John,
We agree on the rates, but I disagree on debt laden stocks, particularly those in highly competitive sectors. Any company that is highly liquid can ride out a poor economy better than one with debt. The US rates have been high compared to the rest of the world as countries kept rates low to stimulate economies, yet it is the debt that's causing the current Asian crisis. They were able to borrow cheaply and they did. The overexpansion from the borrowing has caught up with them and will soon be a major factor in the US.
I would be very leery of any companies that have shown major growth from borrowings and look for companies that have grown, yet maintained liquidity. I would also avoid companies that have used stock for acquisitions as they almost always paid too much.
The current situation in the market has no economic basis, but we will see a major fall off. It's mental and, just as it's caused the recent bull market, when investors run scared the market falls and the economic problems follow. I don't know if it's going to happen or not, but I believe investors should be prepared for the worst. Of course, it's this thinking that causes it to happen.
JMHO,
Ron |
