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Stocks Aren’t Cheap Enough to Buy Now: Stein

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The first trading day of the second quarter is starting out with a bang, after a first quarter rally that defied expectations. Despite ongoing troubles out of Europe, signs of Chinese economic weakness, and rising energy prices, the S&P 500 and the Dow Jones Industrial Average posted the largest first-quarter gains since 1998; the Nasdaq since 1991.

"We have had an astounding rally, astounding rally," says Ben Stein, economist, lawyer, and author of What Would Ben Stein Do? "If you think of the rally from early March '09 until now, it is just breathtaking. It's almost unbelievable."

Among the major U.S. indexes, the Nasdaq closed Q1 up 18.7%, the S&P 500 up 12%, and the Dow up 8%. But the market environment has been one of low volume, low volatility, and low confidence, leaving investors with overwhelming questions about the second quarter. What will keep the trend in place, how long we can continue higher, is it too late to put new money to work, and is it time to take some profits and protect your assets?

"This market is discounting a very substantial recovery. Unfortunately the recovery doesn't seem to be here yet and markets are very far from being perfect predictors either up or down," says Stein. "At this point I would not be confident buying a lot of stock at these levels."

Breakout's Jeff Macke welcomed Stein's comments as a sign that even he is trying to time this market.

"When price itself is abnormally low, when you buy at those times, over 10, 15, 20-year horizons you make much more than just buying it (the market) randomly everyday. So I am a market timer but only for very long periods of time," Stein explains.

Stein has always been clear that he invests with a long-term horizon in place. This is how he combats problems arising like the MF Global collapse or the BATS IPO debacle, which erode confidence and keep some investors on the sidelines.

"It's always something," he says. "But over long periods of time, if you buy when the market is abnormally low, you do make money. The market is not abnormally low right now, so maybe right now is not the time to buy."

Are you buying, selling, or holding stocks in the second-quarter? Let us know in the comment section below or visit us on Facebook.

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