Here's one of the more troubling conclusions I've reached about the short-term vs. longer-term outlook, though it will take me three sentences to explain, so bear with me.
1. Financial engineering does nothing to create long-term value for shareholders, and I can say with complete confidence that the majority of money spent on stock buybacks is behind us.
2. A lot of companies that are seeing their stock get pummeled are actually the ones that spent on buybacks. (ExxonMobil, considered a "serial" stock repurchaser, said this week it's slashing its buyback program. Sure, that's specific to the energy sector woes — like ConocoPhillips slashing its dividend on Thursday, something all oil firms are loathe to do — but I see "survival mode" thinking cutting across a much broader swath of companies.)
3. And yet, continued financial engineering is one of only two themes — along with M&A — that I think should push some stocks higher, even if they don't actually create long-term value. M&A can impact sectors more than others, but it isn't a "lift all boats" strategy.
Oh, it's painful all right.
And while everything may be "lower for longer" in the markets — not just oil — investors are overlooking the jump in the cost of health insurance this year. In fact, it is one of the only places that "lower for longer" doesn't apply. For many consumers, the savings from low fuel costs doesn't even come close to the added cost of health insurance.
It's hard to say cash is the only thing worth "investing" in — and I am looking to buy GARP stocks on big moves down. Yet right now it feels like cash is king. And queen and pawn and rook and bishop. And that's a big problem. As an investor, it's debilitating.
— By Mitch Goldberg, president of ClientFirst Strategy
Read more views from Mitch on the markets and investing here.