I am watching with amazement as nothing ever really changes in the investment commentary landscape. The economy is improving and at a better clip than most of the street is willing to admit. That may be because much of Wall Street is still licking its wounds from their backing of Romney/Ryan.
The election was a mandate. The president, love him or hate him, trounced his competitor. The game was simple, win Electoral College votes. He did by a land slide. Don’t go looking at other stats. The reason the campaigns focused on swing states, all but ignoring states like CA, NY, IL and other states as well as making no attempt to get out the vote there is simple; it was not the game. The game was all or nothing Electoral College, and Obama won by a landslide.
Next is Sandy. Perhaps too many analysts live on the upper east side where they were unaffected. Much of the general population and even the moneyed east coast were trounced by the hurricane, hunkered down before it, sitting in the dark after and then slammed with cold and snow again a few days after the power came back. This series of events bodes poorly for firms like Groupon (GRPN), NasdaqGS and Nordstrom (JWN) NYSE and even worse for truly mass firms like McDonald’s Corp. (MCD) NYSE. What a shock that people can’t drive, are focused on flashlights and candles and not on a discount on their next facial! Even the mighty Apple Inc. (AAPL) NasdaqGS had its stores close, suffered from lack of web access (by those of us with no power) in the hard hit areas. That meant no app store, iTunes or ordering new Macs or iPads.
The news from Europe is reported like its new, but in reality it has had few material changes except the passage of time and some honest and not so honest attempts at solving their crisis. They will kick the can down the road for another few years. Europe and the US Government need to be refinancing like the private sector, and large caps should be issuing bonds also at historical low interest rates. Once more cash is on the books, sooner or later, and I know we have been waiting a long time, our good old friend inflation will solve many of our public problems, and companies will tap the equity markets when interest rates are not so attractive sparking that part of banking. China Friday showed further signs that the country’s economy is recovering. Inflation rose a less-than-expected 1.9%, while industrial production increased 9.2% yoy, another monthly improvement.
Hopefully, Congress and the administration will do the right things, increase the Social Security cut off to $200,000, raise the retirement age for Social Security gradually, fix the larger issues with Obamacare without throwing the baby out with the bath water, and right-size by prioritizing our defense spending (without hurting our troops or global position). Last, we have to fix global warming, I can’t take these storms. Out in Rockaway NY, the first solar power generators brought in is from Greenpeace, not FEMA or the city. Flood zones, stronger storms, we had our warnings and multiple catastrophes. Let’s go Washington and the states, let’s get it together and take a global leadership position on climate change. It is costing us too much time, human capital and money not to deal with this proactively. I has seen much suffering and that alone should be our compelling reason for handling climate change.
The private sector has created a lot of jobs, housing is coming back. The federal government has few people on the payroll today that when Obama took office. I was privileged to work with a great economist 2004-9 who also listened to other really smart people. He taught me that as demand decreases deflation and all heck breaks loose. Once demand returns, profitability comes first, and then jobs, then growth. We have been waiting now for going on five years for this to occur. It has been anything but a straight line. But we are living the turbulence of our times, not reading about it in a history book. I believe in the US and the free market. The S&P 500 will be above 1500 one year from today. We will look back on this time in 20 years and praise the slow progress.
I am buying more US equities, counting on congress and the administration to handle the fiscal cliff and move forward. The economy will inch its way forward, albeit with plenty of ups and down regardless of government actions. If you’re a trader, there is lots of vol to play, if you are an investor, set your course and keep your eye on the prize.
Disclaimer: Mr. Corn is long AAPL and MCD and may take positions in the other stocks mentioned.