I went to a dinner where a leading investor spoke. Here are the highlights:
- The longest recession ever was 16 months. He thinks best case we entered into a recession in November of 2007 or worst case January 2008. This would put us well into the later half of the cycle, which will be painful but short.
- We are setting the base for a 10 - 15 year bull run. The stock market has never performed worse in the last 10 years, yet corporate profit expansion has never been better.
- The market will not rally until bond yields come down on the long end. Right now you should be in munis of solid states that are yielding 7% - 8% risk free.
- TARP will make money. Historical yields on toilet quality mortgage packages are well above the prices people are contemplating buying them. Really smart vulture guys are buying at the 50% - 60% levels. He and Buffet are also buying at these levels.
- We will see a healthy level of deflation before we see inflation. He predicted $50/barrel oil. Demand has been slowing for a year. As long as money velocity turns to favorable, government can pull out the excess liquidity before it becomes inflationary.
- The dollar has turned the corner and will rally from here against the Euro.
- Governments will drive LIBOR down to force interbank lending. Europe is much worse off than the U.S. in terms of bank health.
- Cash on the balance sheets or corporates has never been higher. If they all bought back there stock their P/Es would be trading at a 50% discount to the historical market average.
- He and Buffet are buying U.S. equities for their personal accounts.
I'm not sure I agree with all these prognostications, but he made a convincing argument.
- The longest recession ever was 16 months. He thinks best case we entered into a recession in November of 2007 or worst case January 2008. This would put us well into the later half of the cycle, which will be painful but short.
- We are setting the base for a 10 - 15 year bull run. The stock market has never performed worse in the last 10 years, yet corporate profit expansion has never been better.
- The market will not rally until bond yields come down on the long end. Right now you should be in munis of solid states that are yielding 7% - 8% risk free.
- TARP will make money. Historical yields on toilet quality mortgage packages are well above the prices people are contemplating buying them. Really smart vulture guys are buying at the 50% - 60% levels. He and Buffet are also buying at these levels.
- We will see a healthy level of deflation before we see inflation. He predicted $50/barrel oil. Demand has been slowing for a year. As long as money velocity turns to favorable, government can pull out the excess liquidity before it becomes inflationary.
- The dollar has turned the corner and will rally from here against the Euro.
- Governments will drive LIBOR down to force interbank lending. Europe is much worse off than the U.S. in terms of bank health.
- Cash on the balance sheets or corporates has never been higher. If they all bought back there stock their P/Es would be trading at a 50% discount to the historical market average.
- He and Buffet are buying U.S. equities for their personal accounts.
I'm not sure I agree with all these prognostications, but he made a convincing argument.
Last edited by:
centermiddy: Oct 25, 08 13:33
