3 ETFs to Consider While Interest Rates Are Low
NEW YORK ( ETF Expert) -- I have met David Kotok, chief investment officer at Cumberland Advisors, at several conferences in which we have both been speakers. He is intelligent, amiable and approachable.
Recently, I read an article by Kotok on whether or not Federal Reserve tapering constituted tightening. He suggested that it may not be. He also maintained that Cumberland would remain fully invested because it will take the world's economies many years before reaching a stage in which they will need to deal with maturing assets on the balance sheets of their central banks.
Mr. Kotok wrote in his conclusion:
"When interest rates are maintained at a very low level, the discounting mechanism to value assets works to raise the prices of those assets. That trend will continue worldwide in the major economies for several more years as all of them go through this process of central bank stimulus, plateauing, subsequent tapering, reaching a neutrality level, and then confronting in the out years how to permit the assets of the central bank to roll off and mature over time without shocking those economies."For the most part, I agree with the assessment that rates will remain low in the major economies for many years to come. I also agree that monetary stimulus will be a saving grace for investors during the next few years, though I'm less convinced that tapering will be followed by forward progress toward reaching "neutrality." Instead, I anticipate more "twists" or "QEs," as any sign of economic weakness will foster central bank unwillingness to let an economy stand on its own legs. Perhaps ironically, Kotok's primary explanation for remaining fully invested for several years is the multi-step process central banks will undergo before they shore up their balance sheets. Nowhere did I read that traditional measures of stock valuation matter; nowhere did extremely expensive price-to-revenue ratios factor into the fully invested decision. Come to think of it, the list of non-essentials is so vast, the "all-in" proclamation does not merely ignore fundamental factors like record high price-to-sales ratios (i.e., S&P 500 companies are barely selling "stuff"), it also ignores sub-standard economic growth, lower-than-normal asset volatility and higher-than-typical bullishness. Indeed, everything is boiled down to the singular notion that the world's central banks ensure success for the fully invested participant.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV