I had a discussion this morning about the future direction of the stock market+ with an old friend. He is quite bullish based on the hope for a $1.9 trillion stimulus package and an infrastructure bill's eventual passing. I get that and talked about it yesterday in the Banking on Profit Weekly Update. This has to happen, and it has to happen fast to support the economy.
Will it be enough to justify the current valuation levels in the stock market?
I don't know.
Many bulls like to make the interest rate argument. While it's true that low-interest rates can justify higher valuations, it is also true that, as Meb Faber pointed out this week, we have never had this combination of low rates and high valuations.
I don't think anyone has a clue what the market will do in the rest of 2020. This is uncharted water for stock prices.
Rather than torture myself trying to guess the unknowable, I will focus on what I do know.
Bulldog Investors filed a 13D concerning The New Ireland Fund last month. He attached a letter to the fund's management that said, "Based upon the wide discount at which the Fund's shares trade, we can infer that there is just insufficient investor interest in a small closed-end fund with a relatively high expense ratio (of around 2%) that specializes in Irish equities. Since other measures to narrow the discount have been tried and failed to narrow the discount, we think the time has come to afford shareholders an opportunity to realize a price for their shares that is at or close to NAV by converting the Fund to an ETF or dissolving it."
The fund trades at a discount of almost 20% to NAV today. A conversion or liquidation could produce a ...