“Complacency Reigns Supreme” Loews CEO Warns The Market’s “Major Disconnect Concerns Me”
by Tyler Durden
ZeroHedge.com
Feb 6, 2017
Jim Tisch, the CEO of Loews, is worried – worried enough that he slashed his firm’s share buybacks in 2016 and explained to an anxious analyst crowd during his earnings call that “complacency reigns supreme. However, my experience has shown me that this state of affairs won’t go on indefinitely.”
Simply put, Tisch warned that investors who bid up the prices of stocks and bonds aren’t accounting for the risks, given global uncertainties about taxes, regulation and trade.
“I want to start by showing my thoughts on the financial markets, as a backdrop to what guided our approach to capital allocation in 2016. I’ve been around long enough to have lived through all sorts of markets. I’ve learned to respect markets, while at the same time being skeptical of conventional wisdom.
I’ve lived through a bond bear markets and a gargantuan bond bull market. I’ve seen bond yields above 15% and below 2%. I’ve seen inflationary spirals, I’ve seen deflationary threats, I’ve seen deregulation and reregulation. I’ve seen the S&P 500 trade as high as 30 times earrings and I’ve seen the S&P trade as low as seven times earnings.
With all this experience, that comes with age I might add, here is what I’m seeing in the markets today.
In the credit markets, spreads on the high yield securities are approaching historically type levels, while key credit metrics such as leverage and coverage ratios are showing signs of weakening.
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