Earlier this week, Goldman portfolio strategists Peter Oppenheimer and Matthieu Walterspiler wrote that “the prospects for future returns in equities relative to bonds are as good as they have been in a generation,” in a long-term bullish call that shocked even some of the most optimistic investors.
But legendary value investor Doug Kass isn’t having any of it. He goes so far as to exclaim, “I can’t help but think that Goldman Sachs might have rung the bell that the market has topped in the near term!” in an editorial published by The Street today.
In particular, he contests five assertions made by Oppenheimer and Walterspiler:
- Kass simply doesn’t agree that the “unrealistically large declines in growth and returns in the future” that equities are implying right now is a farce. Instead, he emphasises the continuing drag that uncertainty and sluggish growth will have on equities markets.
- He argues that the current 14x equities growth is not so different from the average 15x we’ve seen over the last five decades, refuting Goldman analysts’ arguments that valuations are unnaturally low.
- Low valuations right now are not a good enough reason to spurn safer bonds in favour of a potential upswing in equities in the next few years.
- The cheapness of stocks is not a good enough reason to buy them amid a mountain of “cyclical and secular concerns.”
- “While stocks might be ‘the best house in a bad neighbourhood’ and will be more attractive than bonds, any real estate agent would tell you, ‘Never buy the best house in a bad neighbourhood!'”