Okay, The End Is Nigh

I just looked at Towers Watson (TW) stock. Look at that valuation, then look me in the eye and tell me this rally isn’t a bubble.

Do you even know what TW does? I do – because I used to be in the industry. It’s an actuarial firm; imagine all the employee compensation of a performance investment bank, but with none of the leverage or scalable business to ever make the big returns even possible, trading like a tech stock in the 90’s.

At least a third of Watson Wyatt and Towers Perrin (before they merged and consolidated) was – get this – pensions. As you can imagine, the fascinating and exciting business of fixed income securities is just a booming source of revenue growth nowadays…

Wait, no, sorry. Pensions is actually a hole that at these interest rates will eventually swallow whatever it touches. That’s what I meant to say.

I’m sure TW is getting some good business from the healthcare deal. Hell I know I am on the consultant side. But there is no way there’s enough growth taking place here to justify a 30 PE ratio. That’s insane.

Towers Watson employees are highly trained, high cost employees that expect massive bonuses when they contribute. The business is intellectual capital driven – outside of the minds of the employees, it’s just a bunch of Excel spreadsheets and some office equipment. The company can’t even take a position that could possibly result in a massive payoff like banks sometimes do; it’s a permanent fixture in consulting circles. Any big performance gets eaten up in employee performance compensation – $400,000 salaries come from somewhere.

You people are out of your minds. I will begin to ease into a larger cash position with the next low volume melt up. This ends in fire.