Contact us 415-464-9144
  • Who We Are
    • Terry O’Neill
    • Kal Salama
  • What We Do
  • News and Events
  • Best Asset Classes
  • Best ETFs
  • What Really Matters
  • Contact

Valuation Comments – December 2, 2013

December 02, 2013
by Kal
Comments are off

Overvalued US equities continue to get more overvalued.  The success of the recent Twitter IPO reminds us that high prices and overvaluation to investors means lower cost of capital for issuers.  Over the past few years in bond markets, returning investor risk appetite pushed prices higher and yields lower.  This lower cost of debt capital was greeted warmly by issuers, who happily took advantage of the very attractive financing terms.  Increasingly, the same process is unfolding in the US equity market and we should expect the US IPO market to gain momentum as a result over the coming months.

Weaker markets in Asia are beginning to attract our attention from a valuation perspective.  However, we believe the more attractive nearer term valuation return opportunities remain in Europe.

We maintain full equity exposure today but protect clients by having above-normal allocations to certain non-US equity markets and below-normal allocations to US equities.

Following strong developed equity markets this year, credit spreads have tightened to one year lows.  A slowly recovering US economy and plenty of monetary support globally continue to encourage credit risk taking.  Monetary policy observers recognize that the current policies of major world central banks are very far from neutral.  Investors are being reassured by central bankers that even when bond buying programs eventually end, real short term interest rates will remain below zero.

We maintain full bond exposures today but avoid owning Treasuries and long duration bonds.

About the Author
At The Headlands Group, we are committed to making high probability of success investors. We transform client concerns about financial markets into the confidence that comes from knowing their investing experience will be a successful one. If we can succeed in getting clients to avoid “easy and popular” and allowing us to do “difficult and unpopular” on their behalf, we have made them into the “house” at the market casino and improved the odds that they will be successful over their investing lifetimes. We believe our clients perform better than most large institutions – despite not having the same investment resources.
Social Share
  • Best Asset Classes
  • Best ETFs

HEADLANDS GROUP, INC.

100 Larkspur Landing Circle
Suite 202
Larkspur, CA 94939
415 464 9144

Recent Posts

  • Best ETFs 6/30/2022
  • Best Asset Classes 6/30/2022
  • Best ETFs 5/31/2022
© Copyright The Headlands Group, LLC