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Wow! Wow! Wow! This video is great! I like the deep dive into the market dynamic. Janet Yellen is always my favorite when she was the Fed Chairman and now the Treasury. I like her because she is straight forward and accepts responsibility when she makes mistakes (just like when she explained that transitory was wrong). Unlike Yellen, Fed Powell was and still is clearly wrong with his policy , but yet he does not accept responsibility for his mistakes. I don't want to sound like a Monday Night quarterback, but he should have stopped the bond buying and started the rate hike last year, not this year. If someone is responsible for this mistake, it definitely should be Powell and not Yellen.ReplyDelete
Anyhow, thanks for explaining the history of 1940 debts vs. GDP in comparison to today. I am just hoping that Fed Powell can ease his hawkish rate hikes before something breaks in the market. If not, things like you said will roll over hard.
Question: If something does break and the market rolls over hard, which sector would be the most vulnerable? How about growth stocks? I was too young to understand the dot.com bubble in 2000 and to understand the 2008 financial crisis due to credit default swap. Is 2023 going to be similar or less severe?
Hi Sam, yes I agree that the Fed was in denial with regard to how persistent/structural this inflation is, and completely missed the mark initially and now in terms of an effective policy response...Delete
With regard to what does well, at first blush it makes sense to say that the sector or asset class that actually breaks (or whose move causes the breakage) will be where the most pain is felt... That said, in major panicky selloffs we can expect, initially, that all correlations go to 1... Meaning, everything gets hammered as investors (particularly margined investors) sell anything and everything they can get a bid on... Including the good stuff (as it'll presumably offer up the best bids)... It's in the aftermath, or when central banks swoop in (and these days they do it with unconstrained force), that the cream rises to the top... You can argue that growth stocks will take the brunt initially... Beyond "initially" if the "break" does a serious number on the economic outlook, growth stocks will likely outperform, as they tend to shine (relatively-speaking) in weaker (lower interest rate) environments...
Another quick question: What is your opinion about AT&T INC? I am surprised that 61.8% of the ownership of the stock is by insider. In terms of growth, it receives a very low score. What should they do differently? It is currently trading at less than 1X of earnings. I do like the annual $1.12 dividend. It is currently trading at the lowest level since approximately 20 years ago.ReplyDelete
Also, AT&T INC firm is trading at a forward price to adjusted operating cash flow multiple of 3.1 and at a forward EV to EBITDA multiple of 6.5. I think it is very undervalued.Delete
Yes, AT&T looks very attractive from a valuation standpoint... They still carry a high debt load, and project lower revenue in '22 (some, but not all, explained I suspect by the WB spinoff), but picking back up next year... Speaking of insider ownership, for what it's worth, since the stock peaked in May, there have only been insider buys reported, the most recent on 9/30... Can't right here speak to what they can do differently going forward; considering, again, valuation and dividend ratio they look to be delivering value to shareholders (save for the latest price action)... Their intent was/is to focus their attention on 5G going forward, using the $43 billion they received in the WB spinoff... We continue to hold it as a core position...Delete
Thanks Marty! I agree with you! I listened to John Stankey and liked a lot of the comments he made. WB was a huge distraction to T core business. T debt load is high, but it is coming down and under control in my opinion. John Stankey and his team are laser focused on expanding the 5G business. Now, T is in 23 States and has a huge footprint in the US.Delete
LOL. I waited 6 months and got it for $5 cheaper. One thing I do learn is that patience and consistency are the most important factors to a successful portfolio. I am still learning on how to control the ants on my feet. :)