Symposium 2010: Do you feel the stock market is overvalued, undervalued, or fairly valued?

I don’t believe that the market at this time truly reflects the fundamental risks of the overall economy and how those risks translate long-term into negative business conditions. What I think is happening is that investors are looking for a place to put their money where they can get a better return than on Treasury bonds that aren’t yielding too much. I don’t think it is a reflection of investor sentiment towards the market overall. I think it’s just a matter of opportunity and where they’re seeing a better prospective return on their investment. We’ve seen a tremendous rise in some commodity prices which is usually associated with investors hedging against inflation or other factors.

If the economy continues to weaken, which I think it will, it is going to manifest itself in weaker share prices simply because the demand for goods and services is going to be lower. A lot of businesses have responded to the recessionary trends over the last couple years by cutting fat from their operations in the way of excess labor, discretionary spending, etc. and made improvements in productivity to maintain and at time improve the bottom line while sales were flat or had only nominal growth. But, there’s only so much that a business can cut. Once you reach that point, if sale don’t increase because there’s lack of demand then the bottom line won’t rise any further. I think we’re going to see that happen more often than not in the near future, and I’m speaking in general terms as opposed to any industry specific commentary. If that’s the case, then we will likely see a decline in the markets in the coming year. There are a number of other factors, but sufficient to say I believe the market is overvalued at this time.

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