Our advice: Stay in cash, gold and stocks you won’t want to sell even if their market prices get cut in half. This is no time for the amateur speculator to be in the US stock market.
Dear Diary, We hardly know where to begin. There are so many people to laugh at… and so little time. We can’t laugh at them all. So, we’ll have to take our best laugh. And that must be a laugh at Janet Yellen. There are many reasons to laugh at poor Ms. Yellen. But time is limited, and so we will take our best shot there, too. Since we are fair-minded, affable and sensitive, we are quick to point out that we mean no disrespect to the new Fed chief. In fact, we are sympathetic. We feel her pain.
The trouble with capitalism’s guardians is that they have no respect for it. Markets have been around for at least 2,000 years. Since then they have evolved in many directions, with fancy and sophisticated techniques… and elaborate systems and complicated instruments that take a PhD to understand. But despite all the brain power put into trying to figure them out, markets still surprise, confound and puzzle everyone. There is still no formula for predicting market movements. And even the smartest and most experienced traders often wash up. You’d think Janet Yellen and other central bankers would take a step back and stand in awe.
You probably haven’t noticed, but boring government bonds are up double digits this year… US stocks continue to push to all-time highs as well… even Europe is soaring to multiyear highs. Today, we’ve got uptrends around the globe. The big question is… after so many investments have run up so high… where is the value in the world today? Is there any left out there? In short, YES! Let me show you exactly where the value is right now… There are dozens of ways to size up what’s cheap… One classic measure of value is the price-to-earnings (P/E) ratio.
Janet Yellen has dismissed rising inflation figures. They were “noisy,” she said. She didn’t like the sound of them. Valid numbers are harmonious. Invalid ones are cacophonous. But after so many years of listening to such loud noise coming from her own colleagues, poor Ms. Yellen may be tone deaf. At least, that is one explanation for her nonchalance toward the threat of inflation. As we pointed out yesterday, the Titanic-like US markets glide over the smoothest seas in nearly a decade. The squalls and swells seem to have disappeared. The VIX, which measures the market’s expectation of 30-day volatility, shows little fear.