? Too soon to tell. But there's this: He put a "buy" rating on Washington Mutual Thursday and the stock jumped nearly 8 percent Friday.

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.

[Last modified August 17, 2007, 22:44:00]