`Paper Stocks Are Very Cheap'

From his base in the Bahamas, Holowesko, 36, manages $29 billion in assets for the Templeton World, Growth, and other funds.

ON U.S. STOCKS

-- "We're finding many more sell candidates than buys. We're reducing our exposure in the U.S. and increasing it in Europe."

ON EUROPE

-- "We've been buying a lot of paper companies. Paper stocks are very cheap."

ON COMMODITY PLAYS

-- "Oil is cheap. In the U.S., we own Texaco, Valero, and Sun. In Latin America, YPF. In Europe, Total and Elf."

ON U.S. YIELD STOCKS

-- "Real estate investment trusts offer good yields, especially health-care REITs."

ON HIS BIGGEST HOLDING

-- "Merrill Lynch. We own 5.9 million shares--31/2% of the firm. They're doing a phenomenal job. But their stock still sells at 10 times earnings, when the market is selling at 19."

ON EMERGING MARKETS

-- "We now have 9% [of our assets] in Latin America, 9% in Asia, and 2% in Eastern Europe."

ON JAPAN

-- "We don't think Japan is cheap. We have only 2% of our assets in Japan, and most of it is Sony. We can't find any stocks to get excited about."

ON STREET JITTERS

-- It will be no surprise if we have a correction. All the signs [of excess] are there."