Whirlaway’s Great Derby Race

Whirlaway wins the 1941 Kentucky Derby

The good ole days of watching Whirlaway galloping down the middle of the track, holding the lead in the Kentucky Derby are long gone but a fond message of sheer athleticism, unopposed, unchallenged for some 60 years.

I was curious to see how bullishly postured money managers played the opening quarter. When the market turned south, did they sit tight or run for the hills and shed assets?  Before looking at the numbers, my guess is few operators cut back and thereby outperformed, saving themselves from ruinous losses. 

When I totted up asset shrinkage year-to-date for name postings like IBM, Tesla, even Microsoft, Home Depot, Salesforce and Meta rested 100 points or more below 12-month highs. 

As for myself, I’ve never owned fewer stocks. Namely four positions: Apple, Amazon, Goldman Sachs and a bank stock, Morgan Stanley. These are volatile pieces of paper, but I don’t feel out of my league. So far so good. Let somebody else own Telsa. I cannot analyze its fundamentals. 

At one time, I thought American Express and Boeing could be stocks but oil futures over par reversed their blue sky. Airlines with energy costs rising over par attract no interest.  Net, net, S&P 500 futures still hold too pricey for me making for a foreboding high price-earnings ratio for the market. 

In my calculations, the S&P 500 Index approximates 20 times earnings. Such valuation is more closely associated with market peaks. I’d have to see the Index at 15 times projected earnings power for me to flex my “buy” muscles. 

I’m getting ready to buy 30-year Treasuries as they press to yielding 5%. My thinking is a 5% yield should at least protect us from inflation going forward.  A 7% yield on corporates carries substantive credit risk if we lapse into recession shortly. 

Rather be a galloping track horse than a flummoxed money manager who’s lost his nerve.