Or maybe a better question might be (ripping off the bard) “To be, or not to be (in)?” No doubt you will get a plethora of views from the media as we move forward. In kortsession 7 I made it pretty clear that I favor being a long-term investor on common stocks. Having said this with the market chugging higher every day, it becomes more difficult to urge people to rush out and buy them with abandon. By the same token, it seems to me that most people are more “out” than “in”, and that a healthy skepticism exists fostered by thirteen years of relatively bad times in the market. The bottom line is a measured approach is warranted; and, in the long-run adding to holdings now could end up looking very smart.
Browsing through Barron’s today, I came across two articles that touch on the topic, one on Howard Marks (the legendary 67-year-old head of Oakmark Capital Management) and the other by columnist, Kopin Tan, entitled “It’s Not Just the Fed”. In the piece titled “Master of Disaster” Marks postulates that the super-low interest rate “bond bubble” that we are in may only be in the fifth inning (obviously good for stocks). This piece also gives the reader a window into how Marks looks at the investment process, including a little bit of contrarian wisdom. Take a look at the sidebar on page two, “The World According to Marks”.
Kopin Tan’s piece, “It’s Not Just the Fed “, also struck me as timely because of the refrain you hear from the Bears, “what happens when the Fed takes the punch bowl away?” Tan makes several important points in the piece. One is that the Fed may not stick to its word about keeping money loose and rates low until the unemployment rate drops below 6.5%. That would obviously upset the market. Would it be the end of the road? Maybe not, as this would signal, in the Fed’s opinion, that the economy had strengthened enough to stand on its own. With the S & P now hovering near a new all-time high, the author also points out that earnings and dividends on the index have doubled in the thirteen years since the previous high. As a sidebar here, the interest rate on the ten year U.S. Treasury, January 1, 2000, was 6.66% (over three times the current rate).
Again, take a look at these two articles. They are, in my mind, examples of the good work and thought process the media can offer. I have provided hyperlinks on the blog . They might give you the courage to stay with your investments at the lofty peaks (in price, if not valuation) that we have recently regained.
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.