We’re in a Bubble. Buy Stocks?
Legendary investor Julian Robertson made news recently with a rare television appearance…
Robertson is one of the greatest investors in history. His Tiger Management hedge fund earned a more than 30% annual return for 20 years.
His remarkable success carries serious weight.
And his recent comments on the stock market to Bloomberg TV had the media buzzing and investors stunned…
Much of the market analysis Robertson shared on Bloomberg will be familiar to my regular readers…
He thinks zero and negative interest rate policy is a huge mistake.
He believes ZIRP and NIRP are destroying savers who are unable to find safe, reliable yield.
Robertson told Bloomberg that this desperate search for yield is creating distorted stock market valuations:
“Take a widow: they don’t know what to do with the money. There is no way they can do anything with it unless they go into stocks. I think forced equity investing creates the bubble.”
And he believes that by preventing short-term corrective pain, the Fed is causing long-term chaos:
“Janet Yellen is just unwilling to see the American public take any pain at all. Because of that, I think she is creating a serious bubble where serious pain is going to come.”
With this depressing analysis, investors could have expected Robertson to tell them to sell everything, hide their money in their mattresses and head to the Idaho wilderness to prep for end times.
But he did something completely different…
The Only Game In Town…
Despite lofty valuations, Robertson didn’t pull a Jim Cramer panic and scream that investors should ditch stocks.
But why not head for the exits when the market is so bubblicious?
Well, Robertson recognizes something that I told my Trend Following readers a few months back…
In his words, “Stocks are the only game in town.”
Think about it: Where else are investors going to go?
The average dividend yield of the S&P 500 index is about 2%. That’s a lot higher than what many government bonds are paying.
If you’re an investor looking for income, would you rather buy a 10-year Treasury bond with a yield of about 1.5% or shares of blue-chip Boeing, which are currently paying a dividend yield of more than double that at 3.4%?
It’s a no-brainer at the moment.
So although they’re trading near all-time highs… stocks could go much higher from here. No one knows.
Remember, as long as ZIRP and NIRP continue to drive yields into the basement and possibly six feet under, stocks could continue to head to the moon from what Robertson calls “forced equity investing.”
And maybe one day that becomes “forced equity selling.” But what if that’s 10 years from now?
Do you sit on the sidelines and not follow the trend for a decade?
I know this view goes against prevailing conventional wisdom. But the markets doesn’t always do what we think they should be doing… especially when a group of psychotic central bankers are manipulating the proletariat like never before in history.
All bets are off. It’s time to buckle up and follow the trend.
Please send your comments to me at firstname.lastname@example.org. Let me know what you think of today’s issue.
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