Alex Green: The American Dream Is Alive, Profit From It
Editor’s Note: The Oxford Club’s Chief Investment Strategist Alexander Green headlined our Annual Investment U Conference this week in St. Petersburg, Florida. What follows is a summary of his presentation, courtesy of Contributing Editor Aaron Task. Alex’s regular column will return on Monday.
“Everybody focuses. What are you focusing on?”
That was the question Alexander Green asked the packed crowd during his keynote at this week’s Investment U Conference.
True to his regular Investment U columns, Alex’s presentation focused on the opportunities for investors versus the potential pitfalls.
Quoting Bill Gates, Warren Buffett, Jamie Dimon and Mark Zuckerberg, Alex noted that the world’s most successful people are optimistic by nature and understand that there’s much more right about America versus what needs fixing.
“The American Dream is still very much alive, even if most Americans don’t see it that way,” Alex said, running through a string of statistics showing how the quality of life in America has never been better. “It’s harmful to your financial health to buy into gloom and doom.”
So what does this mean for investors? Alex reflected on the incredible opportunity investors had eight years ago, when the current bull market began.
Back then, you could use a shotgun approach to the market. That’s not the case today, but there are still plenty of opportunities, he said, pushing back on the prevailing notion that the bull market is about to expire.
“Nobody knows” when the current bull market will end, Alex admits. But the vast majority of bull markets end because of one of three things that don’t pose a present danger:
- Recessions: Since WWII, every U.S. recession has begun with job losses. Today, the economy is adding about 200,000 jobs per month. “Jobs are up, wages are up, corporate earnings are strong, and consumer confidence is up,” Alex said. “There’s no recession in the offing.”
- Financial Crisis: “Banks are healthy, cash reserves are up, bank profits are up.” Financials is the best-performing sector since the election. In short, we “don’t seem to be on the edge” of a financial crisis.
- Extreme Valuations and Sentiment: U.S. Stock valuations are “definitely more expensive than average,” but “maybe the stock market deserves a higher [than average] valuation” given rock-bottom interest rates, low energy prices, low inflation, an improving economy and rising corporate profits. On the sentiment front, Alex noted the vast majority of financial commentary these days is about the risks in stocks vs. the opportunities. More importantly, the amount of money going into bond funds since the market bottom in 2009 has dwarfed the amount going into stock funds: $1.5 trillion vs. just $256 billion. That’s a sign individual investors still haven’t embraced the bull market. (See also: This Is What a Stock Market Bubble Looks Like.)
From there, Alex reviewed his research on common characteristics of 10-bagger stocks, including rapid sales growth, significant insider ownership, better-than-expected earnings and “protected” margins… meaning the company has patents, copyrights or other ways to fend off the competition.
Finally, for all the talk about how the market is “rigged” against the little guy, Alex believes there’s never been a better time to be an investor. Consider this… Trading costs have never been lower, spreads between the bid and asking price for stocks have never been thinner, trading executions have never been faster, and accurate, real-time information on stocks is readily available (for free) to anyone with internet access.
Think about it: When was the last time you looked up a stock quote in the newspaper to see how a stock did yesterday?
Just One More Thing
Later in the conference, Alex participated in a panel presentation aimed at helping young investors get started. The workshop focused on reasons why many younger Americans are so skeptical of the stock market (see: 2008, The Financial Crisis of) and ways to get them thinking about the long-term benefits of investing.
Alex said many young people don’t appreciate “the beauty of capitalism,” where “you can have anything you want by filling the needs of others.”
The panel ended with a question about the single best idea for someone just getting started and looking for a true long-term investment.
Alex recommended attendees take a look at the Vanguard Total World Stock ETF (NYSE: VT), describing it as a tax-efficient way to get broad exposure to global stocks. He further noted that 85% of the world’s population lives in emerging markets, which may be out of fashion now for investors, but will periodically have their day in the sun. He also noted that international stocks broadly are currently trading at a discount to the U.S., presenting an opportunity for those willing to venture beyond our shores.