“Market is second-most overvalued I have seen in the last 20 years.” David Tepper, Appaloosa Management
Happy Monday!
I spent the past four weeks in Atlanta doing the whole social distancing thing, but I did manage to dine-in at one of my most favorite restaurants this past week. That was a real treat and it was the first time in more than 2 months.
The public markets are still constrained by basic financial fundamentals – the market is l “overbought” as evidenced by high valuation multiples in the S&P, Dow and Nasdaq. The disconnect between market performance and underlying economic health continues, lots of explanations but unlimited liquidity from the Fed continues to be our best answer.
In May, Fed action allowed the overall market to come-back a bit more with the S&P closing up 4.5% for the month. The COVID-19 shelter-in-place orders were also relaxed in most states and the int’l oil market has come back from the dead ... so there are some bright spots!
I still blame well-intentioned, but wrong-headed, public policy at the Federal, State, and Local levels for shutting down our economy without a comprehensive plan to mitigate the initial impact of COVID-19 and then reopen the economy in a responsible manner as quickly as possible.
As I stated last month, in my opinion, Dr. David L. Katz lays out a very rational and comprehensive plan for minimizing total harms and mortality from both infection and indirect social effects in his “Total Harm Minimization” strategy (overview of the complete plan).
I sincerely hope that our public leaders pay more attention to Dr. Katz and many others who have been pointing out for quite some time the grave errors in their national “shelter in place” strategy. This, in fact, is NOT a complete strategy, it is just a first phase of a much more comprehensive strategy.
In May, the S&P 500 closed at 3,044 and ended the month up 4.5%. The Dow closed at 25,383 and ended the month up 4.3%. Nasdaq closed at 9,490 and ended the month up 6.7%. The Russell 2000 closed at 1,394 and ended the month up 6.0%.
In June, we believe the public markets will continue to stabilize, but I would not rule out a second or even a third testing of the correction lows, but that should be a buying opportunity. In our public portfolio in May, we increased our cash position to 70%, but expect to put a substantial amount of that back into the market in quality investments at superior values (like Verizon) over the next month. Take a look at our latest Top 10 investments list here.
Thanks again for your consideration & for sharing your thoughts and ideas with us.
Have a wonderful June and 2020 ahead!
Best regards,
Vinnie
Vincent M. Oddo
Managing Partner
PointFour Capital, LLC
vincent.oddo@pointfourcapital.com