This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cash is King and so Are Sinclair and Nexstar

NEW YORK ( TheStreet) -- We are now in the season when, from an investing perspective, cash is "king" once again.

GMO Chief Investment Strategist Jeremy Grantham channeled himself through a spokesperson recently and stunned members of the Value Investor Conference in London by confessing that the investment firm was 50% in cash.

GMO, the famous Boston-based contrarian investment firm, manages about $100 billion in assets mostly for institutions and the wealthy.

At the conference the GMO spokesman warned that it now considers all western stock and bond markets to be ominously overpriced. The firm believes that from current market levels most investors are likely to lose money, after factoring in inflation, over the next seven years or so.

The firm considers China to be in a dangerous bubble but it did say it still saw some opportunities in other emerging markets. It moved to 50% cash and cash equivalents awaiting better buying levels.

From an asset allocation standpoint, being 50% in cash may sound very bearish. From my viewpoint it looks opportunistic, and follows the "Jim Cramer model" of always having enough cash to buy the dips.

U.S. stocks are still expensive with a price-to-earnings ratio for the S&P 500 somewhere around 16.5, up from 14.7 at the end of 2012. With third quarter earnings season about to begin the "E" in P/E, earnings, isn't looking too bright.

So the notion that we should be mostly invested in stocks right now may not be prudent. If you own stocks with ridiculously high P/E like Amazon (AMZN) and Netflix (NFLX - Get Report) you may be "cruising for a bruising".

To illustrate my point Netflix is trading with a P/E of about 407 and a forward (1-year) P/E ratio based on anticipated earnings of almost 100. The current stock price trades at nearly 100 times next year's EPS.

My point about having cash right now can also be emphasized by a question. Would you rather own 20 shares of Netflix at $327-per-share now, or have $6,450 the next time NFLX corrects to a 52-week low? Its 52-week low was $57.40 on Friday.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NFLX $90.26 -0.86%
NXST $51.50 0.27%
SBGI $31.96 -2.10%
AAPL $95.03 -2.90%
FB $116.73 7.20%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs