I was looking at the stock market recently, and I 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 of 2020, I felt like we’re in a true 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 it is priced near its all-time highs. It’s not too rare to have a few indices near the all-time highs. After all, the market generally goes up over time. The only way to do that is to break some records going up. But nearly everything is at an all-time high. When something is within 2% of its all-time highs, my spreadsheet gives it a blue coloring. I use that to tell me to consider whether it’s time to rebalance that position into something else that isn’t near its highs. (There’s no real significance to blue; it’s just a color that I hadn’t used. Maybe we can say it is like an ultra-hot flame?)
When I look at my spreadsheet, it is all blue. The general 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’s super close. It’s also up 132.13% since 2023 due to AI driving the markets.
All those being near their all-time highs doesn’t necessarily mean that they are expensive. If earnings are through the roof, then paying a high price is justified. It’s still a good price/earnings ratio. However, the Shiller PE is in the dot-com bust range at over 40. That means that earnings are not keeping pace with prices. If you have money to invest, it feels like TINA – there is no alternative, cheap place to invest. That’s a tough situation with that Shiller PE signaling rough times ahead.
At the end of the year, many stocks pay their biggest dividends. 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% from its highs – a bargain compared to anything else. I’m not too enthusiastic about real estate lately. Energy (XLE) and utilities (VPU) are worth considering. If there’s a crash, they’ll probably do better than most stock ETFs. However, I’ve already invested in them, and I feel like I have a good asset allocation there.
This leaves me to look at individual stocks. I had been trying to sell off my individual stocks to simplify my portfolio. When you get to the world of individual stocks, there appear to be some bargains. The problem is that there are usually some red flags. Also, individual stocks have a diversification problem. Nonetheless, I think I’ve found a couple that I like:
Procter & Gamble (NYSE: PG) and Colgate-Palmolive (NYSE: CL)
Both of these consumer staple companies are trading near their 52-week lows. They both are Dividend Kings, meaning that they’ve increased their dividends for 50 years or more. They also have price/earnings that are attractive, around 21, nearly half the Shiller P/E. I couldn’t find any red flags with their businesses. It seems like investors are simply focused on big growth in the AI industry. That’s fine, it gives me an 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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