Ed Dempsey: It’s Too Expensive to Be Defensive (XLU, XLK)

If Macy’s put signs in its windows, suddenly announcing that everything was 25% off, people would be lined up in the street looking to take advantage of the deal. On Wall Street however low prices seem to be a deterrent. Right now the safest assets continue to be priced up, while riskier investments are being ignored. In short, it’s become very expensive to be defensive.

“It’s so illogical; why would investors afford Utilities (NYSEARCA:XLU) a higher P/E than Tech stocks (NYSEARCA:XLK)?” asks Ed Dempsey, chief investment officer at Pension Partners in the attached video. “The reason is, they’re obviously just afraid of markets.”

And it’s not just the stock market. Bond markets at home and around the world are also pushing the limits on price.  “It feels terrible. It really does. It feels really bad” says Dempsey of the current state of unease that has fueled the aversion to risk. “Investors have positioned inside the stock market for a crash that has not happened.”

See the full “Breakout” interview below:


Utilities Select Sector SPDR (NYSEARCA:XLU)

The Utilities Select Sector SPDR invests primarily in companies that produce, generate, transmit or distribute electricity or natural gas. As of 03/31/12, there are 32 companies in the Utilities Select Sector SPDR.

Top 10 Holdings

  • Southern: 9.09%
  • Exelon: 7.79%
  • Dominion Resources: 6.82%
  • Duke Energy: 6.04%
  • NextEra Energy: 5.93%
  • FirstEnergy: 4.45%
  • American Electric Power: 4.37%
  • PG&E: 4.20%
  • Consolidated Edison: 4.02%
  • PPL: 3.84%

Technology Select Sector SPDR (NYSEARCA:XLK)

The Technology Select Sector SPDR is composed of companies primarily involved in such industries as IT consulting services, semiconductor equipment and products, computers and peripherals, diversified telecommunication services, and wireless telecommunication services. As of 03/31/12, there are 79 Technology and Telecommunication companies in the Technology Select Sector SPDR.

Top 10 Holdings

  • Apple: 18.75%
  • IBM: 8.11%
  • Microsoft: 8.08%
  • AT&T: 6.21%
  • Google: 5.46%
  • Intel: 4.02%
  • QUALCOMM: 3.88%
  • Oracle: 3.86%
  • Cisco Systems: 3.82%
  • Verizon: 3.66%


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