What These Pundits Said Will Make You Want To Hoard Cash
It is official. We are all just screwed.
Janet Yellen told us that stocks are overvalued and potentially dangerous.
Warren Buffett said that if interest rates go higher we will find that current stock valuations are high. Of course interest rates have moved higher all over the world as bonds have sold off on inflation fears and the 3,907 other reasons offered up by traders.
At the Sohn Conference, David Einhorn warned us that fracking stocks are dangerous.
Jay Walker, a co-founder of Priceline (NASDAQ: PCLN) talked of an increase in black swans that could have serious economic and social consequences. Social media earnings are a disaster so far.
At the SALT Conference in Las Vegas, Peter Schiff suggested that the Fed is living in fantasy land, and "With these assumptions baked into portfolio dispositions, investors risk being caught wrong footed when the ugly truth is finally accepted."
Mohamed El-Erian told SALT attendees that, "QE was a painkiller we took too much of. The big problem we face is liquidity." He further speculated that government could not control as much as they think and 2015 may not be a great year for global economies.
Michael Novogratz the CEO of Fortress Investments said that the bull market in binds is over and yields are going higher.
Even Leon Cooperman who thinks we move a little higher this year said "The outsize gains for the equity market are behind us. That game is over."
Given this incredibly gloomy outlook provided by some very smart people what should we do now?
Pullback situations are the easiest time to get positioned for huge gains over the next several years. To add a touch of reality to the situation, markets are still flirting with new highs right now. Nothing has changed except the tone of forecasting and predictions, and that is pretty much worthless. Keep in mind that it took almost four years after Alan Greenspan's suggestion of irrational exuberance for markets to succumb.
Prediction about markets is just folly. Even Warren Buffett and Charlie Munger said at last months Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) meeting that they were not very good at predicting things out into the future when it comes to grand macro matters.
As Munger said, "Since we failed to predict what exists now, why would anybody ask us to predict what's going to happen in the future?" Buffett added, "We think any company that has an economist certainly has one employee too many." It is almost impossible to do correctly constantly although if you make a lucky guess you do get quite a bit of publicity and will probably make a few bucks before your next dozen or so market calls have disastrous results and the good people break out the tar and feathers.
After Daniel Loeb called Warren Buffett out for his deceptive comments Monday, saying "I love reading Warren Buffett's letters and I love contrasting his words with his actions. I love how he criticizes hedge funds, yet he had the first hedge fund. He criticizes activists, he was the first activist. He criticizes financial services companies, yet he loves to invest in them. He thinks that we should all pay taxes, yet he avoids them himself."
Spend a little time thinking about how Buffett really made his money.
What made Buffett and Munger rich in the first place is much different than what they have to do for reasons of size at Berkshire today. A recent piece on Marketfy and summarized their initial path to wealth as "buying 'cigar butts.'"
Essentially, buying illiquid inefficient markets (sounds a lot like community banks doesn't it?) and hoard cash to put to work in a crash.
Easy in theory, harder in practice, but the point is to keep trying!
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