Now Carl Icahn is spotting bubbles, too! The billionaire investor-agitator said he is “very cautious” on the stock market, telling a Reuters conference he can envision a “big drop” because many companies are depending, for their profits, more on low borrowing costs than on strong management. As if that weren’t enough, along comes Ben Inker of Boston’s famed Grantham Mayo money-management firm, calculating a fair value of 1100 for the S&P 500 index, about 40% below where we are today. Inker projects that the S&P will generate a negative return, after inflation, over the next seven years.

We want to build plenty of defensive toughness into our portfolios long before any such incident takes place. That’s why I’ve been urging you to weed out vulnerable stocks and mutual funds as the headline stock indexes plow higher. Move gradually and systematically, like the Carl Icahns of the world, with a sense of purpose—not panic. On the buy side, you’ll be smart to enlarge your holdings of stocks that throw off generous dividends. They’re not nearly as numerous as they were a year ago, but you can still find a few good ones: Xcel Energy (XEL) and Vanguard REIT Index ETF (VNQ).

Source: InvestorPlace

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