The market has exceeded my expectations so far this year. At Christmas time 2018, the SPX was
sitting at 2350 and I posted that it was reasonably priced with a fair value set at 2650. I still
think this is a sound estimate of fair value and now regard the SPX as modestly overpriced. My
views on the economy have changed little since the Mar. 14 post (just below), and as I have
thought more about the fundamental outlook, I realize I could make a late cycle "thread the
needle" forecast of SPX 3000 based on low inflation and interest rates and an economy that
improves just enough over the next 12 months to produce some further slight improvement in
earnings, all underwritten by a continuation of sharply rising private sector short term credit
growth. This type of scenario would create a clear cut overpriced and well overextended SPX.
On top of all that, I think we can say with assurance that Trump will try to do whatever he
believes will keep the market trending higher through 2020.
But, to be honest, we have had a damn fine run from the brink of disaster in 2009 and I am
more than happy with 2650 on the SPX. Moreover, I am finding it all boring and am perfectly
content to let others gild the lily.
A few years back, Tim Geithner, former head of the New York Fed, who partnered with Fed
Chairman Ben Bernanke and Treasury Secretary Jim Paulsen to engineer a bailout of the
financial system in 2008-09, said: "We saved the economy, but we lost the country." Prophetic
words indeed, and maybe the truth if Trump wins another four year term. Thinking about
what it may take to build something decent and good in the US for future generations is
not boring like the stock market has become, and it's where I am spending my time these days.
