Whether from clients, friends, or students, I am constantly being asked the same three questions. So, I thought I would share my answers with my readers.
- What do you think about Bitcoin? Should I invest in it? – Bitcoin is a cryptocurrency which is “mined” from complex computer algorithms. It is type of electronic counterfeiting. In all honesty, I expected Bitcoin to wither away once the Mt. Gox Bitcoin Exchange was closed over three years ago, and clearly, I was wrong. Or just perhaps premature. Professional investors are trained in recognizing growth and value. That is derived from future earnings and dividend payments. Bitcoin offers neither. Furthermore, Bitcoin cannot be planted in the ground to grow food or manufactured into an end product. It only has phantom value. Speculate if you must, but I refuse to do so with money of my own or that of clients. Give the frequency of questions about Bitcoin, and a recent announcement that a Bitcoin futures contract was in the works; I can only conclude that it is ensconced in a speculative bubble. All told; Bitcoin is becoming the modern-day Tulip Mania.
- What do you think about the new FOMC Chair nominee, Jay Powell?- Powell has experience on the Federal Reserve Board of Governors and served in the US Treasury. Unlike previous FOMC chairs, he is not an academic. Rather he is an attorney with experience in investment banking. I see this as being a positive, not a negative. In general, I expect that he will continue the policies of Janet Yellen. I am happy that President Trump did not select John Taylor. Taylor, designer of the “Taylor Rule” is predisposed to model based monetary policy which I believe is too objective and inflexible.
- Is the market too expensive? Is it time to get defensive? – The short answer is no. The long answer is also no. There are two elements to market valuation: Price and Earnings. Taken together it forms the metric, P/E or price to earnings ratio. While the P component has risen so has the E denominator. I would be concerned if the P/E rose too high, as it did in1999, if earnings growth slowed down, or in the case of a recession, contracted That is not the case. According to Bloomberg data, the Standard & Poor’s 500 (SPX) P/E Ratio for full year 2017 stands at 19,44. On a forward basis, for 2018 earnings estimates, it is 17.65. I get worried when the ratio exceeds and holds above 21. That is not happening anytime soon in my opinion. So stay fully invested and remain selective as to stocks and sectors to optimize your returns.
Mark your calendar. Nvidia (NVDA) reports results tomorrow and Apple (AAPL) goes ex-dividend on Thursday. The SPX is just less than 10 index points away from my 2017 price target of 2,600. We may meet that objective any day now.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, NVDA, SSO & SPXL— although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
– You can email Scott at firstname.lastname@example.org
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