QOTD: 16 times

from Dan Loeb’s just released Third Point letter…

While it is important to stay abreast of political events and shifts in economic policy, data, and forecasts, our performance is driven primarily by bottom‐up, fundamental investing and only occasionally by our ability to read a macro crystal ball. Still, we spend time studying global market dynamics because, every few years, doing so gives us a chance to decisively shift positioning or asset classes when we recognize a turning point in extremely volatile markets. With this in mind, our view of the current economic backdrop is: 1) US growth will remain buoyed at a high level due to the fiscal stimulus impulse from spending increases coming into the system. Barring an escalation of trade conflict, most of the deceleration in the global manufacturing cycle is likely behind us; 2) inflation has remained stable in the first half of the year, with little sign of impending acceleration, despite a record low unemployment rate; 3) the cycle can extend longer than many people think as companies are in good shape, particularly in the US, and the consumer is strong while carrying only modest debt levels; and, 4) equities are not expensive at 16x forward earnings. We believe the risk of recession in the next year remains low and, without this concern weighing heavily on markets and with the tailwinds we have described, we believe equities should go higher but at a moderate pace.

I thought that was a reasonable way to think about where we are.

Source:

Third Point Q2 2018 Investor Letter