Stocks are looking good, especially versus bonds. Goldman is fairly valued, but it’s a good company. Likes mid-caps and small-caps better — bigger ponds to fish in. You can also wrap your arms around their asset value better. McGraw Hill will split up, and S&P will be an intersting business. This is the time to do Dell; money is cheap. Better than 50/50 chance of a deal at $14-$15 dollars. Hewlett Packard is a mess, and it would be harder to do this with them, though there is more to work with there.
By banks at 1x book at 10x earnings. Likes Citi and JPM. Pandit and Dimon were the right guys at each institution for the last few years. Banks have gotten more transparent. International exposures are under control
Europe is still tough, and the stocks have rallied.
You have to do the work to be ready when prices come down.
We don’t care about the VIX (spoken like a true value investor), but we want price dislocations. Today, overpricings are in bonds which are not yielding very much.
Part 2 — JCPenny , CEO is doing all the right things. As uncertainty goes away, American consumer has pent up demand, and JCP is trading at probably half of intrinsic value. Lots of real estate there.
With these interest rate levels, this is a cheap market. We don’t invest in stocks based on the macro outlook. We are bottom-up investors. All I do is look for stocks. There aren’t many bonds/bankruptcies around. The “Ben Cliff” is coming. Be with guys who have a discipline and a good long-term record (10-yr record). Stop looking at short-term records for funds and managers.
Question on HFT — Liquidnet is the last virgin in the whorehouse. The business is not done ont he floow. The SEC has been asleep at the switch in HFT. “I have to have 2 traders run my portfolio, because I get ripped off all the time.” Nonesense that liquidity is improved. They’re frontrunning, according to price. The SEC needs to get on the ball.
