Taking the Long View

I think stocks are ridiculously cheap if you believe. . . that 3% on the 30 year {US Government} bonds make sense.

Warren Buffett statement to Becky Quick on CNBC

The US economy is coming out of a slowdown caused primarily by the Federal Reserve Board (Fed) policy of increasing short-term interest rates. The Fed reversed policy in January 2019, after a 20% decline in stock market prices.

What Happens Now?

  • Central banks in all major countries are lowering interest rates and increasing liquidity. Growth in money supply (M2) indicates future economic growth.
  • Deficit spending by the US and other major governments is boosting economic activity.
  • Bond investors and traders have driven interest rates (yields) sharply lower.
  • Resuming trade negotiations with China has removed, for now, a major fear keeping investors in cash and/or defensive securities.
  • The Stock Market, a leading economic indicator, is at an all-time high, in part, because financial conditions are now more favorable for corporate earnings growth that drive stock prices.
  • With current stock prices about average within the range of valuations since 1990, quality stocks represent good value, and just maybe, they will turn out to be “ridiculously cheap.”