Bill Gross and Scott Black Wary of US Assets

Both are members of Barron’s Roundtable and are making the rounds on the Bloomberg media circuit, sounding rather sour on the US economy:

Gross Says US Won’t Be Able to Exit From Aid Programs

Delphi’s Black Calls S&P 500 Index `Overpriced’

Gross’ comments regarding the structural changes occurring in the US economy are elucidated in his newly released Investment Outlook. Many of his comments and suggestions have been echoed here on this blog in the past, which should be no surprise as I am a huge fan of Bill Gross, despite his tendency to game the markets. Of note was his warning to investors to diversify out of the US dollar before it is too late. Gross also hits on a point that I’ve brought up previously: the markets and the economy are now buoyed only by government support. Can the Fed and Treasury pull back their various intervention programs without crashing the markets? It’s hard to see how they do that from here. The 1930’s experience (experiment) argues no.

Scott Black is more of a fundamental analysis investor than Gross but he calls the S&P 500 overpriced at these levels based on earnings. Black thinks a few cheap stocks still linger but the bargain blue chips (like MSFT @ $17) are gone and markets could see a correction from here. Despite his macro view, Black mentioned two stocks he likes: Spirit Aerosystems (SPR), which is also a holding of Bruce Berkowitz, and Arch Capital Group (ACGL).

I will post my thoughts on the current market in a later post but Black’s interview reinforces my previous post that value investors should let macro considerations inform but not override their fundamentals-based investing strategy. It is a fine line, to be sure and not one I claim to have mastered. Perhaps that is why value investors are famously exhorted to ignore the big picture and focus only on a company’s fundamentals.

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