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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. ### Post your comments on Michael's column at: http://www.money.com/depts/investing/sivy/index.html To subscribe or unsubscribe to Sivy on Stocks, go to: http://www.money.com/email/ Earning Releases and Calls For the latest corporate earnings releases and online conference calls click on: http://money.ccbn.com * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! Sign up for a RISK-FREE issue of MONEY MAGAZINE at http://www.money.com/subscribe2 Or if you prefer call our toll-free number 1-800-544-4594 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * We may, from time to time, contact you with offers for Time Inc. products and services which we think may be of interest to you. 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