Market Pulse: Didn’t I say …?
I’m not the kind of person that says, “I told you so.” But, now and then. A few weeks ago I wrote that while the financial and general media were saying worries about rates rising sooner than most had thought were causing a 4 percent drop in the market, I disagreed.
In the real world investors weren’t selling stocks and bonds because they thought rates would be a little higher (4 percent or so) three or four years from now. Would you? Of course not. Someday rising rates might end this bull market as they have others, but not anytime soon.
Others pointed to international news as the reason stocks were sold. The terrorist group known as ISIS cannot and should not be taken lightly, but when it comes to investing one must ask how it affects earnings and interest rates. After all, earnings and interest rates are the driving forces that determine future stock prices, and the outlook is still good.
And then there is TINA, There Is No Alternative. Money has to go somewhere and stocks are the most attractive asset class. Real estate is unworkable for most investors. Commodities are too risky.
Gold produces no income and it’s in a bear market. Silver is worse. Treasurys and better-grade corporates yield next to nothing. Stocks are the best choice.
Speaking of stocks … in my recent “Diversification — it’s overrated” article, I spotlighted Weatherford International (WFT). Fund manager Mario Gabelli, a large stockholder, since appeared on CNBC saying that he believes the company will be targeted by another (he mentioned Halliburton) in a takeover priced at a 50 percent premium. I say sooner the better!
I’m not always right, but I was right when I urged readers to invest for the probabilities, not the possibilities. It is nearly always the case that one or more obvious problems crowd out less evident positives.
I don’t believe the worst-case scenarios for the simple reason that they are in no one’s interest. Investors who focused on the most-likely case were rewarded. And they will be …
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.