Dirk Müller: Currently, I do not see any formation of bubbles like we had around the year 2000. Indeed, some companies today are overvalued due to excessive optimism, such as Tesla, which is valued higher than the largest US automaker, General Motors, despite only selling 0.8% of the cars in comparison. GM makes a profit of 9.4 billion, while Tesla incurs several hundred million in losses. There is too much optimism at play here.
When assessing overvaluation, the media usually only looks at the so-called P/E ratio. This is the current stock price relative to the company's current earnings. However, this number alone is completely worthless. One must also consider the company's growth. A company with a P/E ratio of 20, but no growth, will still have a P/E ratio of 20 in 5 years and is therefore expensive. A company with the same valuation but with 25% annual growth will have a P/E ratio of 6.5 in 5 years, which is very cheap.
Furthermore, one must consider the return expectations on stocks compared to alternatives. In times of high interest rates, investors also expect high returns from stocks and are therefore willing to pay lower valuations. In times of zero interest rates, higher stock valuations are accepted as, for example, dividends provide a good return. For Roche, this is currently 3.4%.
It is not at all difficult to distinguish good from bad stocks. One just needs to follow a few basic rules that anyone can easily understand. This can be explained to any investor in half an hour.
Speakers Excellence: What can we expect in the coming weeks and months in the stock market?Dirk Müller: THAT is the million-dollar question! No one can say for certain. The stock market is currently as exciting as it has been in decades. Opportunities and risks are currently equally enormous.
The cheap money from central banks is currently providing a globally sufficient economy, which is also leading to broad-based increases in corporate profits. As long as this stimulus from central banks continues and no negative surprises occur, markets can continue to rise and reach new highs. BUT!!: Central banks are currently like jugglers in a circus, holding countless plates on sticks in the air. A catastrophe can happen at any time. The potential triggers for this are diverse. Political developments in the US (Trump), military developments (North Korea-USA, Iran-Saudi Arabia, NATO-Russia), or central bank decisions (such as an interest rate hike) can lead to a collapse at any time. It could happen tomorrow, or it could be ten years in the future. No one can say for sure. And this is where the secret lies: to profit from these enormous opportunities that every market offers with clever strategies and close observation of events, while minimizing risks.
Speakers Excellence: Is there currently a development in world events that particularly concerns you?Dirk Müller: The US has been the undisputed leading nation in the world so far. Ironically, this hegemon currently has a government that is hardly predictable, and its decisions can lead the world in one direction or another. This unpredictability comes at a time of greatest international uncertainties. It starts with Europe, which is currently grappling with various issues about its future. A misguided financial and economic policy in many areas leads to increasing imbalances within Europe. So far, we have found no answers to this, and it is driving this crucial European peace project further apart. However, positive changes are on the horizon.
Islamic terrorism is increasingly exacerbating the security situation in Europe as well. The burning Middle East has now become a permanent hotspot, bringing numerous dangers to international security. The confrontation between Russia and NATO is a focal point here. In the Persian Gulf, a larger conflict between Saudi Arabia and Iran is already emerging, which could have significant implications for oil prices. However, this is a topic that probably lies two to three years in the future.
The biggest risk I see is in China, and numerous experts also recognize the biggest economic bubble in history here. The extreme indebtedness of corporations, mismanagement, and misinvestments have created unimaginable imbalances here. As long as the central government manages to keep the boom going, such a bubble with its misdevelopments will continue to expand. This could - if we are lucky - go well for another ten years. However, whenever this boom ends, which strongly depends on foreign capital inflows, the global repercussions will be very significant due to global interconnections. Until then, a lot of money can be made here, and when the time comes, even more fortune can be made during the resulting turbulence if positioned correctly.
Speakers Excellence: When looking at the stock market, are there any sectors that you would currently strongly advise against?Dirk Müller: I mentioned Tesla at the beginning. One should focus on companies that have proven their abilities and strengths through sustained profits over many years, while still having growth potential. Apple is also an example here, as well as the American company Tyler Technologies. I am currently staying away from overvalued companies without profits (Tesla), but also from banks with incalculable risks. Overall, the German automotive industry is currently at high risk. Due to technological revolution, its 100-year-old business model is in jeopardy. Just in this phase of weakness, where companies need all their strength for realignment, they are paralyzed by concerted attacks such as emission and cartel investigations. The foreign competitors of German automakers, who have been inferior for decades, are rubbing their hands, and it remains completely uncertain how the development will proceed.
Speakers Excellence: Which markets would you consider to be permanently stable?Dirk Müller: Currently, there is no market that is safe. We are dancing on a volcano. It can grumble quietly for many more years or erupt at any time. The key is to stay in the game as long as possible and enjoy the party, but to seek safety in time when the seismographs start to show activity. That is my job and motivation: to explain these signals to people so they can better assess the situation that arises from the daily news flow.