If the macro picture is so bad then why isn't the market down 3000 points? Every day the picture in Europe is frightening investors. We either wake up to a Greek tragedy or an Italian soap opera - terrified to make a move.
As of this moment the best place in the world to invest is the United States. Hard to believe but true. Despite the negative sentiment we are having no trouble finding stocks meeting our investment criteria. For every Green Mountain (GMCR) or Netflix (NFLX) there is a Google (GOOG) or Disney (DIS), if not hitting the ball out of the park at least getting a base hit.
Hello, (pounding table) Hello, can anyone hear me? Despite our formidable headwinds we are not in a recession so let’s stop acting like we are. We may be close to the ground and flying on one engine but we are still flying.
Given the backdrop in Europe and our formidable headwinds here the top down macro view of the US has been downgraded by nearly every economist on the street. Slashing their estimates for the U.S. they have decided there is no hope and we should all stick a gun in our mouth and pull the trigger.
Macro vs. Micro
Macro investors are hiding in the caves and the bottom up Micro people are coming out looking for spring.
I admit much of the economic data has been poor but last month we started contacting some of our clients who are leaders in their respective industries and were surprised to find them rather upbeat.
Two months ago after many downgrades in top down estimates for the S&P we started seeing securities analysts cut their estimates for their companies under coverage. Now that we are well through the reporting season analysts are starting to realize that they went too far. Each week we are starting to pull up more new high estimates vs. low estimates. While we aren't at parity yet we are getting a lot closer. A few years ago we couldn't even admit we had a problem. Now it is all we can talk about. We are well into the…
Five Stages of Grief
- Denial - We went through this already. By 2007 we had been in denial for twenty years.
- Anger - By the end of 2008 we were all angry. Mostly with ourselves for letting this happen.
- Bargaining - Who can deny that we have been trying to bargain our way out of this mess?
- Depression - This is where we have been as a nation for the last 3 years and many of us are still here but I honestly believe that for the first time we are starting to move on to...
- Acceptance - Look around. Despite the radically different approaches being discussed to fix our admittedly formidable problems we all at least agree there is a problem. That is major for a country that has been sweeping its problems under the rug for 30 years.
We all know it is going to be a rocky ride and I know there will be days ahead I wish I never heard of stocks. It is time to stop hiding in the cave watching David Tice re-runs of Dow 3000. Get some skin in the game.
Disclosure: I am long DIS.