From time to time, I participate in an online poll conducted by
a major research organization. It only takes a few minutes,
and I'm interested to see what topics they're investigating.
Also interesting are some of the "regular" questions, which help
the researchers categorize respondents. One of these goes
like this, "Do you consider yourself to be mostly a resident of:
your city or town, America or the planet earth?"
For me, it's an interesting question.
I live in the city where I was born, 400 yards from the house where
I grew up. I have 35 living relatives here in Salem. My
office is in the old public library building where I was employed
in my high school years, and across the street from the school that
I attended from fifth through eight grades.
So I could easily say city.
On the other hand, I could say the planet earth. I've had a
valid U.S. passport since I was 8. I've traveled to 32
countries, mainly for pleasure, and I'm hoping to visit dozens
more. Every week I correspond with readers from all over the
world; recent emails came from Uzbekistan and Latvia.
But I always answer America.
In part, this is because my major focus at work is the condition of
the U.S. economy, as it impacts the stock market, the companies
that comprise it, and our daily lives. But in part it's
because it's the American condition that I'm most interested in.
Our assets include great physical resources, the rule of law,
freedom of speech, democratic elections and a great tradition of
entrepreneurial capitalism. We have the world's leading
institutions of higher education, its leading software companies,
entertainment companies, media companies, hospitals, drug
companies, e-commerce companies and more.
On the other hand, we have some world-class liabilities, including
heavy debt, both public and private, as well as future obligations
that threaten to bankrupt our country. We are overly
dependent on energy imported from unfriendly suppliers. And
we have less confidence in our elected leaders than at any other
time in our history.
As a result, some critics are saying the best days of the U.S. have
passed, and that the future belongs to the Chinese, who are more
ambitious, feel less entitled, and are more optimistic about their
But I'm confident we'll muddle through somehow, because that's what
we do. Americans lead the world in their capacity to adapt to
changing times and to find solutions to enormous challenges.
In fact, the bull market--which is now nearly 14 months old--is
telling us quite clearly that there's better news in store from
numerous companies that have adapted to the changing demands of the
marketplace. Well-known names that are looking very strong
include Apple (
), Coach (
), Netflix (
), Priceline.com (
) and Whole Foods Market (
), all of which are thriving because they've adapted and innovated.
Sadly, however, the perceptions of ordinary Americans tend to be
lagging. Many still dwell on our problems ... and our
For example, last Monday, I was out walking my dog before heading
off to work, when I met a cousin who lives nearby. We stopped
to talk a while, and before long she asked if I'd heard about "13
Bankers." I said I hadn't but I'd look into it.
Ten hours later, I was at a little cocktail party, when a friend
asked the same question. "Have you heard about 13
Bankers?" And I gave the same answer, "No, but I'll look into
So I did. And I found that "13 Bankers" is a book that
had just been discussed on NPR.
Its theme is that there has developed in recent decades an unholy
alliance of our biggest banks and the federal government; that the
influence of the banks on federal policy has grown excessively
large; that the banks have grown so large that our government is
unwilling to let them fail; and that mistakes by these bankers now
(and in the future) will result not in losses but in rescue by the
government ... which might eventually end with our country in
For the record, the "13 Bankers" referred to in the book are:
Ken Chenault, American Express
Ken Lewis, Bank of America
Robert Kelly, Bank of New York Mellon
Vikram Pandit, Citigroup
John Koskinen, Freddie Mac
Lloyd Blankfein, Goldman Sachs
Jamie Dimon, JPMorgan Chase
John Mack, Morgan Stanley
Rick Waddell, Northern Trust
James Rohr, PNC
Ronald Logue, State Street
Richard Davis, US Bank
John Stumpf, Wells Fargo
Here's what I think. If this book had been written five years
ago, I might have taken note. Back then, the U.S. was flying
high, fueled by a mountain of mortgage debt, and only a very small
percentage of people (the really perceptive ones) were worried
about our country's financial system.
But this book would have been ignored by most people back then.
Today, however, its theme is embraced so readily that two people in
same day mentioned it to me! And to me (viewing the matter
through the lens of Contrary Opinion), that's a very clear sign
that the U.S. financial system is NOT what you and I should be
worrying about today.
Now, I'm not saying it should be ignored. I'm well aware of
the current campaign to reform Wall Street and regulate the
financial system. And I'm confident that some progress will
But the reason that people are very receptive to the idea of a big
financial problem today is that they've just experienced one!
The housing and mortgage bubbles burst, and the Great Recession and
Great Bear Market hit us hard. But the worst is behind us,
and the perceptive people are worrying about something else
today. Not banks.
As to the stock market, here's the way I see it.
The bull market is nearly 14 months old. That's not ancient,
but it is mature. And until the April high, it was
characterized by an extremely cohesive, broad-based bull
market. That's good. It means the bull market is NOT
But now the market has begun a correction phase, aided by an
earnings season that is bringing good news to some shareholders and
less good news to others. As a result, many stocks are still
soaring to new highs ... but others are falling out of their
So far, this is an absolutely normal consolidation, and if it
continues true to form, the voices of discontent (by both losing
shareholders and critical media) will grow louder and louder ...
and the number of stocks at new highs will grow smaller and
Many investors will throw in the towel.
But just when the feelings of disenchantment have grown
greatest--ideally in concert with the appearance of notable bad
news--the market will come back to life. And it's at that
time that investors in leading stocks, who haven't fallen prey to
the worries of the masses, will make a lot of money quickly.
One of the stocks that might deliver the goods is Live Nation (
), which is trading at a very affordable 16 today but has the
potential to be much higher in the months ahead as its very capable
management works to integrate its really big acquisition.
The stock earned a spot in Cabot Top Ten Report two weeks ago, and
here's what editor Mike Cintolo wrote.
"Live Nation was spun off from Clear Channel Communications in 2005
and today it's the world's largest seller of tickets to live
events, mainly concerts for popular music. Last year, when half its
business came from North American music sales, the company sold 140
million tickets, promoted 21,000 concerts and partnered with 850
sponsors. But this year, it will do far better because it's merged
with Ticketmaster! ... Live Nation will be an even more powerful
and profitable force in the industry. Note, the business is highly
seasonal, quieter in the winter and super-busy in the summer, but
the long-term trend is positive. In fact, Live Nation has grown
revenues every year since 2002. "
When that appeared, the stock was trading at 16, and we recommended
that subscribers try to buy between 14 and 15.5. Well, the
stock did pull back calmly to 15, but it climbed right back up at
16, and today it broke out to new highs.
Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory