Fear is again palpable all around. The incessant calls for the "End of America" continue to tire me. Any time I challenge an end of the world doomsayer, I am instantly ridiculed as being an idiot, not understanding money, not having a clue, and being part of the problem.
The black helicopter crowd is increasing their rhetoric in comment sections of my previous articles, almost as a flippant "I told you so" manner, as if America died Friday with the downgrade to their credit rating.
Sorry doomsday folks. America is not the focus of my concern, Europe is. Europe is not made up of countries who are Sovereign issuers of their own currency. I heard so many people worry about the debt ceiling default and how that was going to bring us down as a nation. I wrote why it was not an issue.
All the doomsayers are in the know, as I remain on the outside, part of the system that is the problem, uneducated to the realities of the situation. The End of America is HERE! I am told. The dollar is worthless, gold will be at $15,000/oz., and I need to invest in ammo and farmland. Shorting Treasuries is also supposed sage advice.
Am I just such a blind, and clueless Pollyanna?
No - I am more balanced, because I do not know with certainty as these doomsayers seem to. I own gold. I own stocks. I own cash. I own real estate. I own foreign and US government bonds ... I am not putting out fantasy world analysis and saying Dow 50,000 by January 2013. I would be mocked for such absurd predictions. Yet, that is the equivalent of these guys calling for the collapse of America and a bond market collapse "anytime now." I guess it needs to be in the realm of potential possibilities on my radar, but would I put my reputation on such a low probability event?
You see the difference?
If is the fear mongers who are make the outlandish claims. I just write to combat the insanity of it and bring a more balanced view to life for those susceptible to be influenced by such scandalous material.
My writing is against the never ending call for the End of America and how we only should own gold, guns, and groceries.
If America was starting the collapse as we are hearing from this downgrade, the dollar should be crashing, bonds should be dying, and commodities skyrocketing as people prepare for the end.
Instead, we have seen the long bond OUTPERFORM even gold during the past few days while the market crashed! We have seen the majority of commodities like oil, corn, cotton, etc actually be DOWN year to date.
HMMMM - not playing out like it is supposed to go down. I know, I know, just wait, it's inevitable as I am told constantly. Been hearing and reading about that for decades now. I continue to anticipate when I will learn my lesson everyone keeps telling me I will learn when it all falls apart.
While a call for Dow 50,000 by 2013 is absurd, the constantly shriek of our impending collapse is just as comical.
If I am so confident, what do I think will happen? Stocks, bonds, gold, commodities, real estate will go up ... and it will go down ... and probably up and down again. It is the reason for more balance to one's approach to the economy. These calls for owning nothing but gold, ammo, and farmland, is terrible advice.
My call is not the drastic one. It is the echo of the fear monger and the hysterical Internet mob who clothes themselves in delusions of grandeur of perfect and all knowing knowledge of the future demise of the system, and out of their good hearts, they plan to share their inside information with the rest of us so we might all be saved. The thing is, do a quick Google search for the same sound bites you hear today, and you will see the doomsayers have been saying the same thing for decades. That is the nice part about being all knowing and a doomsayer. You can always be right, since "the event" is always just around the corner. Never being wrong, you can only just be early, we just all need to wait and see as their prediction comes to pass exactly how they mapped it out. If something happens to delay the inevitable, we are told that is will only be that much worse when the reality of their predictions come to fruition. Can kicking if you will.
Now that you have read my rant, hear me a little longer. We just bought McKesson Corp. (MCK) in client accounts in the high $72 range yesterday as the market puked. McKesson Corporation offers medicines, pharmaceutical supplies, and information and care management products and services for the healthcare industry. If America is about to collapse, this was a terrible abuse of my advisor responsibilities. But when I look through the gloom, I see a company making their owners wealthy. While I typically like to buy companies that pay large cash dividends from their free cash flow, McKesson could not be overlooked. Sporting an $18 billion market cap, last year McKesson made $2.1 billion in free cash flow last year. Just under a 12% owner earnings return.
What did they do with that cash? The spent a small amount paying out the dividend, but used $1.68 billion to buy back stock with! That is a 9% return of cash that was re-invested in the shares. That is no different than receiving a 9% dividend yield and then taking that dividend and re-investing in more shares. Reading the annual report, the board approved more huge buybacks in the very near future. In such a low return world, 11.6% free cash flow yields is not something to sneeze at. McKesson has a bit more debt from the Oncology buyout last year, but that debt increase is nothing to worry about as the acquisition is accretive to cash flow. The yields on the deal are right in line with what they made last year from the core business. So they are growing, in a business that people will always need, and they diversified their revenues and will be able to reduce costs from overlap of the buyout. All this while earning double digit free cash flow yields.
McKesson is just one of MANY examples of companies who have very solid businesses that are creating value for their shareholders. I have written many articles on some of them, which are still relevant today at these prices. For those who are afraid of stocks because of the they lose sleep over the end of America, I would encourage you to get a little more perspective of reality and the history of the calls for collapse that have continued to decades. In regards to higher stock prices from here, I think a strong case can be made for that scenario based on cash flow yields as I wrote in this article.
I leave it now to the comment section. As I have been saying recently: Queue the countdown for calls that question my sanity, my mental capacities, and my character. Also - queue the countdown for reasons why we have not collapsed "yet." Plan to hear all the reasons why we only kicked the can down the road, how the pain will now be much worse when the collapse does happen (because it has too, as they say) and why we should all pull our money from this evil country.
Let the banter begin.
Disclosure: I am long MCK.