Buffett: Productive Assets Like Stocks Offer Most Safety — Not Bonds

Over the past few years, investors have poured into low-yielding Treasury bonds, perceiving them as the safest place to be during the global economic tumult. But, according to Warren Buffett, bonds are one of the most dangerous places for investors to put their money over the long term — and that’s not going to change. “The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in… Read More

Deflation Could Help Us, Trahan Says

Highly-rated strategist Francois Trahan says that “deflation” is not a dirty word, and that the Federal Reserve could help the economy by allowing deflation to stem commodity price inflation that is “eroding people’s pockets”. Trahan says Fed members and other policymakers and economists are relying on economic principles that aren’t relevant right now. Three main things are making the economy fundamentally different today than it was years ago, he says: consumers are deleveraging; governments are… Read More

Arnott on Why the Valuation Picture Is Troubling

Interest rates and inflation have a much greater role in stock market valuations than you might think, and that means the stock market is on a “very dangerous” path, according to Rob Arnott. In an article for Morningstar, Arnott, of Research Affiliates and PIMCO, looks at the relationship between stock market valuation levels, interest rates, and inflation. His findings: More than half the variability in P/E ratios over the past 140 years can be explained… Read More

Dreman: Look Past the Fear — Now’s the Time to Buy

While many investors have been fleeing stocks this summer, David Dreman says it’s a good time to be buying. “No, the market volatility and the seemingly never-ending Fed follies are certainly not what makes me positive on stocks today, but there are some good reasons to be bullish right now,” Dreman writes in his latest Forbes column. He points to U.S. companies having record-high cash hoards that should “allow them to weather almost any storm”;… Read More

Don’t Forget The Dividends — And Inflation

Investors may spend a lot of time fretting over whether their portfolios are going up or down. But, despite all of the advances in stock market data availability, many may not be getting an accurate picture of what their portfolios are really doing, says The Wall Street Journal’s Jason Zweig. According to Zweig, after last Friday’s decline, the Dow Jones Industrial Average was 11% below its 2007 high; the S&P 500 was 14% off its… Read More

Arnott: Look to Alternative Investments to Battle Inflation

Saying that a “3-D Hurricane” — debt, deficits, and demographics — is lingering on the horizon for the U.S., Rob Arnott is taking several steps to prepare his portfolio for an inflationary climate. Arnott tells MarketWatch.com that the U.S. budget deficit is worse than many think, if you include entitlement program costs like Medicare, Medicaid, and Social Security. And with an aging population that will mean a shrinking workforce, he says he sees slower growth… Read More

Winters Looks Overseas; Growing More Concerned About Inflation

Top-performing fund manager David Winters says many investors are overlooking some great bargains beyond the U.S.’s borders. “The most compelling opportunities are no longer in North America but in companies domiciled overseas or focused on the world beyond the U.S.,” Winters said at InvestmentNews’ 2011 Retirement Income Summit. Winters said he has 75% of his portfolio invested outside the U.S. “There are a couple billion people enjoying the party, and they want everything we have,”… Read More

Buffett Still Worried on Inflation

Warren Buffett says he’s still worried about inflation, and says, contrary to what many believe, inflation can occur even if the economy is operating with significant excess capacity. “I don’t think there could be a better Fed chairman [than Ben Bernanke], but I still worry about inflation,” Buffett tells CNBC. “He didn’t talk about this the other day, but there’s a lot of people who take the approach that because there’s excess capacity in the… Read More

Muhlenkamp Says Market Fairly Valued; Sees Volatility Ahead

Top value investor Ron Muhlenkamp says that stocks appear “fairly priced”, and that he expects to see equity prices becoming more volatile. In his latest quarterly letter, Muhlenkamp says he thinks stocks have continued to climb a wall of worry in recent months because of the attractive prices that existed six months ago; the U.S. economy continuing to grow modestly; and the Federal Reserve’s latest round of quantitative easing. (A tip of the cap to… Read More

O’Shaughnessy on How Inflation Impacts Stocks, Bonds

Given the huge growth in monetary supply that the Federal Reserve has overseen in an effort to combat the financial crisis and Great Recession, many top strategists — including Warren Buffett, John Paulson, and Bill Gross — have said that they expect significant inflation to hit the U.S. at some point. And if that’s the case, according to new research from James O’Shaughnessy, active stock selection strategies are the place for investors to be. “If… Read More