Good Companies Use Debacles to Get Better at Everything
Short-term headline addicts will see the endless commentary on the disruption happening throughout the world as negative and scary.
Long-term investors should see it as bringing long-term advantages, opportunities, and significant wealth.
You get to choose your perspective.
As bad as this shutdown has been – the self-inflicted economic damage, unrest, and screams for change - we will look back on this from far higher levels than we can ever imagine today.
From my seat in Chicago I can tell you history shows us that in the heat of the battle and fear, the harder you punch America and kick her when she’s down the stronger she comes back.
For many years now we’ve been saying Generation Y and the tsunami of technology and science heading our way will take the reigns of the New Economy.
And the movement of the manufacturing production to support its development back to America’s shores in beginning in earnest:
As a theme, expect this beginning trickle of change to be a tsunami in 2-5 years as the baton passes to the New Economy ahead.
Left out of last week's terrible headlines, US homeowners are feeling less stress as the world slowly opens back up.
The latest housing data shows massive upside surprises for closings, while also revealing a new multi-decade low in supply.
Even with the cloud of the shutdown, we are now nearing roughly 60 days of market supply of new homes.
The phrase "Spring-loaded" comes to mind from the above.
As for the homeowners?
Well, it seems they’re feeling better too:
There are also good signs of thawing in other consumer areas not often covered by the media.
Let's take a look:
The good news here is the market is sniffing out improvement.
What many won’t remember from the 2008-2009 Great Recession is that companies used that debacle to get better…at almost everything.
That process is unfolding again.
We fully expect that by the time we get to a somewhat more new normal view of the future in 2021 and beyond, we’ll see productivity massively increase, falling costs to address more on-shoring, and efficiencies birthed by the disaster itself.
This will lead to higher margins, surprisingly non-inflationary pressures, and entirely new ways to accomplish more for all of our collective lives.
Something to consider...and it relates back to something Warren Buffett stated years ago:
If rates are near zero for far longer than almost anyone anticipates at this time, if a 10-year bond is prices at 140+ times earnings, if bank accounts and money markets earn anything...what is a fair price for a growing equity stream?
So, I can feel 'secure' with a bond for which I pay 140 times earnings, or I can buy boring old Proctor and Gamble for 22 times earnings…
Underpinning that point: Amazon just sold $10 BILLION in 3-year notes for a cost of just 40 basis points.
Change is everywhere my friends.
Don't let wild movements terrify you.