How to Eat an Elephant
"If a business does well, the stock eventually follows." - Warren Buffett
The best way to eat an elephant is one bite at a time.
And this current batch of problems we’re seeing is just another proverbial elephant in a long line of elephants over the last 40 years.
Makes you wonder how nutty I would have sounded back in 1982 – when few if anyone thought we were at the start of one of the longest bull markets in history, and the Dow Jones was at 970 – if I said we’d all still be cowering in fear some 40 years later when the Dow Jones was at 29,000 plus?
You’d have told me I’d lost my mind, “No way the Dow goes that high, and no way we’d be unhappy if it did.”
True as well that at every point up that mountain we had some tough moments, some seemingly unending struggles, loads of problems and setbacks, more than a few hurdles, a dozen or so true disasters, and unrelenting fears…
But while our minds may have been preoccupied with near-term concerns, the long-term mountain climb continued over time.
To be a successful investor you must see that larger picture, and how the undercurrents and demographics now in place will fuel the next 20 plus year run.
And the speed will be mesmerizing.
So, if you need a refresher and some context on all that then click the video below (there are two short clips on the same page):
Politics & Market Sentiment
The red ink of the last few days is precisely what we want to see before the US Presidential election.
It spring-loads subsequent growth and sets the stage for "what's next."
And for anyone who thought the crowd would get grow overzealous you only need to have a look at the latest sentiment points.
The AAII continues to set records for the now huge span of time where bears have outnumbered bulls.
It continued this week:
We’re just single digit percentages away from all-time highs, and 2/3's of the crowd STILL does not feel all that well about stocks.
Follow the Money
I’ve never seen a rainy-decade fund quite like it!
Cash on deposit is just shy of $19 TRILLION dollars:
That type of behaviour has fear written all over it.
Now, call me a little slow but I would call that Philly Fed number (above) a pretty big beat.
The light in the tunnel ahead is not an oncoming train.
Don't let politics sway you on your long-term pathway.
In my time in this business we’ve seen six US Presidents (Reagan, Bush 1, Clinton, Bush 2, Obama, and Trump). And the trend has remained the same, even when interrupted by a myriad of disasters along the way.
Small Business Overcomes
While the news would lead you to believe that small businesses are just a bunch of weak-minded souls cratering under the pressure, the data is telling us otherwise.
American business does BETTER under stresses. It does BETTER when it counts the most:
When I look at data in this format, I train my mind to scan backwards across the chart - to gain a sense of where the present readings stand from a relative perspective.
The green line above on these two great Calafia Beach Pundit (Scott Grannis) charts does that for you.
Keep in mind that only on exceedingly rare occasions has Small Business Optimism been higher than it is right now!
Bet against that over the long haul at your peril.
On both measures of “Jobs Hard to Fill” and “Hiring Plans” small business is running fast toward recovery:
The financial Grim Reaper is always en route.
He sells newspapers. And they sell fiction.
And long-term investors have learned that when all the above ingredients are baked into the pie, the road ahead has been marked by a clear and resounding message: Surprises to the upside.