Yours and the initial Druckenmiller article have a lot to consider.
Dividends are as good as stock buybacks. For instance, SCCO does not reduce (or increase) their share count, but they pay a 4.4% forward yield. Message 33387572
Agreed: As long as QE continues, hi-PE stocks will continue going higher. But when interest rates are allowed to rise, the value of their future earnings will decline a lot. Since I am not confident about predicting when the music stops, I will not take the risk.
The price of commodities is decided by the supply/demand balance, which is independent of interest rates. Commodity producers cannot control the price of their product, which can swing wildly. The price of iron ore has been 50$ and 220$ in the last few years. So VALE and other iron ore miners should have strong balance sheets, or they will not survive downturns.
Rising interest rates are going to kill a lot of hi-debt companies going forward. If the hi-growth is dependent on hi-debt, the risk/reward balance is not good. Debt is an addiction; you don’t want your stocks going cold turkey.
In an oligopoly economy, there is less room for small companies. If the top 5 companies in an industry are taking 90% of available profits, and only they can charge monopoly prices, nobody else will do well. |
