“Davidson” submits:
Q4 hedge fund letters, conference, scoops etc
The Dallas Fed inflation measure, 12mo Trimmed Mean PCE, was reported at 1.84%. This is a drop of ~0.2% from recent levels of 2.02% Inflation remains controlled.
The SP500 Value Investor Index(VII) for April is $2357. The SP500 priced at $2825 represents a 19.4% premium. Should inflation continue to ebb from current levels, the VII will justify higher equity prices, i.e. lower inflation makes SP500 EPS more valuable.
The VII has its greatest value in identifying good equity buying levels. Dec 2018’s SP500 decline reduced the premium to 3% and was a good buying opportunity. Past market peaks represented 100%-50% SP500 premium to the VII. While the VII is not used to identify market tops, the SP500 ~20% premium present today is not overly speculative. Before this investment cycle peaks, the expectation is that the SP500 is likely to price more than 50% premium to this index. The VII represents US growth fundamentals since 1939 and sports a 6%+ year over uptrend. Should tariff and home mtg initiatives currently in process prove successful, in 4yrs-5yrs the SP500 has the potential to price in the $4,000-$5,000 range with a 50% premium to the VII. A more speculative market could see higher prices.
