By William Davis
Story goes that in 1901, Andrew Carnegie sold at once his entire steel empire to J.P. Morgan Jr. (his friends called him Jack, by the way) for a cool $480 million – a sum the Scotsman had scribbled on a piece of paper for the banker’s consideration. It’s said that Mr. Morgan – the buyer — barely flinched at the number. And with the stroke of a pen, Mr. Carnegie – the seller — became one of the wealthiest human beings in world history.
Legend also has it that before the ink had figuratively dried, Mr. Carnegie was wondering aloud whether he’d struck a good deal or not. Seems Andrew, the wealthy seller, was quick to question if he should have parted with his business at all, and if so, was the equivalent of $400 billion in today’s dollars all he could have squeezed out of Jack, the greedy buyer?
It’s the Seller’s Dilemma, of course: I’ve sold my stuff, now what? The wealthy steel man’s problem was a good one to be sure, but it still bothered him. We have to think that folks fortunate enough to be in U.S stocks after a nine-year rally are feeling much the same way these days. They, too, are faced with a “dilemma” of sorts: If I hand over my arguably over-priced S&P 500 holdings to some greedy buyer, what the heck do I do with the proceeds?
While the pundits like to tell us how the S&P and its index ilk are trading at outrageously rich valuations, there’s good reason to think a combination of robust corporate earnings, high business and consumer confidence, and an unemployment rate at its lowest level in nearly two decades could keep driving U.S. stocks higher. Some might even suggest “there is no alternative” place to put money besides U.S. stocks. Sure, the so-called TINA trade is less appealing than it was a few years ago, but from where we sit, there’s still no better alternative.
What the numbers are saying…
- $1.63 billion
The potential EU fine social-media giant Facebook is facing over a data breach that compromised the accounts of more than 50 million users
What Fed Chiefs who want to sound officious are saying…
“These rates remain low. This gradual return to normal is helping to sustain this strong economy for the longer-run benefit of all Americans.”
- Fed Chairman Jerome Powell on the Central Bank’s rate hike
What CEOs who can’t help but bloviate are saying…
“We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency.
- Wells Fargo Chief Timothy Sloan on his company’s plans to cut as many as 26,500 jobs over the next three years
What brand-new CEOs who sound like Dilbert are saying…
“This work includes strengthening risk management, simplifying operations, leveraging digital automation, divesting noncore businesses, and continuing to become a more efficient company.”
- Former General Electric board member Larry Culp on taking over for John Flannery, who was fired after just 14 months in the job
What the facts are saying…
- October has historically been the worst month for gold, silver, and Brent, the global benchmark for oil prices.
- Nearly $3 billion flowed out of government-bond funds during the week ended Sept. 26, the largest weekly outflow since November 2016.
- The S&P 500 financials sector closed down 1.3% Wednesday, its largest one-day drop since mid-July.
- Last week’s decision marks the first time that the Fed has raised rates above 2% since a series of rate cuts that followed the government’s intervention in March 2008 to prevent the liquidation of Bear Stearns.
- The S&P 500’s health-care sector is the best performer of the index’s 11 groups in the third quarter, up 13% and on pace for its strongest showing in more than five years.
What folks with ears to the Street are saying…
“We are definitely not trying to call a market top here. But it is hard not to.”
— Heard on the Street columnist Justin Lahart