As you may know by now we favor much of Richard Fisher’s thoughts. The current Dallas Federal Reserve Chair, and a new voting member of the FOMC in just a few days, Fisher’s recent speech grabbed our attention. Here and here we visit a few of his topics from prior events, but his latest speech rhymed with our thoughts, and had a funny headline for such a stiff position.
“Beer Goggles, Monetary Camels, The Eye of the Needle…”
In this speech to the National Association of Corporate Directors, Richard Fisher echoes many of our thoughts. Feel free to click on either of the links for the complete speech, but it is rather long, so we will cut to the echoes below for your time-saving:
- Share buybacks financed by debt issuance that after tax treatment and inflation incur minimal, and in some cases negative, cost; ( Ditto in our Earnings update in the newsletter, buybacks increase earnings growth more that headline numbers seem)
- Stock market metrics such as price-to-sales ratios and market capitalization as a percentage of gross domestic product at eye-popping levels (We use PE ratio, but same thought…I cut out 1999 comparison from Fisher so as not to scare/alarm … again taking the high road for now)
- In the bond market, investment-grade yield spreads over “risk free” government bonds becoming abnormally tight (We have warned against high yield, repeatedly…this is a similar thought)
- I want to make clear that I am not among those who think we are presently in a “bubble” mode for stocks or bonds or most other assets (We said the EXACT same thing, not a bubble, but frothy and not cheap)
- Were a stock market correction to ensue while I have the vote, I would not flinch from supporting continued reductions in the size of our asset purchases as long as the real economy is growing, cyclical unemployment is declining and demand-driven deflation remains a small tail risk; I would vote for continued reductions in our asset purchases (This we agree with and have mentioned many times, understanding this could be a tad of gasoline on a negative thinking market)
There you have it, another similar thinking person to our thoughts. We usually stray from the crowd and this time we are not in the crowd, but there are a few notables that share our thoughts.
Have a Great Day !
John A. Kvale CFA, CFP
PS This is why we like NOT reading anything from our favorite sources before formulating our year estimates and postulation.http://www.jkfinancialinc.com http://www.street-cents.com 8222 Douglas Ave # 590 Dallas, TX 75225