Only Sell Stocks in Recessions?
We were recently made aware of an interview at Bloomberg, in which Tony Dwyer of Cannacord and Brian Wieser of Pivotal Research were quizzed on the recently announced utterly bizarre AT&T – Time Warner merger. We were actually quite surprised that AT&T wanted to buy the giant media turkey. Prior to the offer, TWX still traded 50% below the high it had reached 17 years ago.
The merger of AT&T and TWX simply doesn’t appear to make much sense. It certainly is a symptom of loose monetary policy though – click to enlarge.
The merger as such is actually not what we want to discuss though. Rather, it is a remark of Mr. Dwyer’s regarding the stock market in general and what the recent merger mania is signaling. He makes two major points in the course of the conversation. For one thing, he notes that the merger (along with many other mergers that have recently been announced) is the result of the extremely easy availability of credit.
This is undoubtedly true and he rightly avers that all of this will end badly. At the same time he believes though that it represents a great opportunity for investors currently – a point he thinks is not receiving the attention it deserves. This in turn is based on his assertion that one should never sell stocks, even if the market misbehaves by going down a bit, as long as there is no recession.
You can watch a video of the interview here:
Tony Dwyer and Brian Wieser opine on the T-TWX merger – Dwyer’s remark on when to sell or not sell stocks is of particular interest to us (in case the video doesn’t play, here is a link)
The Problem with Predictions
The problem with this is of course that by the time everybody realizes that a recession is actually unfolding, the stock market is usually already half-way to making its bear market lows. Mainstream economists and central planning bureaucrats are usually particularly clueless when it comes to forecasting recessions. They don’t even recognize them when they are staring them into the face.
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