I was looking at the stock market the other day and simply shook my head. I almost always have a pretty clear idea of what is cheap and what is expensive. However, everything looks expensive. For the first time since November 2020, I felt like we were in a real TINA situation. For those who don’t know, TINA is an acronym for There Is No Alternative.
When I say something “looks expensive,” I mean that the price is near its all-time high. It’s not that rare to see a few indices near all-time highs. After all, the market generally goes up over time. The only way to do that is to break some records. But almost everything is at an all-time high. When something is within 2% of its all-time high, my spreadsheet turns it a blue color. I use that to tell me if it’s time to rebalance that position to something else that isn’t near its peak yet. (Blue has no real meaning; it’s just a color I didn’t use. Maybe we can say it’s an ultra-hot flame?)
When I look at my spreadsheet, it is completely blue. The overall US stock market (VTI) is blue. International stocks (ETF symbols VWO, VEU, VXUS) are blue. Small caps (VB), dividend (HDV) and bonds (BND) are blue. NASDAQ Cubes (QQQ) is not blue, but it is super close. It is also up 132.13% since 2023 thanks to AI driving the markets.
Just because they’re all near their all-time highs doesn’t necessarily mean they’re expensive. If revenues skyrocket, paying a high price is justified. It is still a good price-to-earnings ratio. However, the Schiller P.E is in the dotcom bust range above 40. That means profits are not keeping pace with prices. When you have money to invest, it feels like TINA: there is no alternative, cheap place to invest. That is a difficult situation, now that Shiller PE indicates that difficult times lie ahead.
Many stocks pay their largest dividends at the end of the year. I don’t automatically reinvest them, but use them to buy something cheap. So where do I go from here? Real estate (VNQ) is about 6% off its peak – a bargain compared to everything else. I haven’t been very excited about real estate lately. Energy (XLE) and utilities (VPU) are worth considering. If a crash happens, they will likely do better than most stock ETFs. However, I have already invested in it and I feel like I have a good asset allocation there.
This allows me to look at individual stocks. I tried to sell my individual stocks to simplify my portfolio. When you enter the world of individual stocks, there seem to be some bargains to be had. The problem is that there are usually some red flags. Furthermore, individual stocks have a diversification problem. Still, I think I’ve found a few that I like:
Procter & Gamble (NYSE: PG) and Colgate-Palmolive (NYSE: CL)
Both consumer staples companies are trading near their 52-week lows. They are both Dividend Kings, meaning they have been increasing their dividends for 50 years or more. They also have attractive price-to-earnings ratios, around 21, almost half of Shiller’s price-to-earnings ratio. I couldn’t find any red flags with their companies. It seems that investors are simply focused on big growth in the AI industry. That’s fine, it gives me the opportunity to buy low.
Now it’s your turn. What are you investing in? Let me know in the comments below.
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