I share many of Tim's concerns. The popularity of interest-only mortgages is a condemned house of cards waiting to be razed. The flattening -- and recent inverting -- of the yield curve is a worrisome sight. The New York Yankees are overspending again yet not addressing the problems within their starting rotation.
OK, so Tim isn't really worried about the last one, but to be frank, I'm not overly concerned about the first two points, either -- at least when it comes to stock investing. Those are the symptoms of a housing bubble in desperate need of a needle tip. It's an asset class that will be tested in 2006, and I would be shocked if a good chunk of that change isn't pulled out and tossed into the equities market.
Tim is worried about consumer debt. Shouldn't it follow that he also gets excited about cash-rich companies that are ready to rake in steep interest-income distributions? Over the past two years, we have had energy prices spike and have lived through 13 different Fed rate hikes. Corporate profits, by and large, haven't skipped a beat. The coming year should be kinder on all fronts. There hasn't been any irrational exuberance in the stock market. The froth has formed around the mouths of commodity traders and real estate speculators this time around.
Companies are better run these days. In the past, major conglomerates were bloated behemoths, bent on leveraged buyouts to boost their lethargic organic-growth spurts. Today, diversified companies such as Altria
Why would I bet against these companies holding up better in the kinder climate that 2006 is likely to be, trading at the lowest multiples in years -- just because I see bull caricatures on business magazines? How about letting a picture tell a thousand value-minded words?