Merrill Lynch fired up a lot of investors' hopes last week when -- for the first time in more than three years -- it urged the institutional biggies to aggressively buy common stock. The lack of a strong market follow-through, though, indicated that skeptics remain bountiful. s
One of them is none other than former Nixon Treasury Secretary William Simon.
"I think -Merrill Lynch is all wrong," Simon told me. "I believe a decline has recently gotten under way that'll enable you to buy stocks a lot cheaper -- maybe 100 to 150 points lower on the Dow. And I expect to see those lower levels in the next 60 days."
Simon offered this comment in response to a report I had picked up that the former Treasury boss -- with a reputed net worth of $15 million-$20 million -- had personally unloaded in the past two weeks nearly all of his equity holdings valued at some $5 million.
Simon confirmed that he had indeed sold most of his stocks, but declined to specify their value.
Included in his sales were the stocks of a number of companies on which he sat as a board member. For example, he sold 1,000 shares of Dart Industries, 1,000 shares of United Technologies, 3,750 shares of American Medical Building, 1,500 shares of INA and 1,000 shares of Xerox.
Simon emphasizes that his recent stock sales are simply a concern about the market's near-term performance -- that over the longer run he's quite bullish on the equities.
"Logic suggests that a correction is due after the strong market we've had," Simon said. He expects a slight uptick in interest rates, which he believes should make a number of people nervous and provoke some selling.
Going beyond the near term, Simon thinks the Dow Jones Industrials could reach 1,200-1,500 two to three years out -- assuming, he says, that Reagan's in the White House, not Carter.
A good part of this enthusiastic scenario reflects his expectations of a declining rate of inflation (more than generally expected), a strengthening dollar (from an improving balance of payments and balance of trade) and a further drop in interest rates once the current blip is over. Accordingly, Simon takes a rosy view of the bond market after the expected brief rise.
Simon is widely expected to return to Washington should Reagan win the presidency.
"I'd view going back to Washington with no elation," Simon said. "But if I couldn't talk Reagan out of Bill Simon, then I'd probably accept."