The S&P 500 continues to make a local high, and commodities except for natural gas appear to be on the rise again.
My examinations continue to be on zero or low-dividend, non-resource, non-financial companies. I don’t have much to report at present.
Canadian Finance, Economics and Fiscal Analysis
The S&P 500 continues to make a local high, and commodities except for natural gas appear to be on the rise again.
My examinations continue to be on zero or low-dividend, non-resource, non-financial companies. I don’t have much to report at present.
How do you know the SP500 is making a “local” high? 1562 is not that far off. I guess it’ll be local until it becomes global, AKA ATH.
Also, why sit on cash at these stock market valuations? Why not pick up some calls on the market? VIX at 16.80 there’s no excuse to not be long the market at these valuations. No excuse.
Finally, why exclude financials? Yes, the regulators are looking to kill the business. Yes, the world is deleveraging. Yes, there’s sovereign risks. Yes, P/E’s will probably not revert to their previous levels in the near future. Yes, ROE will not revert to its previous levels anytime soon. Yes, yes, yes. In the end of the day, though, you have to look at the valuations and be long. If you look at the US or Eurozone financials, how is it possible that having none of them in the portfolio makes sense? There are banks out there trading at P/B of 0.20 post write-off (first round anyway) and recapitalization (again, first round anyway).
I guess that to the extent that I have a point here it’s that you should IMO complement your stock selection strategy with a index level strategy of being invested in the market when the market is cheap.
I guess if you substitute “12-month” with “local” then that was my drift there.
If you go through the top components of the S&P, JPM, WFC, C, etc., look cheap but I find those companies exceedingly difficult to analyze to a level that I am comfortable with. They seem more like leaps of faith than anything else.
Individual financials are indeed difficult to analyze and it would be hard for me to get to the comfort level to have 10% of the portfolio in a single financial company. However, why wouldn’t one be comfortable with having a 0.5% position in 20 large US and European financials?
It seems we’re making the exact opposite reading of the market!
My “risk on” approach of purchasing Royal Bank of Scotland Hybrids (RBS-PT) and big oil stocks (SU) earlier this year has paid off. As ptuomov mentioned, the market valuations earlier this year were too good to ignore. Whether they are currently too good to ignore is another question.
ptuomov: Who says they’re not all mismanaged? I really don’t know. True, you are diversifying a good deal of risk by spreading it amongst 5, 10, 20 selections, but isn’t a significant risk the fact that the whole sector is garbage? I really don’t know. I know this “I don’t know” line makes for really horrible commentary. Probably why I never made a career in media – I’d be thrown off the air in six seconds.
Cannikin: Congratulations. That said, anything considered a remote credit risk was trading low around last October-November… in retrospect it almost seemed like an “aftershock” of the 2008-2009 financial crisis earthquake. There were a few issues of fixed income (junk debt) that I was eyeing during this time period but never pulled the trigger on any of them – was hoping for lower prices.