Recently Gerri Willis of the Willis Report (Fox Business Network) and I had a chance to exchange email on the Dow. With it recently surpassing 14,000 (again), I wanted to get Gerri’s take on the Dow’s historic climb (I guess history does repeat itself).
As somebody who largely ignores the hoopla around something like Dow 14,000, I was curious just how Gerri interpreted these events. I think Warren Buffett would be proud.
Rob: Dow 14,000–Does it matter?
Gerri: I think levels like this get a lot of attention from the media but are essentially meaningless. It’s one of those arbitrary benchmarks that outsiders think is important but really serves no use. Strangely, though, whenever we roll over one of these, it seems to take the markets a while to digest. There is a bit of a psychological impact.
Rob: Is the Dow at 14,000 overvalued. Why or why not?
Gerri: Are stocks overvalued? Now, that’s the right question to be asking!! Looking at ratios like P/E helps you keep everything in perspective. Trading at 15 times earnings, no, stocks aren’t necessarily expensive. That’s the good news. Here’s the bad news: Why is everybody so excited about Dow 14,000 when we hit 14,164 back in 2007 – nearly six years ago!!! Yes we are up – but after being down a very long time. Keep it in perspective.
Rob: How does the market differ today as compared to 2007 when it hit 14,000?
Gerri: That’s an interesting question. The mindset of individual investors is completely different. They are more wary, more cautious. They’ve seen this movie before. Most of them have been through two bubbles – the dotcom boom and bust and the housing bust. In fact, they are so squeamish now about stocks that many have missed this move. It’s like the lottery: If you don’t play, you can’t win.
Rob: Have you changed your investing strategy as a result of the recent run up in equities?
Gerri: I did rebalance at the start of the year. My stocks had had a great year and I had to cut back a little. It’s all about asset allocation in my view. What did the famous economist Paul Samuelson say? Investing should be like watching grass grow, really boring. If you want excitement, go to Vegas.
Rob: Many have reported that insiders have stepped up selling. Is that an indication that the rats are fleeing the ship?
Gerri: Higher insider trading is not a good signal. Corporate CEOs have been nothing but nervous for sometime. They are stockpiling cash; dumping stock. Maybe this is their version of question No. 4. They just want to stay safe. But safe and investing are two words that just don’t go together – like oil and water.
Rob: Off-Topic: Einhorn vs. Apple–Should Apple give back some of its cash to investors?
Gerri: I love the fact that Einhorn is being the angry investor. I think Apple should share the dough with investors if it doesn’t have something better to invest in – a new idea on the level of the iPad. The iWatch? Not sure that is it. We’ll see. It’s difficult for any tech company to stay at the top of the innovation heap forever. Witness: H-P, Motorola, Blackberry, Sony.