April 15, 2021

debt: Exploding debt ranges imply stocks cannot go ‘To the Moon’ eternally

By Sarah Ponczek and Michael P. Regan

Peter Cecchini, founder and CEO of AlphaOmega Advisors, joins the most recent “What Goes Up” podcast to debate the loopy 12 months that was 2020 in markets, and to present his outlook for what’s to come back. Subjects embrace efficacy of the Federal Reserve, a increase in retail investor buying and selling and zombie firms.

Some highlights of the dialog:

“Among the earnings estimates that I am seeing, as you mentioned, the consensus is slightly below $170, are going to require multiples that simply do not make lots of sense to me inside the context of the truth that charges cannot go any decrease. So if we’re searching for a number of growth to proceed to drive the rally, I do not assume we will get that as a result of the Fed’s efficacy is restricted, proper? It has firepower, nobody’s saying the Fed would not have ammunition. It will probably print cash and it may go purchase Treasuries for so long as it might like. However on the finish of the day, once you’re at zero, the stimulative influence is muted… I feel that’s one big piece that individuals are lacking. We’re not simply again to, you recognize, this `to the moon’ situation for earnings. If something, we’re again to a state of affairs the place cashflows stay problem and, by the way in which, debt ranges have exploded.”