Lots of Air in Tech Valuations
The equity market (I’m speaking primarily of the NASDAQ) is overvalued. Trump’s victory and the potential for lower corporate taxes is obviously a net positive for earnings, but when since 2020 have earnings mattered? When have the fundamentals mattered since 2020?
Next step in my view is that Jerome Powell will resign as Fed Chairman and be replaced with an even bigger dove.
At this juncture the Fed ought to become a subsidiary of Treasury as its primary function since 2020, perhaps since 2009, has been to subsidize fiscal policy and to artificially suppress interest rates.
The Fed has completely failed to protect the Dollar as it has failed to fight inflation. Please do not tell me that the Dollar (DXY) is strong. When I refer to a strong Dollar, I am not referring to the Dollar relative to other currencies. I am referring to the Dollar relative to itself over time and relative to real assets such as gold.
What to do? Buy quality companies at reasonable valuations. What is a quality company? Ahhhh. That is where experience comes in. A quality company led by a quality management team is not simply a team that meets or beats guidance. I hate guidance frankly. One attribute of a quality team and a quality company is the ability to create a sustainable competitive advantage, one that can be profitably monetized. Technology companies that cannot generate operating profits or free cash flow are a joke.