Bill Ackerman Invests $2.5 Billion in Equities
That (Ackerman) had absolutely nothing to do with my decision to rebalance portfolios yesterday.
“That’s about the most bullish thing we’ve done,” he (Bill Ackerman) said in a Bloomberg TV interview. “We are all long. No shorts, you know, betting on the country.”
That had absolutely nothing to do with my decision to rebalance portfolios yesterday (I had no idea he did this until last night). But it’s nice to see glimpses of optimism.
As I’ve outlined throughout this crisis, I have three investment approaches, of which I continue to concentrate on the first and long term most reliable approach. “Own what you LOVE before the bottom.”
On the equities I look for fund managers that invest with innovative companies. I like strong cash flow and less debt exposure. And look for sectors that could have an advantage in how we do business moving forward.
On the bond side I’m concentrating in the US. I continue to limit exposure to high yield (lower quality) bonds. Some of the changes are in response to Federal Reserve buying (don’t fight the fed).
As a reminder, I also built portfolio options for selling out of the market and going further by shorting the market (I refer to as approach 2 & 3). I’m not recommending those.
There are many ways I’ve tried to quantify the market decline to determine what a fair or near bottom price could be. I spend a large portion of my day on conference calls with economists and portfolio managers. Since 2009 I also download quarterly Federal Reserve Flow of Funds Reports, and update spreadsheets tracking data as far back as 1980.
Here’s one insightful metric from my spreadsheets. The stock market declined roughly 30% since the beginning of this correction, bringing the S&P 500 value down to mid-2016 levels. At that time the economy (GDP) was 17.4 trillion. The last Fed reports GDP at 21.4 trillion for 2019, 23% growth from mid-2016.
So is the market downturn, now priced at 2016, sufficient to reflect current and near future GDP reality? It’s possible.
However, our country isn’t merely watching the economy freefall. The Federal Reserve has implemented massive unheard of before financial support and, if a bill gets passed, Washington is proposing incredible stimulus. The combination of these two efforts would be measured in the trillions.
Back to my first email regarding this crisis, the entire world is focused on two things – Containment (of the virus) and Growth (of the economy). We are in the midst of containment, and the beginning stages of stimulated growth.
Our country loves our people and we are willing to go to great lengths to protect both human lives and economic livelihoods.
We are always available to you, and we are watching over your accounts daily – doing our best to make logical decisions that are in your long term best interest.
For all those young investors out there -
I would 100% buy heavily into this market. Even if it takes time for the market to come back to pre-crisis levels, your returns could be SUBSTANTIAL. It’s like stepping back in a time machine to 2016.