The monetary tide, in particular, has been "guided" by a bunch of academicians (armed with 400 PhDs) at the Federal Reserve who erroneously determined, through ex ante analysis, that inflation would be transitory - marking the single largest mistake in The Fed's 109 years of history. Warren Buffett also once said "only when the tide goes out do you discover who's been swimming naked." In economic terms, the transition from too easy to much tighter monetary conditions has been a tide going out, which has revealed the incompetence and lack of quality leadership of our fiscal and monetary authorities.As such, higher interest rates diminish the value of stocks, especially high growth, Nasdaq names. (DDM is a quantitative method used for predicting the price of a company's stock based on the theory that its present-day price is worth the sum of all its future dividend payments when discounted back to their present value). note yields about 4.5% - it is not only a strong alternative to equities but is an important part of the calculus used in valuing stocks in a dividend discount model. An elevated risk-free rate of return is particularly concerning. dollar and rising interest rates (" all roads lead to interest rates!") remain our biggest investment concerns. Goods inflation and the prices of durables, automobiles and housing, are moderating rapidly - but wage inflation will likely remain sticky.Click here to see his holdings for FREE.* Though equities are growing more attractive, as noted in my Diary's commentary over the last two months, there are existing headwinds: Must Read: Warren Buffet's Top 10 Stock BuysĮXCLUSIVE OFFER: See inside Jim Cramer’s multi-million dollar charitable trust portfolio to see the stocks he thinks could be potentially HUGE winners. Values could be finally emerging, but the technical and price damage has been immense. The risk-vs.-reward quotient for stocks is improving - perhaps measurably - coincident with lower prices. Treasury yield back down to 2.12% despite possible Chinese selling. Interest rates continue to trend lower, with the 10-year U.S. Still, global economic and currency pressures remain acute. If I have to put odds on it, I'd say that today's job numbers make a September rate hike a 50/50 decision for the Fed. Muni bonds are better today, but the high-yield market is flat. Thus far, the SDRP S&P 500 ETF has bounced twice from its lows - but is now within a few pennies of its session low yet again. I expect that the new Investor Sentiment numbers out next week will be much more bearish. (He's looking for a new S&P 500 high by year's end). One exception is my pal Tobias Levkovich at Citigroup, who sees his panic/fear numbers signaling buying opportunities. Most commentators are downbeat now, with only the perma-bulls remaining bullish. There's a clear demarcation line between the business media's degree of enthusiasm today vs.
Originally published at 1:37 PM EDT on September 4, 2015Ī pattern of "lower highs and lower lows" remains in place. Takeaways and Observations (Early Edition) Must Read: Warren Buffett and Berkshire Hathaway: The Insider's Guide I'm adding to my long of the SPDR S&P 500 ETF on strength off of the session lows and putting Goldman Sachs GS and Morgan Stanley MS on my Best Ideas list at prices paid this afternoon. Originally published at 3:14 PM EDT on September 4, 2015 reward.Ībove all I subscribe to Warren Buffett's adage: "Price is what you pay, value is what you get." Instead, I pay close attention to upside/downside ratios and risk vs. Remember, my approach to investing is virtually indifferent to charts.
I differed in view both then and now, although I might be wrong. I find that some who were previously bullish (particularly in our comments section) are now very glum and bearish. My advice is that we should all try to be emotionless, particularly given the 200-point-plus drop in the S&P 500 in recent days. And there will probably be more if we see any further market weakness.Īm I generally bullish? Not really, yet - but the first move toward turning more bullish is to turn less cautious and start to accumulate value. Well, several of those companies are finally moving into my buy zones - most notably Goldman Sachs and Morgan Stanley today. I wrote months ago that I had completed research on a number of large-cap stocks that I would find attractive at the right price. Originally published at 3:25 PM EDT on September 4, 2015 Click here for a real-time look at his insights and musings. NEW YORK ( Real Money Pro) - Doug Kass shares his views every day on RealMoneyPro.
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