Larry House

Evaluating Current Market Levels with S&P 500 Having Reached My Fair Value Target

I think you build a reasonable case, Chad. You have as much of a chance as anyone of being right. The game-changers would be another crisis in our financial system, larger job losses, currency crisis, greater consumer contraction, unrealistic earnings estimates, our government doing something stupid--there are a lot of things that can go wrong. Let's hope they don't but invest as though they might.

Tech Is Cheap, Banks and Financial Are Expensive

What if the multiples of '07 do not return? Are they cheap then? I think those multiples are now a pipe dream--up in smoke, not to return. It is crazy to just assume earnings and multiples will just jump right back to those levels. It flies in the face of what many, many economists are predicting. It makes a good story, but a lot of fiction makes a good story.

If the Recession Is Over, What Now, Ben?

As long as money is flowing like water, one has to assume reflation. For how long is another issue.

The Economic Backdrop: Not as Strong as Advertised

For sure. We are in a multi-year process that is unchartered territory.

Catching Up with Reality

I just went long the dollar with UUP as a contrarian move to counter balance some equity positions. Where things go from here is an absolute guess; buying the $ is just a bit of a hedge looking into the unknown.

Putting the Equity Rally in Perspective

A lot of crystal ball gazers see different things, but the outlook for GDP is not exciting. Bill Gross puts it at about 3%, some go a little higher, and some go a little lower. Not exciting numbers. Equities have limited long-term (multiple year) potential from here at best. I know the last few months have given us all hope, but the next few months can just as easily be the exact opposite. It is a question of risk vs. potential return. In the best of times, stocks are risky; they are called risk assets for a reason. In uncertain times, the risk is multiplied. Are stagflation, deflation, or inflation good for stocks? To hold stocks long-term now is a bet that we can avoid all three. I hope we can, but I think the chances are against it.

Can't Stop the Market Bulls

The bulls will stop themselves. They can't buy forever, and it doesn't take selling for the market to go down--just takes a lack of buying. Volume has not been substantial at all for a rally of this magnitude. Please tell me--is there anyone out there who went long in March and still hasn't taken profits? There are bulls, and then there are smart bulls.

Trash Is King: Beware Being Late to the Party

Let's consider the possibilities: 1) the market goes higher steadily from here over time with pauses and modest corrections along the way; 2) the market goes relatively flat from here for an extended period of time; 3) the market has a correction soon and then resumes the march upward; 4) the market has a correction (perhaps to the March lows) and goes flat from there; 5) the market double dips to the March lows and then rises; 6) the market crashes and we go into Great Depression #2. Have I left out any real possibility? What chance do you give each possibility? I give #1-10%; #2- 15%; #3 -15%; #4 -25%; #5- 20%; #6- 15%. Now I know there are a lot of holes in this but, as an investor, I have to some way quantify my risk/reward in stocks. Now, if #1, #2, or #3 happen, I want to hold the stocks I have now. For #4, #5, or #6, I don't want to be in stocks. That means, by my view of things, I give myself a 40% chance of a good outcome in holding stocks from here. However, I give myself a 60% chance of a not-so-good outcome. Right or wrong, my own assessment (and I am the only one I answer to) is that the odds are against me, and I don't want to play this hand holding stocks. In addition, considering that any upside from here may be quite modest but the downside is almost limitless, I prefer not to be in stocks, even if I miss some upside. I bought stocks in March but sold in June. I have caught some upside since, but I just don't like the looks of the game right now. I'm going to fold.

Turnaround Could Be Slow for Jobs Market

A very convincing case can be made that many (perhaps millions of) jobs are gone forever. Future demand is expected to be modest at best, and producers are learning how to produce more with fewer employees. They will be very reluctant to add workers unless there is an acute need to do so. The story of a "new normal" is real, and it has yet to be fully told.

Lessons from a Market 'En Fuego'

There are certainly times traders should be 100% cash, but investors--probably not. This is a good time to reevaluate a portfolio and make necessary adjustments. I agree, Roger, that this rally just seems to much too soon and too fast for the economic problems we have. I am looking at high-quality, good-yielding stocks which are more defensive in nature. I am not going to chase the current flavors of the month.

Will Regulation Hobble Capitalism?

We do not yet know how onerous the regulations may be. We also do not yet know just what new tax proposals will surface which will burden businesses and consumers. I think the current administrations wants control--period. We do not yet know just how much oxygen they will allow the economy to have.

Investors Throwing Caution to the Wind?

The falling yields on junk bonds indicates investors are quickly embracing more risk. I think the risk out weighs the rewards, but I have been wrong before. It is just more risk than I am willing to take right now. The same goes for equities in general. I hold a select few, but I am about 50% underweight stocks.

The Enterprising Investor’s Guide 9/14/2009

True enough. The risk/reward ratio is not favorable at the moment. I think investors should have core holdings of high-quality good-yielding stocks in essential businesses that can be held. I would take profits on lower quality stocks, at least until the outlook is clearer--beyond this fall.

Jamie Horvat Fears Extended Period of Stagflation

High-quality, good-yielding stocks with essential products and services are the only ones to hold right now. I am not afraid of a repeat of 1987; I am concerned about the unexpected that no one can foresee. We have so many landmines in front of us that it is only a matter of when and which ones we step on. We can't avoid all of them.

U.S.-China Trade Spat: Warning of Worse to Come?

Certainly this is a troubling situation that could escalate. Even if the results are harmful to both parties, major parties don't always pull back from mutually destructive action. We all think they need us and we need them, but they are in the stronger position, and there is no reason for them to not push their advantage. China can literally make or break the US. What a deplorable condition to be in!