Three months ago, we tried to put this bull market in historical context. While noting some troubling signs typically associated with a frothy market, we also pointed out that stock prices ultimately reflect underlying economic fundamentals and the financial performance of individual companies.
As the bull market hit its fifth anniversary earlier this week, stocks were continuing their ascent and further stretching valuation levels. In a recent speech, Federal Reserve Bank of Dallas president Richard Fisher aptly remarked, “Stock market metrics such as price to projected forward earnings, price-to-sales ratios and market capitalization as a percentage of GDP are at eye-popping levels not seen since the dot-com boom of the late 1990s.”
The Fed, which has worked tirelessly to boost the animal spirits of investors, may want to hang its “Mission Accomplished” banner before it’s too late. Bull markets lasting longer than five years are a rare breed and, as many have pointed out, the “this time is different” meme has a very poor track record.”
Here are some worthwhile reads you may have missed in recent weeks.
Strategic Thinking
- Seth Klarman warns that "buy the dips" will be replaced with "what was I thinking?" (Financial Times)
- Have researchers uncovered Buffett's secret? (Advisor Perspectives)
- Michael Lipper’s ultimate contrarian advice: Don’t follow Buffett to the peak. (Inside Investing)
- Howard Marks thinks alpha is harder to find and there's less of it. (Top 1000 Funds)
- Rich Bernstein on the importance of beta management. (Richard Bernstein Advisors, PDF)
- Lord, give me just one more bubble and I promise not to screw this one up. (Alhambra Investment Partners)
What to Do with All That Cash
- Most companies are sitting on mountains of cash. (The Fiscal Times)
- Some companies, however, are spending lavishly: "Inside the Facebook-WhatsApp Megadeal" (Forbes)
- Is M&A the right strategy? (Points and Figures)
Stock Selection
- Valuation pro Aswath Damordaran thinks Apple CEO Tim Cook is missing the point. (Musings on Markets)
- A look at new research into defining and identifying "quality" stocks. (CFA Magazine, PDF)
- Samuel Lee says the Shiller P/E is imperfect, but the alternatives are worse. (Morningstar)
- A new profitability measure: cash operating return on assets. (Fortune)
- James Surowiecki warns of one-hit wonders. (The New Yorker)
- The Meat Racket, a critical look at Tyson Foods, is reviewed by Bethany MacLean, a speaker at the 2014 Financial Analysts Seminar. (The Washington Post)
Icahn versus eBay
- Carl Icahn calls for the separation of eBay and PayPal. (Shareholders Square Table)
- EBay’s CEO says a breakup is a bad idea. (Wall Street Journal)
- eBay director Marc Andreessen also takes issue with Icahn. (Andreessen Horowitz)
- In defense of eBay, Jeff Matthews asks, Who’s Icahn Enterprises got? (Jeff Matthews Is Not Making This Up)
- LinkedIn cofounder Reid Hoffman on the future of PayPal. (LinkedIn)
Activists Angle
- Ackman, Herbalife, and the intersection of Wall Street and Washington. (The New York Times)
- "Activists Increasing Success Gaining Board Seats at US Companies" (FactSet Insight)
- Do-it-yourself activism for CEOs. (BCG Perspectives)
High Profiles
- Paul Tudor Jones settles down. (The New York Times)
- "Fama's Market" (Tufts Magazine)
The Lighter Side
- A survival guide for Pimco employees. (Dealbreaker)
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
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