Loews CEO warns of investment risks
New York City – 7 February 2017 –
Loews Corp chief executive officer Jim Tisch has 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, Bloomberg reported.
“The movement of these markets is in stark contrast with many unknowns of our current economic and political landscape, both here and abroad,” he said in a conference call discussing the company’s results. “It’s a major disconnect, and it concerns me.”
Tisch said he was sharing his cautious view to explain why the company repurchased only US$134 million of its stock in 2016, about a 10th of the total from a year earlier.
Bloomberg said stocks have been rallying since 2009, with the gains accelerating after Donald Trump won the US presidential election. Trump has threatened measures that could limit imports and has sent mixed signals on some plans.
“The markets are priced for perfection, and they have been that way for quite some time,” Tisch said. “Complacency reigns supreme. However, my experience has shown me that this state of affairs won’t go on indefinitely.”
“Key credit metrics such as leverage and coverage ratios are showing signs of weakening,” Tisch said. “The leveraged loan market has been overrun by such massive inflows of capital that you could probably get a loan to buy a fleet of zeppelins at this point.”
While Loews has been adding hotels at its lodging operation, Tisch has refrained in recent years from expanding by acquiring new companies. He said the valuations that private equity firms have been willing to pay for leveraged buyouts has frustrated his search for takeovers.
New York-based Loews went “pretty far down the road” last year toward making an acquisition, but the parties were unable to reach a deal, Tisch said, without identifying the other company.
Still, Tisch said he will “continue to kick the tires” searching for the right company to buy, even if it becomes physically grueling.
“One of our shareholders recently asked if my foot is getting sore,” Tisch said. “I have to admit it is.”