The holidays are here. Please allow me be the first to say there’s reason for optimism.
Yes… You read that right: optimism.
I have been thinking a lot about this — about optimism and pessimism and the reasons for both — in recent post-presidential election days. It’s not that I care that Obama won or Romney lost. Please don’t misunderstand me. I didn’t (and still don’t) support either of them.
It’s the whole process that gets me down. It brings out the worst in everybody. And I am always a little blue at election time anyway because the ideas I most cherish — those quaint-sounding notions of liberty and inalienable rights that so moved the Founding Fathers — seem to have no force in the national debate. Instead, we have a free-for-all to see who gets to feast at the government trough.
Yet there are reasons for optimism: big, powerful, long-term reasons to feel good about the prospects for liberty… and for your portfolio, particularly in the U.S. Though the two are related (an idea I hope to develop more in a future letter), we’ll stick with the investing side of it for now.
(As an aside, I would like to point out that the act of investing itself is optimistic. If you were really pessimistic, you wouldn’t invest in anything. You’d spend it all right away or lock down like a survivalist.)
An editorial in last week’s Wall Street Journal by William Conway, a co-founder of the Carlyle Group, titled “Why We’re Investing in America” hit on some of the reasons I’ve started to feel optimistic again — especially about the U.S. Conway writes, “A decade ago, China was the most attractive place to invest.”
But it is no longer. As Conway points out, China has emerged. It is not the same growth story it was. And there are new challenges. A Washington Post story over the weekend highlights one of them. The article was about how so many of China’s wealthier citizens want to leave the country. If it is so good in China, why do they want to come to the U.S.?
It’s not just China. Brazil has problems. It is looking like the banana republic it was and perhaps always will be. India struggles. The EU is shrinking. Japan has mega problems. These are all big markets. And they are all in trouble.
The U.S., compared with this lot, has many attractive attributes.
Conway points to some: rule of law (for the most part), deep and liquid capital markets and transparency to degrees many other markets are not yet up to snuff on. (They are getting there, as my World Right Side Up thesis says they will.) Plus, the U.S. is a big market by itself — 300 million-plus — still the world’s largest consumer market.
And there are four more big reasons to be optimistic, some of which Conway touches on:
Conway sums up:
“Many in America and beyond have been paralyzed by fear of the fiscal cliff, frustrated with Washington’s partisanship, mesmerized by the presidential election or stunned by the post-Great Recession recovery. Any way you look at it, though, now is a great time to invest — and there is no better place than America.”
I am not quite as optimistic as Conway, but I do believe it is a good time to invest in the U.S., especially as it relates to those four bullet points above — though you still need to be choosy, in particular about the price you pay.
My conclusion should not come as a surprise, really. This is especially true if you’re a reader of my newsletter Capital & Crisis. In those pages we have come to focus on U.S. opportunities – indeed, most of the global plays have been sold off. Instead, we find our focus is on American real estate, American banks and American manufacturers.
There will still be good opportunities abroad, of course. But as you celebrate over the coming holidays, go ahead and put in a few good words for the old US of A. It ain’t dead yet.
Original article posted on Daily Resource Hunter
Chris Mayer is managing editor of the Capital and Crisis and Mayer's Special Situations newsletters. Graduating magna cum laude with a degree in finance and an MBA from the University of Maryland, he began his business career as a corporate banker. Mayer left the banking industry after ten years and signed on with Agora Financial. His book, Invest Like a Dealmaker, Secrets of a Former Banking Insider, documents his ability to analyze macro issues and micro investment opportunities to produce an exceptional long-term track record of winning ideas. In April 2012, Chris released his newest book World Right Side Up: Investing Across Six Continents.
it is odd that in this article there is no mention of political policies and regulations distorting opportunities and altering outcomes
The author doesnt understand the difference between prosperity and liberty. None of the reasons given should make one optimistic about liberty. Instead in those reasons given occur, Obama will get credit and the public will have solidified in their mind the need for a strong powerful central govt to plan the economy.
Pump-priming now again, just as the Alan Greenspan Fed did in previous years, the Fed is now showing that it has leaned nothing from the deep recessions America has suffered through and not to mention that the problem of the shrinking net-worth of the baby-boom generation still has not been solved. Decades of constant inflation created by the Fed and still no solutions.
BDCs are soaring while banks are suffering. Banks are still working through nonperforming portfolios while regulators continue to restrict them.
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