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Financial Exchange Radio Show: Short IWF

Sep. 02, 2020 2:12 AM ET
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My idea for this week is to sell short (IWF). This is a fund of mega-cap U.S. growth companies which also happen to be among the most overvalued assets in history. By selling short this fund you have a diversified set of equities with an average price/earnings ratio of 40.10 as of the close on Thursday, August 27, 2020. This has to be the highest price-earnings ratio for a major fund which I have seen after investing for four decades, even surpassing the levels of some unusually overpriced funds in early 2000.

We have millions of new investors who knew nothing about the stock market one year ago and who now have Robinhood and other trading accounts. They are buying the names which they know rather than those which represent compelling valuations. As fewer and fewer U.S. stocks remain in bull markets, other investors are crowding into these without regard to fundamentals.

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