And we see a slower world economy, that's going to bring oil prices lower. So, you know, I definitely believe that lower oil prices are going to help.
But it's going to be- take quite a while before we get there. And I believe that lower prices on oil is going to have a positive ripple effect in terms of pricing. You know, the inflation story has been a big one for quite some time. Does this in any way reset the inflation expectation going forward?ĮD BUTOWSKY: Well, I'll tell you. Now oil is crashing down, down 10% at one point, slightly off that low now. So before Thanksgiving, the whole story was inflation- that's all we were talking about- and supply chain issues, and the rest of it. I don't mean to be a bear, but I just don't believe any of these stocks are worth what they're selling for. And I think that they've come down and they should stay down.
I think these, you know, these stay-at-home stocks were, you know, properly priced at one point but- before the pandemic- they just skyrocketed to unsupported levels. And this new variant is an excuse, I believe, to sell off the market because I think it's because the market is so overpriced. And if you look at Zoom, you're looking at a company that is still incredibly overvalued. Is there a bit of an overreaction or you think this is, kind of, the time to move back into a lot of those trades that saw huge gains on the back of last year?ĮD BUTOWSKY: Right. Does that kind of trade make sense to you, given that we don't really have a whole lot to take away from on this new strain? We're still waiting for a broader assessment from the WHO. You look at a name like Zoom, up more than 7% in the session. But the overall market was definitely overvalued and you had to be very careful about it.ĪKIKO FUJITA: Ed, you talk about reassessing the risk now, but if you look at some of the outliers in the session today, the stay-at-home trades coming back. Up until recently, the market was 32% overvalued and it was only in a very few number of companies that you were seeing this, you know, kind of, growth rate that could be supported- you know, Facebook, and Google, and so on. You have to remember, in October 1987, the stock market was 40.2% overvalued. And we've stayed away from a lot of the growth stocks just because you just cannot support and justify, for a long period of time, this kind of overvaluation.
We've been writing a bunch of cover calls, which, you know, just gives us a lower access or entry point on stocks. And then, sir, how are you reassessing growth projection going forward and equity valuation? What are you advising investors to do?ĮD BUTOWSKY: Well, we've been buying a lot of senior rate floating notes, and business development companies, and preferreds in anticipation of this. I'll tell you, the market has been 31% overvalued for a number of months and I believe that this is the first leg of, you know- call it repricing, whatever you want to call it, but it's definitely going to be a downward move going into 2022. I see this as the first leg of a multi-step downward move in the S&P. Is this- what we're seeing today, is this a repricing of risk or is this, kind of, a buying opportunity as you see it?ĮD BUTOWSKY: I'll tell you, I don't see it as a buying opportunity. Ed, you heard Jared kind of pose the question for us here. We've got Ed Butowsky, Chapwood Investments managing partner. Video TranscriptĪKIKO FUJITA: Jared, let's talk more strategy with our first guest for the hour. Chapwood Investments Managing Partner Ed Butowsky shares his views on Friday's market selloff, asserting an "overvalued" market and providing areas that investors should avoid.