Yesterday was history beyond the headlines as investors worldwide ran fearfully into 10 Year US Treasury Bonds, it pushed the yield to their lowest point ever at 1.907%. Or to state it another way, the price for yield are roughly at the most expensive place that they’ve been ever. My question to readers is when has John Q Public ever been right about investing? Or more broadly speaking, when has general consensus ever been right?
Let’s contrast this with the S&P 500. At roughly the same time as this, 500 of the largest, most strongly financed and most profitable companies in the world finished reporting the highest quarterly operating profit in their history. Not only this, but their profit margins and cash positions also at historic highs. Somehow, this missed the headlines. At this point in time, the dividend yield on the S&P 500 was about 2.04%.
When two historical moments are put side by side, you have two investments. One (the 10 year US Treasuries) at its most expense point in history paying a yield of about 2%, or the other (S&P 500) at its most profitable and cash strong point in history and … paying a yield of about 2%. More detail could be said, but folks, this is completely insane and speaks to a great buying opportunity and despite all logic, everyone is running the other way.
Again, I ask, when has John Q Public or general consensus ever been right?
A few great quotes from Benjamin Graham: "If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume." "The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate." "The investor's chief problem - and even his worst enemy - is likely to be himself." "Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies." "The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell."