I feel so lucky to be in a business in which people get better with age. Leon Cooperman, Art Cashin, Carl Icahn -- I'm sure there are plenty of others.
Icahn moved the market yesterday with a single tweet, and I salute him for what he said. He publicly called out the financial engineering nonsense whereby companies borrow money at record low rates and rather than expand their businesses or invest in new plants, equipment, etc., instead they buy back their stock at record highs. By lowering the amount of shares outstanding, they are able to goose their earnings per share EPS to make it look like they're doing great.
If you dislike this as much as I do, you can thank Jack Welch for it. In my opinion, he drove GE to record heights back in the tech bubble using financial engineering. I'm sure he would disagree. But that's how I feel.
As noted yesterday, 1773.44 is the level I'm watching. Icahn or not, yesterday's pullback was expected and could test 1780, but I want to buy it using 73.44 as a hard stop. I want to get short above 1802.33. I've been using VIX calls lately. I will add SPY 180 puts and hopefully some OEX and SPX puts too.
Evidently, the folks at GMO Capital agree that this market is a bloated pig. They peg the fair value of the S&P at 1100. But they're not afraid to go further.
"Combining the current P/E of over 19 for the S&P 500 and a return on sales about 42% over the historical average, we would get an estimate that the S&P 500 is approximately 75% overvalued."
Thank God they're not calling for a crash.
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