Wearing my emotion on my sleeve:
Maybe it's because I just read this month's "The High-Tech Strategist", but I am very concerned about the market over the next year or two.
(Caveat: I have also been reading all of Graham's books again -- and how a real bear market reacts.)
1) Energy is stabilizing, & I feel it should decline -- but higher energy prices will effect industrial profits.
2) Every valuation metric for most large companies (& many mid-cap companies) are way out of proprortion. Reading about people putting stocks like "AOL", "TYC" in the value category is a little disturbing. The writeoffs of goodwill, stock options, and balance sheet manipulation are rampant and continue to pop up on a daily basis.
3) Interest rates will be increasing over the next few years -- albeit, probably slowly -- but who knows. I doubt they will go to 0% like in Japan.
4) Insider selling continues.
5) Value stocks, in my opinion, are very scarce. The market is simply way over priced -- in almost every sector.
6) Investors I respect, (Bill N of Oakmark Select fame), are buying stocks like Merck. This is a quality holding: top financial rating, blue chip one-decision stock, etc. But going through the patent expiration review, P/E, P/S valuations -- I just don't see the same cheapness or value.
7) Every valuation metric, comparing the current coming-out-of-a-recession timeframe vs. prior periods -- a la 1990 time frame -- indicate a major rebound is already in the cards.
I'm a firm believer in Graham & Dodd's valuation metrics. I hope the significant bear market doesn't occur, and hopefully earnings will rebound soon.
Thanks for letting me get that off my chest! :) |
