Courtesy of David Brown, Chief Market Strategist, Sabrient
Who’s on First
By David Brown, Chief Market Strategist, Sabrient Systems
What a charade we have had! Who is the Greek Prime Minster today Tomorrow How about Italy The market has invested literally months trying to figure out what will happen in the European version of “Who’s on first” How many investment dollars have been won and lost speculating on all of the questions related to the PIIGS debt ratings (and of course our own!) Who even knows what the right question is The domestic stock market has been fixated on the myriad of possibilities.
But when it comes down to results, it is quite likely that only speculative correct bets will win anything in the long-term fixed income market. The short-term market rewards us with next to nothing except the stress of whether or not we will recoup our investments. How long will it take for real estate values to stabilize Who’s on second
So let’s assume that all we have left to choose from are equities and precious metals. There are other choices, but they are not as easily accessible to most of us. After today’s sharp rise in gold and silver prices, do we really want to bet on those We are left with equities. Which economy if any should we choose Who’s on third
What can we say about equities Most public company CEO’s are paid handsomely to generate earnings for us. Can we find companies run by honest CEOs that are properly valued Even bargains I think we can. Apparently so does Warren Buffet as Berkshire invested $23.9B in equities in the third quarter (Berkshire’s largest quarterly investment in 15 years). But companies whose earnings are growing and are selling at historically reasonable, if not bargain prices, should be a good investment regardless of what European sovereigns do. The Fed has promised to keep interest rates low and control inflation and they will certainly try.
Our economic indicators have not been great: last week PMI and ISM were on the weak side, but factory orders and initial jobless claims improved. Today the wildly varying consumer credit was up $7.4B versus an expect $5B. Not much else is coming this week other than the trade balance on Thursday and Michigan Sentiment on Friday. So why not buy some well-priced equities and hedge with…
