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Whoever said comparison is the thief of joy clearly wasn’t looking out for a stock market collapse.
In attempting the sometimes-impossible task of forecasting market moves, comparison is often the only tool reliable enough to form a sound thesis. For those concerned current market conditions are reminiscent of past bubbles, rest assured. At least one well-known investor thinks not.
“The valuation levels back in 1999 were just extreme and in the market leaders today, it’s not extreme. They’re pretty fully-valued, for sure, but not extreme,” said Whitney Tilson, author, investor and former managing partner at Kase Capital, to TheStreet.
“I don’t see anything imminent and obvious that’s going to cause a big bloodbath out there,” Tilson said. “If I did see that coming, I would have stayed in business and waited for that bloodbath to put money to work.”
Tilson closed his Kase Capital fund in September 2017 after owning up to losses. But before that he pointed out that he made two strong, profit-turning calls “nailing the internet bubble and the housing bubble.” Tilson later positioned his fund defensively from 2009 on, failing to beat the performance of the broader long-bull market and subsequently “giving up out of frustration.”
“It’s just hard … The old playbook and the inefficiencies and mispricings that I used to be able to find reasonably easily in most markets … just aren’t there,” Tilson said. With a wide swath of stocks richly valued, it can be hard to identify those that might be more overvalued than is fair.
“Even in prior peak markets, in frothy markets like 1999, as long as you just stayed away from or shorted the stupidly overvalued sectors, everything else was cheap. And that’s not true today — it’s just pretty complacent and richly valued across the board,” he added. “But generally not wildly overvalued, either. So in other words, there’s not obvious area where there’s a bubble to short, nor is there any obvious area to go long.”
In the days of the internet bubble, Tilson said there were obvious places for investors like him to place bold calls – and make a lot of money. The internet stocks were so obviously in a bubble that experts had to be blind not to recognize them. But today, nothing of that nature exists in traditional markets.
“Other than the bitcoin bubble which is already half-burst anyway and going down more, there’s no huge area to just short like crazy,” Tilson said.