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  • Luis G. ha respondido al debate Ted SeeksQuality en el foro Estrategia hace 7 meses

    «The 3-month Treasury has now inverted with the 10-year Treasury. You earn essentially the same yield pledging your money for three months as you do for ten years. That is a strong FORWARD signal of a recession looming.

    Europe may already have tipped. The German manufacturing print this morning was shockingly weak. I believe German bonds are now trading with a negative yield again. That is a signal of a recession (or at least severe weakness).

    China is struggling, likely damaged by the trade war but also by the slowing global economy. Which is also reflected in the FDX earnings this week.

    So what does this mean? Quality companies should continue to pay dividends. Defensive companies are not likely to see their earnings hurt much, though Sensitive sectors may start revising their outlook downwards. The last recession wiped out a year or two of earnings for many of the Industrials. But again, quality companies should continue to pay dividends!

    Right now the Industrial and Tech companies promise the strongest forward returns, however that is based on their current earnings outlook. If we do hit a recession, that outlook will be coming down and those great “values” in the Industrial sector will suddenly look a lot more reasonably priced. Even overpriced. Yet quality companies should continue to pay dividends.

    In my opinion, this is a bad time to be buying values based on aggressive growth targets. All value is in the future, and when those earnings estimates are slashed the price targets will come down with them. This is a good time to be buying quality companies that generate cash flow sufficient to their needs and pay a sustainable dividend.

    What is the worst that can happen if you do that?»