We have often referred to the current stock rally as a garbage rally. The low quality of the rally has been extreme in its nature as low quality high spec names substantially outperform high quality names. Several of these low quality names are part of what CNBC refers to as the “1,000% club” – a club that surely represents the speculative times. Hedge fund manager Nick Bullman says the market is grossly overvalued after investors have driven up the market:
LONDON (Reuters) – Speculation rather than economic fundamentals has driven this year’s sharp rally in stocks, and equities may now be 20 percent overpriced, said the managing partner at hedge fund firm Bullman Investment Management.
Nick Bullman, who told Reuters he has this week placed bets on falling share prices, is concerned that government stimulus packages have not revived bank lending as much as hoped and that conditions remain as tough for companies as they did last year.
“The rally has been a ‘dash for trash’ based on speculation … On Wednesday (I) went short on the S&P (500) and financials via ETFs (exchange-traded funds),” he said in an interview on Friday.
“Stocks that were on their knees have risen to pre-Lehman levels, but the fundamentals haven’t changed at all. Credit card debt in the U.S. is getting worse. I think the U.S. equity market is potentially up to 20 percent overvalued over the short term.”
Source: Reuters
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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