It is just not a good time to be aggressively buying stocks. We can talk about low interest rates and buybacks until the cows come home but somethings are just obvious. You don’t spit into the wind, you don’t pull on Supermans cape and you don’t buy stocks at more than 20 times earnings and several times book value in a slow growth economy. The upside is very limited and there would appear to be plenty of downside. In his recent mid-year update Henry McVey of KKR (KKR) said “At the risk of being labeled Master of the Obvious, today’s macro backdrop , which includes high P/E ratios on stocks and low yields on bonds , appears an extremely challenging one for investors looking for outsized returns in public markets.” The update also addressed rising risk saying “As such, we think that the greatest near-term risk to the global capital markets would be some form of unexpected shock. Beyond mounting geopolitical risks, our base case is that any major shock to the system this year would likely come from excessive debt creation and/or debt levels.” I agree completely. Put it all together and it’s a lousy time to be an aggressive buyer of stocks.
My mantra for some time has been cash, community banks and special situations and I am sticking with that. I am not issuing some sort of sell signal nor have I sold anything from the portfolios lately. Sell decisions are still going be based on careful examination of the fundamentals and valuation of each underlying company. I may be the worst market timer in the industry of markets so don’t rush to sell just because it’s a lousy time to buy. Sometimes the right thing to do is nothing and this is such a time. We ...
